Since the first assault on Turkey’s finances in 2018, which I wrote about multiple times (here, here, and here), I’ve been the lone voice telling everyone that President Recep Tayyip Erdogan is a lunatic but he’s a lunatic with a plan.
That plan is to de-dollarize the economy of a valuable member of NATO geostrategically. Since the first shots across the bow by the Trump administration at Erdogan’s toying with those powers east of the Bosporus (Russia, China and Iran) the Turkish lira has been the primary mode of attack against Erdogan.
Erdogan has pursued what has been deemed unorthodox monetary policy since firing his Central Bank during the lira’s 2018 crisis. Then the Bank of Turkey wanted to raise interest rates to 30% to tame inflation. Erdogan, rightfully, in my opinion, stepped in and said no.
Earlier this year he went after Bitcoin exchanges to stem the tide against the lira and buddy back up to Davos a little, but they are more than wise to his game and Erdogan’s reckoning with them was always on the horizon. Today we’ve reached the horizon and the attack on the lira has him in his weakest state politically in all the years he’s been in power.
And with the lira blowing out to 18(!!) versus the dollar this week, Erdogan’s monetary policy has been all the news, especially with him promising to cut interest rates rather than raise them which is the conventional wisdom.
This blowout finally pushed Erodgan to unveil a new package of interventions to stabilize the lira.
The idea that monetary policy should only be conducted on the basis of creating ‘low inflation’ is nonsense, but that is what everyone focuses on with respect to interest rate policy.
It is certainly one factor, and as a committed Austrian in my thinking, I’d rather not even be talking about such things as central banks, monetary policy and what’s a sustainable rate of inflation, since that last part just sounds like a sustainable rate of theft.
But, I digress.
Erdogan was right to lower rates with the Fed raising rates in 2018 and 2019. His central bank threatened to push rates to 30% and that would have broken the country. He fired them and lowered rates, defying conventional wisdom.
Stop and think for a second. There is no reason why any currency should carry a 30% risk factor unless the the goal is to destroy it. Because nothing says you have no confidence in your own currency than someone paying 30% to borrow it.
At rational risk levels, where investment returns govern interest rates, yes there can be a somewhat linear relationship between central bank lending rates and price inflation. But to project that linearity, if it exists at all, out to positive and negative infinity is asinine.
I’d rather you think of the efficacy of interest rates vs. inflation as a sigmoid curve rather than a straight line.
If that wasn’t the case then the negative rates in Europe would have produced massive inflation by now and 20% rates in Turkey massive deflation by now.
But neither thing has come to pass because Keynesians, in their obsessions with aggregate demand, ignore both supply issues and marginal demand effects of policy.
In short, there comes a point where models break and the theory proves incorrect. So, with rates at 24% in 2018 not stemming inflation or the slide in the lira, what would be the point of going to 30%? If 30% didn’t work then 40%? 50%?
It’s this strict adherence to dogma which is the problem, as opposed to saying, “Hey, maybe at these rates other factors are more dominant than central bank lending?” That never enters into the thinking of even the most savvy analysts, preferring instead to parrot clearly broken models because it’s easier to throw shade at a lunatic with power (who may actually be right) than think through what’s actually happening.
There comes a point where one has to ask a series of important questions:
- How did this crisis start?
- Who benefits from it?
- What would be the geostrategic goals of collapsing Turkey’s economy?
Because even the smartest, most savvy analysts always seem miss the bigger picture. Zerohedge has missed the boat in multiple articles, focusing on whether Erdogan’s new package of interventions will work or not, given the state of things.
But no one asked the question, “How does a country like Turkey see its currency with some of the highest interest rates in the world already, collapse over a five month period?”
How does something like this start? Without considering what prompted the slide you’re ignoring what causes it to end. Who has the motive to attack Erdogan through his currency?
Frankly everyone. Is there a limit to creating panic? And if that limit is reached what would it take to reverse it?
How to Lose Friends and Alienate People
The key thing to remember about Erdogan is the following. Everything he’s done, including taking control of the Bank of Turkey, has been to call out the IMF and the banking institutions of Europe as ravagers of emerging markets like the one he runs.
He categorically ruled out ever taking another dollar in aid from the IMF during the last time the lira was attacked (2019). Remember, as well, he’s convinced (and I have no reason to disbelieve him) that the coup in 2016 against him was orchestrated by the U.S. and NATO, his nominal security partners.
So, there are a lot of powerful people who have a history of wanting Erdogan gone. Now, at the same time he’s done very little to secure friends. But, then again there are no friends in geopolitics, only temporarily aligned interests.
So, after that first attack on the lira which took it from around 1.8 to over 7.0 versus the US dollar and he made nice with Trump, goin on a rampage across the eastern Mediterranean acting as NATO’s spear to undermine Russia’s efforts to stabilize North Africa, most notably his excursions in Libya and continued betrayals of the Russians in Idlib province of Syria.
Last year he backed Azerbaijan in the Nagorno-Karabakh conflict while selling drones to the UAF in Ukraine which he was then likely framed for encouraging the use of to escalate the conflict there to drive a further wedge between him and Russian President Vladimir Putin.
Putin, for his part, doesn’t care who rules Turkey as long as it isn’t a NATO satrap. It’s why he’s put up with Erdogan’s nonsense. He knows the situation on the ground would result in a Davos-backed ghoul coming to power.
With that in mind, the whys of getting rid of Erdogan are clear. Now let’s go one step further. What does getting control of Turkey mean geostrategically?
Clearly the 1936 treaty of Montreaux, which gives Turkey full control over what ships can pass through the Bosporus and Dardenelles, is the prize here. Getting rid of Montreaux will allow NATO to bring ships into the Black Sea to ostensibly pressure Russia into giving up Sevastopol.
Good luck with that.
So, with the full court press on against Russia diplomatically by the U.S. with the EU doing its typical “Oh, woe are we, we have to go along with the evil Americans…” bullshit, it’s no surprise to me that Erdogan is under extreme pressure through Turkey’s biggest weakness, its currency, at the same time.
There are no coincidences in geopolitics.
Challenging the Orthodoxy
The collapse of the lira has been epic to behold. And none of this is a defense of Erdogan per se. He’s a lunatic to be sure.
To create a collapse in a currency as weak as the lira was already takes a small net drop in marginal dollar inflow. Erdogan worked to reduce Turkey’s foreign-currency debt situation, but this was complicated by easy money from the Fed post Coronapocalypse.
De-dollarizing is hard if the country’s accounts are open and the Fed is at the zero-bound.
Once the Fed pulled back on foreign dollar liquidity in June the situation in Turkey was going to deteriorate.
So, is the right response raising interest rates when they are already 1) stifling domestic investment in local currency and 2) retarding savings in that currency because of inflation?
NO. Raising interest rates is a statement by the Central Bank that it has lost the confidence of the market and it has low confidence in its ability to get things under control. Raising rates further only makes that perception that much more ingrained.
Truthfully, when has the IMF ever been right about ANYTHING!?
So, now let’s look at what Erdogan has done over the past three years, he’s run monetary policy exactly opposite of the Rest of the World (RoW). He cut while the Fed was tightening. Then tightened while the Fed was easing and is now easing while the Fed is tightening (see Chart Above).
During all of this Turkey’s inflation has been crazy. But this is a consequence of zero-bound policies by the major central banks, flooding the world with dollars, euros, yen, etc. Remember, for us to not have inflation at home while printing trillions, the inflation has to be sent overseas.
Money printing leads to inflation always and without fail (Martin Armstrong’s lame protestations to the contrary). The question is where the inflation shows up and does the government include it in the CPI? Lies, damn lies, British Polling and Government Statistics, is how I think the saying goes.
But, back to Erdogan’s unorthodox methods. He actually rebuilt Turkey’s foreign exchange reserves, which no one gives him credit for and brought in more than 300 net tonnes of gold into the Turkish banking system.
Turkey’s current account deficit disappeared and by allowing the lira to properly fall because it was a mess in 2018, it improved Turkey’s trade balance.
Now, one could argue my embedded point above, that Turkey’s currency woes are a function of outside hot money flows pushing and pulling on the lira based on the geopolitics of the moment and say that once Erdogan was a good US lapdog, the pressure abated and nothing he did in 2019-2020 actually mattered.
Fair enough. But, then that begs the question what is he doing now?
And he’s made it clear that the goal is to de-dollarize the Turkish economy. That he’s going to take Turkey on the same path forced onto Russia and Iran in the last ten years — finding ways to be members of the global economic system of trade while using as few US dollars as possible.
Turkey has to do the same thing. And to do that you have to tell people you believe in both the lira and your ability to get things under control.
No Exit?
Erdogan has been fully cut loose by the West and they want him gone. The polls in Turkey have moved against him and it’s now time for him to put up or shut up.
I said in 2019 there was no easy way out of Turkey’s predicament, that it would not be allowed to leave NATO without a major cost. That cost will be a short-term hyperinflation of the lira and a radical reorganization of the country’s finances, trade partners and everything else.
European banks are still net short a lot of Turkish debt, blowing up the lira and potentially a bunch of Turkish banks would have big blowback effects on banks like Unicredit, BBVA and others.
That’s all the background stuff. Now let’s talk about what he’s actually doing. And the proof is in the details, which we only got on Wednesday.
The centerpiece of Erdogan’s de-dollarization strategy is a pledge to Turks that it was time to end their reliance on the U.S. dollar as the place to go in times of stress. He would guarantee their savings in lira if it depreciates versus the rate of inflation.
Through the program, the government will compensate lira deposit holders if the currency’s value depreciates by more than the interest rate offered by banks on these deposits. The objective of the scheme is to stop retail demand for hard currencies like USD and EUR.
Now, many think this is just MMT(no!) or unbacked money printing (yes, but who cares in this world today?).
This is a bluff, ultimately, but given that all fiat currencies are bluffs then, again, so what? Turkish lira deposits are running double digit rates of return and U.S. rates are zero-bound, the question now is will this bluff be called?
Remember, the Fed is draining the world of dollars and has pledged to do so radically.
Erdogan has to do something to put reserves into Turkish banks, i.e. savings, and have that savings begin forming the pool of real capital for lending. And that pool of capital can’t come in from those hostile to Turkey. It has to come from Turks and those that still want to do honest business with them not subjugate them to the mercantilist machination of Malthusian fascists.
The conventional wisdom is that Turkey should be raising rates here to attract foreign capital. But it is foreign capital that is the source of the lira’s weakness. Why does a currency halve in 3 months? Because foreign money pulls out en masse.
Remember Question #2 above? Cui Bono?
The very people pulling their money out are the ones who run the IMF who then say, “Hey, we’ll give you a loan at reasonable rates to fix your short-term problems.” This is the standard Economic Hitman Playbook. Erdogan refuses to play that game.
The right move is to stiff-arm any foreign creditors dumb enough to think Erdogan won’t punish them, like what China is doing via Evergrande. Expect targeted defaults here by Turkish corporates. Expect favorable treatment by Erdogan for those that no longer have exposure to his enemies.
Because of Turkey’s importance, i.e. access to the Black Sea, he’ll be able to ask for help from Russia and China, who should be happy to help backstop Turkey in their quest to de-dollarize… for a price, of course.
And that price will be doing all trade between the three of them in lira, yuan and rubles… not dollars. You wean the Turks off easy dollars by backstopping their savings, and cutting taxes on savings as well as investment taxes, which is also part of Erdogan’s package.
Here’s the full package thanks to Zerohedge:
1. A new Lira deposit instrument that will compensate depositors for losses from Lira depreciation. If the loss from Lira depreciation is higher than the interest gain on the deposit, the difference will be transferred to the depositor and will not be subject to withholding tax.
2. The TCMB will offer Lira forward rates to exporters having pricing difficulties due to the exchange rate volatility.
3. The withholding tax on returns from domestic government bonds will be removed. The withholding tax on corporate dividends will be reduced to 10%.
4. Exporters and industrialists will be given a corporate tax discount of 1pp.
5. The state contribution to the personal retirement system will be increased to 30%.
Yes, there are a lot of risks in this plan but only if there is more foreign money to pull out of the country. The reality is that people don’t run on the banks unless there has been an inciting incident to run the bank’s deposits.
And at some point you’ve pulled all the money out, at some point you reach peak panic and all it takes is someone having the confidence to put their ‘tuppence’ back in the bank’s hands. (You had to know I’d work a Mary Poppins reference in here somewhere.)
A Road to Somewhere New?
So, what if we’ve already seen the worst of the situation and the epic collapse both ZH and Goldman are betting on doesn’t materialize? Will someone finally figure out that central bank interest rates and inflation are something other than a linear relationship?
I heard this same crap in 2014-15 when Russia was going through the same blowup of the ruble. It fell alongside oil prices from 28 to 80 versus the dollar. The assault on oil prices was revenge on Putin for stopping the invasion of Syria by NATO. Russia was sanctioned to the point of forcing corporate debt re-denominations because there were corporate bond rollovers due.
This was the same issue that began the run on the Turkish lira in 2018.
Putin allowed the ruble to float freely, Nabullina at the Bank of Russia raised rates aggressively (to 15.5%), they liberalized a lot of the economy spurring new investment and accepted a yuan/ruble swap arrangement to get dollars into the country to assist in the paying out of the corporate debt.
It worked for Russia and I expect you’ll see the next pieces to the puzzle unveiled in due course as Turkey becomes the next node on the Asian anti-dollar currency bloc that’s forming.
Turkey’s debt to GDP ratio is low (39% in 2020). The government has plenty of room to take on the FX risk here and revalue a lot of the foreign currency debt which is the source of the trouble.
That Turkish banks can hold gold as a reserve asset directly means that as we move into a gold bull market thanks to the Fed finally admitting its lost control over inflation Turkish bank balance sheets will offset any lira weakness with gold now that the government has backstopped savings.
You’ll see more investment by both Russia and China in Turkey thanks to the devaluation, increasing tourism and local investment by their people.
There comes a point where you can only hurt a currency so much by pulling out foreign capital. And once it’s all been pulled out all that’s left is people making do with what’s available.
Turkey is too valuable a piece of real estate and too valuable a partner geostrategically to let fall here. China needs it for OBOR; Russia for holding onto control of the Black Sea and Iran as a conduit through which it conducts trade while under extreme sanctions.
The West is taking a major shot at he Turks here. But the numbers we are talking to backstop the banking system there are peanuts versus the potential long-term benefits of cleaving Turkey from NATO for Russia and China.
I expect some of that newly-freed up capital within the Chinese banking system thanks to the PBoC easing will make its way through swaps into the Turkish system.
The thing is, with a strategy like this, you have to let things get so bad that the currency goes bidless. Stocks go bidless etc. It’s only then that you can attract the maximum amount of speculative money into the market as well as give your potential partners the best return on investment if they come to bail you out.
When there’s blood in the streets betting that it’ll become a river of blood is a bad bet. The better bet is that the madness of crowds is in the past and the immense opportunity to clean things up arrives.
This is what China did when they came in to stabilize the ruble in December 2014. The announcement of a currency swap line arrangement between China and Russia is what marked the end of the ruble crisis. Any Chinese money that flowed into Russian banks in 2015 did very very well as bond yields fell steadily until 2020 and the Coronapocalypse.
The same thing is going to happen here with Turkey. And conventional wisdom will be wrong…. as always.
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Interesting analysis thanks.
What chance Erdogadhafi finds himself with a bayonet in his rectal vault soon?
Brilliant…..what a read, an education indeed.
A gold coin has two faces. One is genius the other insanity. Spin the coin and you have Turkey.
Old Eggnogg has been going to judo classes, given by a grandmaster… Mr. Blackbelt, himself.
May I suggest Turkey is the first brick in the NEW GOLD STANDARD. With Russia & China the Keystone bricks..followed by Iran,Italy,Germany,Hungary and all the rest of the BUTB’s…….bars under the beds.
Fort Knox is prepping “Green Backed Toilet Rolls,” stacked too the roof. Australia is a huuge investor.
PS. Eggnogg may win an Oscar for starring in the greatest horror movie the dumbed down and panicked Empire, has ever sat though …
(I do not know what correct pronouns are, I am doing my best, hope I have not offended any readers.)
Now that there was an excellent article. I had not thought about the Turkish situation very carefully at all. Only 39% of GDP in debt, and all of the foreigners pretty much already out of the currency. And lots of gold in reserves. It’s a tough situation, but there’s hope for them, too. Looks like the West is driving Turkey into the arms of its rivals.
Not sure why Ronnie included Germany in his line up for the Gold Standard.
But Tom, good review! I happened to have my ear to the ground about seven years ago and had a really good source tell me Erodgan would be rocking the boat but I have to say I misread his direction. I was shocked when he was running Hillery’s weapons into Syria, stolen from her murder and robbery of Kadaffi, until I heard that all the low priced illegal oil was coming out of Iraq through Turkey lining some corrupt pockets including Erodgan, probably Hillery’s joke of a slush fund, er I mean Charity Trust. But then that is what Democrats do, steal Ukraine’s gold, Iraq’s oil, Turkeys’ shipping rights to further aggravate Putin.
So yes either Erodgan is a lunatic or wants to appear to be . It helps keep your country alive and you in charge. Trump employed the same strategy but scared the Deep State so badly they crapped their pants and openly stole our election putting a Senile old man out front while the weakling operators stay behind a curtain. Also blowing their plan into the open to make the world into Davos slaves. Now we all know that! But I wandered off from Turkey. Erodgan is trying to stay alive in a pond full of treacherous crocodiles that are bigger than him, that is enough to make him do what he is doing. Did Hillery and Obama double cross him, probably planning to take his gold too, probably, but it did not work. Probably because a stupid traitorous, failure named Obama was behind the game. I have to smile about that! Yes, I smiled when they had to give the Dutch most of the Ukrainian gold they stole for letting those mercenary idiots shoot down that plane full of Dutch going to Asia. Putin dodged a bullet that time too.
Erodgan wants out of the Davos(nato) clutches while he is still alive and Turkey is not on their knees. With the Ukraine game in play he sees the writing on the wall. Will Putin cover his escape in exchange for holding onto the access to the Black Sea?
I really like your writing and analysis Tom. Make people think about this stuff.
Excellent comment and analysis! Never underestimate the Sultan! I have taken many a flight between Tel Aviv and Istanbul and all the Turkish Israeli business people are bullish on Turkey all the time and they approve for the most part in Erdogan. Not necessarily the AKP but the old man is a builder and a tough construction fellow. Erdogan means business!
Tom nailed it better then anyone on the planet!
That’s the 1st and only analysis I’ve seen that makes any sense of Erdogan ‘s nuttiness. Be interesting to see if he makes it out from the IMF and $ domination before the 2023 elections.
Brazil did. Turkey can as well!
Hi Tom,
I think this article has some bearing on what you are saying about Turkey. I didn’t realize it, but once a country gets hooked on an IMF loan, they have to spend the subsequent years trying to obtain US currency to repay it and are thus roped into the US hemogenic project:
THE END OF SUPER IMPERIALISM
https://bitcoinmagazine.com/culture/bitcoin-replacing-us-super-imperialism
The article goes through the history of the US dollar, from gold to Bitcoin and really explains why some countries are taking the OBOR option verses dealing with the IMF. BTW: The author also describes exactly the same mechanism Wall Street uses to keep the price of gold down (paper gold) that you have explained in your columns and why he thinks it might not work for Bitcoin.
Glen Greenwald just spent an our interviewing the author but I didn’t feel he had enough of a finance background to really question the author. I would love to hear what you and Dexter have to say about it in one of your podcast news round-up discussions.
The question or some people is how to profit from the situation in Turkey?
This is the reasoning I have proposed to some of my more astute friends…
Turkish PP Deal 24 Dec. 2021
For the last few months I have been studying a deal that seems to be a near perfect fit – maybe for you or a friend or relative. As you know, the right passport can save your life or at least solve a lot of problems.
~~~~~~~~~~~^^^~~~~~~~~~~~~
Would you like to pick up a Turkish passport for yourself, any spouse & any kid(s) under 18 without the need to ever go to Turkey. Of course you can (all) go there if you want to.
See attached or ask me about any details.
The Basics:
Only requirement: Spend $250,000 or more on real estate- any villa, mansion, palace, or several condo apartments—anywhere in Turkey.
Plenty of distress sales are available now. My plan in 3+ years (the required holding period) you can get your $250,000 back (with a likely big profit) by selling — or you can hold it for investment or a vacation place.
In other words, with this deal with a spouse & kids you can get pretty good passports for the whole group & probably make money on the real estate deal !
Pardon my enthusiasm, but this is the Best passport & real estate deal I have seen in 50 years!
I predict that the current Erdogan govt, offering this citizenship & passport deal to bring hard cash into the country (offering a PP which can’t be revoked once granted) could be terminated in 18 Months in 2023! …Then, I.M.O. this window of opportunity will probably close.
A Turkish passport is good to visit visa-free many countries that you can’t go to with a USA or other PP. You can google the map “Turkish Visa Free Travel.” Plus, it is easy to get an EU / British/ Swiss visa with a Turkish passport as you are a self-supporting bona-fide tourist or P.T… Plus, for confidential banking, anywhere, you can, upon request, get a new cute Turkish name in your passport. If you don’t care for “Fatima” or “Kemal” see hundreds of available Turkish names listed. Once again, just google “Most Common Turkish Names” For future confidential banking, you can’t beat that option!
Like fire insurance, or a spare tire, a 2nd passport from Turkey could someday be your life-saver. If you never need the passport, the present bargain basement property prices in Turkey look good as a geographically diversified investment.
Do you want in?
Do you have $250,000 in PLAY MONEY plus another $35,000 for contingencies? The extra would be for appraisals, fees, due diligence, etc.
You can spend more than $250K on a waterfront palace, but you can’t spend less & still get citizenship. I’d only spend significantly more if you really want to have an extra nice place to use over there. A waterfront palace with pool & a private yacht berth could cost well over $1 million. Although this would be 10% of the price of a similar place in the Riviera, I will not be considering such high priced places for myself. I don’t want the overhead and possible difficulty in finding a buyer — later on. I’d stick with the $250-$300K price range. If you want liquidity. Always plenty of buyers.
If interested in having me look at deals for YOU, let me know a.s.a.p.!
I expect to actually go there in Summer 2022 to hunt for bargain beachfront or excellent water-view properties— for my honey, kid, and a couple of friends. If I have over 4 investor/partners like you, I can probably get us an entire deluxe apartment building with condo units. They can be left vacant for our use, or rented out profitably during the 3-year holding period.
Investor/partners I already have (along with me!) realize that although Turkey has many temporary problems, it offers the same kind of opportunities that were available in Argentina in 2001. There, In Buenos Aires, riots, crazy inflation, inept political leadership – all stuff similar to what’s happening in Turkey now – made million-dollar properties available for 10% of value in foreign dollars. Prices went back up after the crisis passed.
The big difference being that to get an Argentine passport took 3 years (actual physical residence) while in Turkey, you should get citizenship for yourself, any spouse, and kids under 18 —in about 90 days after your purchase is verified & approved –even without ever going there… Deals can be made with a power of attorney. The key is having someone like me on the ground to pick up a suitable good deal.
That would be my role.
Maybe you don’t want to enjoy a summer or 3 at a delightful yachtsman’s paradise. Cost of real estate & living there? 2% of Monaco!
The best part is that I discovered a few VERY SAFE beach towns like Fethiye. They are even more internationally popular than the French Riviera. Wealthy Foreigners constitute over half the local population. Real estate ownership and living costs are a fraction of Europe’s Riviera, Uruguay’s Punta Del Este, Mexico’s Baha, or Southern California… Taxes are minuscule to ZERO if you play your cards right…– My good advice will come with the package deal. I am not in this to make money for myself—more to facilitate the deal for a few ex-clients & friends. My kid will be in charge if I am unable to carry out any aspects of the Plan.
An international airport is under an hour away. Plenty of inexpensive car rentals. You can even drive your own car there from Europe.
Greece? A 1 minute drive. Why? Greece borders on Turkey. The Greek border is not far from Istanbul. I expect to also consider & look at properties on the European side of Turkey. It is another day’s drive to the more internationally popular (and better weather) Beach Resort towns around Fethiye.
Going to Fethiye by car from a place like Nice, France would need 2 or 3 days of very easy driving. English is widely spoken in Turkey’s cosmopolitan or resort areas, as is Russian, German, Spanish, Chinese. Reliable Real Estate Management/Rental service is available if you don’t wish to occupy your Turkish Beach property. See:
https://www.propertyturkey.com/real_estate/turkey/fethiye
If one looks a bit inland, you can get a super VILLA for your $250K+— with a pool, and closer to the airport. For me, based on much experience, waterfront, or at least water view property is much easier to sell when the time comes.
At this point, I personally want to buy a couple of waterfront or at least water view properties & thereafter spend the warm (every-day is sunny) 5 month summer season there in 2022 and 2023. After that, we can decide what to do next.
Any thoughts? Do you want to get in on this deal? Let me know.
“Grandpa”
Best article written on this subject. However as I have asserted on many occasions I believe that your assessment of Bibi is incorrect especially regarding Turkey where there is a robust trading relationship between the two states that has never stopped.
DAVOS regards Bibi and Erdogan as the same. Bibi might pay lip service to Davos but just as with Kurz was never full Davos as he developed amazing relations with the Russian president and brought trading relations with China to a sky high level. Israel refrained from criticism against either country to the chagrin of the west. Therefore Bibi had to go
The current Israeli clown show has committed green energy and environmental ministers that are busy destroying the natural gas business of Israel while indirectly attempting to denigrate relations with the UAE. This is treasonous in my view and exactly what O’Biden and Washington desire. Israel must not permit relations to disintegrate further. The west desires chaos and Davis stooges throughout the region and keeping everyone at each other’s throats.
For Erdogan to pull this off he needs robust relations with the GCC as they can give him sufficient backing along with Russia and China to pull this off
Russia decoupled from the west and Brasil decoupled from the IMF. This CAN be done.
I live in Turkey, and no one believes the official inflation rate. From heating gas, to food, to utilities and fuel, real inflation is higher than 30%. Erdogan threatens the Statistics Institute officer, to declare the inflation figures you see. Otherwise such government officers would find themselves in jail, due to alleged membership of a terrorist organisation (there are hundreds of former governement officers currently in jail). Erdogan has a distorted sense of reality. He is the only person in Turkey denying the real inflation rate, and he insists on keeping interest rates at 14%.
Honestly. Interest rates at 14% are enough. the issue is the hot money flows into the country. As the fed raises rates, the situation will improve once all the dollars are gone.
The dollar is the source of the trouble. Erdogan is another issue, but his monetary policy is downstream of dollar hegemony.
As an outsider that spends time in Turkey and lives in Brazil the most important thing is that Imamoglu does not come to power. If he does Turkey will be exactly like Greece. Miserable. So no matter how unorthodox the Sultan is we must continue to back him along with Orban because in my view to paraphrase Doug Casey and Andrew Sullivan personal freedom at least for me is at a premium above financial freedom just for the moment. And it can be a long moment.
The same story on inflation everywhere including the US. It is twice what the government says!
Tom, you missed a very big point: you are assuming some World Leaders are not in a team of power like Erdo. You are wrong: They are all in a one team. But the roles are different only. Please follow Pfizer and Burla Brother’s hegemony in the Worle.
I have to say that your article is the closest to my own opinion than other articles I have read at Zerohedge and elsewhere. Being a Turkish expat I follow Turkish news almost daily thus I am naturally familiar with Turkey, the political landscape and what is going on economically/politically. Firstly I have to state that I am not an ideological supporter of Erdogan. On contrary I am a secular Kemalist and a Turkish nationalist (pls refer to founder of modern Turkey, Mustafa Kemal Ataturk). Nevertheless I fully support Erdogan’s response against this overt speculative attack on Turkish Lira led by the Davos banks. I would like to contribute in two sections (provided you agree of course), as I would like to get a bit deeper into the analysis. The first part will give some idea about Erdogan’s initial years in politics and close relationship with the western power circles and the second part will talk about his parting with the west, Turkish geopolitical interests and the future of Turkey. So this is the first part.
The Beginnings of Erdogan:
Erdogan came to prominence in the 1980s when he proved himself as a charismatic leader of the youth movement within the National Salvation Party (Milli Selamet Partisi in Turkish) which was led by his mentor Islamist politician Necmettin Erbakan, who served as a deputy prime minister in the 70s and as prime minister in the 90s. Erbakan was a hardcore islamist however at the same time a fervent Turkish nationalist who despised the western imperialism and encroachment. Erdogan climbed the steps in this party as an ambitious and influential young man and became the mayor of Istanbul in early 90s by a landslide election victory to everyone’s surprise. In 2001 Turkey was hit by a major economic turmoil and massive currency devaluation ensued. Prime Minister Bulent Ecevit and his coalition partners fell apart and Turkey was ripe for an early election. Precisely at this moment, the young and opportunist Erdogan with some other young politicians of the National Salvation Party (MSP) declared that they are splitting and forming a new conservative party called AKP (Justice and Development Party or Adalet ve Kalkinma Partisi in Turkish). By then he was already well known in Turkey and made himself a concrete name in politics thanks to his time served as the major of the biggest and most populous city in Turkey. He was an ambitious and highly revered charismatic leader especially among the poor masses (migrant Anatolian populations (including Kurdish) living in enormous slums in the outskirts of Istanbul and other big cities) and islamic circles (particularly supported by the infamous islamic cleric Fetullah Gulen and his deep organization called Hizmet). Among his deputies were Abdullah Gul (later became the Foreign Minister and the President of Turkey), Davutoglu (served as the prime minister during the invasion of Syria and also when the shooting down of the Russian military aircraft occurred in 2015) and Ali Babacan (served as the Finance Minister who was close to IMF and ECB). These names are important in order to understand the intimate link and the relationship of Erdogan with the western power structures (including Davos) at the very beginning of his reign before 2010-2011. A well regarded Turkish journalist (S.Onkibar) mentioned in his book that Erdogan and A.Gul meeting with Abraham Foxman (then the head of ADL in the US) and having a three hour private meeting, just before Erdogan became the Prime Minister of Turkey following elections. We don’t know what have been discussed behind the closed doors, however Erdogan getting a medal of honor from ADL in one of his visits to New York (after becoming prime minister) is quite telling. It is also rumored by the same journalist (S.Onkibar) that Necmettin Erbakan fell on the couch and literally started crying when he heard the news about this meeting out of despair and fear for Turkey’s future. Erdogan was very close to western elite circles during his first ten years in power and this is also the time frame when EU started the negotiation period for Turkey’s accession as a candidate. In those initial years Erdogan boasted many time (in front of TVs) that he is the co-chairman of the “Greater Middle East” which was a “re-design/re-shaping” concept of the Middle East being continuously promoted by President W.Bush and Secretary of State Condoleezza Rice during and after the invasion of Iraq. The first ten years, the relationship with the west was all roses until 2010 when “Mavi Marmara” incident took place. Mavi Marmara was the name of an aid ship rented by Turkish islamists (Turkish Muslim Brotherhood) in order to deliver food and medical aid to Gaza (Palestine) where over one million people were trapped and suffering under Israeli sanctions and blockade. The ship was raided by Israeli special forces while sailing close to Gaza and nine Turkish citizens were killed during the ambush. Erdogan accused Israel of murderous act and this was the moment the west and Turkey started falling apart. Islamist cleric Fethullah Gulen surprisingly criticized Erdogan and his Muslim Brotherhood connections and painted the incident as a misdeed on Erdogan’s part. The purge of Gulen’s Hizmet movement in Turkey started the years following the Mavi Marmara incident. Gulen’s schools, foundations, universities, banks and newspapers were shut down one by one over the years and much of his assets and money was confiscated in the next ten years. Fetullah Gulen was (still is) a US deep state asset and his organization has infiltrated into high positions in the judiciary, academia and military/police. This intricate structure was also dismantled following the failed 2016 military coup d’etat attempt. According to one estimate 170 thousand arrests were made. Erdogan was brought to power by the support of the west and especially the US deep state as a “raw model” islamist project (aka American style islamist), but the west started slowly losing control over him. In the year 2013, there was a Soros colored revolution attempt where millions of people hit the streets in Istanbul and big cities all over Turkey. That was the first attempt to bring down Erdogan. In the second part I would like to talk about Syrian war and Turkey’s role, the west orchestrated coup attempt in 2016 to end Erdogan’s regime and most importantly the geostrategic ambitions and goals of Turkey in the Eastern Mediterranean, Middle East (Syria, Iraq), Caucasus, Africa, Balkans and the recent economic attack against Turkey to topple Erdogan and to bring a “globalist” puppet regime in order to stop Turkey’s geopolitical expansion and growing influence in the region / approachment with eastern powers like Russia and China (especially the BRI- The Belt and Road Initiative).
I live in Turkey. Actual inflation, from food, to heating fuel, etc. utilities, it is no less than 30%. Erdogan forces government officials to declare inflation rate lower than it actually is, by threatening them with sending them to jail as members of terrorist organization (there are hundreds of former officials currently in jail). Insisting on keeping the interest rates at 14% makes people run away from holding Turkish Liras. Instead, borrow Turkish Liras at incredibly negative real rates, and just buy anything! Anything yields better than Turkish Liras. This is not a country that you can rely on the official numbers, and decide from overseas.
Turks do not honor contract law. End of story. Lira are worthless regardless of interest rates.
Wow, definitely one of Tom’s best posts — if not the best.
A little expansion on the “how did this start?” question:
* Obama staged at least two coups in Egypt. Eventually the one thing all Egyptians agreed on is that Obama and his “hope and change” should buzz off.
* France told Obama to bomb Libya, and Obama obeyed. Libya had been squirrelly about attempts to develop nuclear weapons. Qadaffi finally came clean, and so Europe rewarded his change of heart by launching a coup. Someone, definitely not Hillary, gathered Qaddafi’s weapons, killed the US embassador, and then shipped the weapons to (can’t make this up) “moderate” terrorists in Syria… and then an attempted coup in Syria.
* George Soros noted that Europe was very dependent on Russian natural gas coming in through Ukraine, so as detailed by wikileaks, Soros called in his chips with Obama and ordered him to launch a coup in Ukraine. Obama obeyed.
* Turkey connected the dots and realized the next coup was going to be… Turkey. Erdogan might be (probably is?) crazy but he isn’t stupid. Stupid is concentrated in Washington DC.
So that brings us to the present. The same foreign policy bureaucratic half-wits that used to work for Obama/Biden now work for Biden/Harris. Biden was hopelessly corrupt before, demanding bribes paid via his son. Then Biden got dementia, bragged about the bribes on TV, and got appointed el-Presidente by very corrupt politicians.
Turkey is the only country in NATO (besides the USA) that actually meets its NATO obligations. So naturally Europe is terrified. Over a million soldiers, not under the command of unelected bureaucrats in Brussels!?!?! Same bat-shit crazy foreign policy team in DC?!?!? Yeah, time for another coup attempt in Ankara.
Turkey will evict the US from its base in Izmir, and it will follow Iran into the Russia/China orbit. Its plausible that the foreign policy morons in DC will evict Russia from SWIFT and speed up the inevitable… but at this point its going to happen anyway.
Also look for thousands of European “voters” to freeze to death this winter because of Brussels. England is predicting at least 10,000 will die; and England is in better shape (energy-wise) than the continent.
Merry Christmas a little late Tom. Screw you to all the wokesters who got triggered by me writing Merry Christmas instead of Happy Holidays. Happy New Year to all
Hey Bond!
I vote you best comment on Tom’s article. Those short peckered, dimwits in Brussles may be dumber than the ones in DC. Tough call! We can see how the first real winter of the Minimum goes before we decide! Meantime we better do what Erodgan’s people are doing, try and get our hands on a few five dollar gold pieces. Last resort, we can buy firewood and a barrel on the street corner. Wonder if Litefoot Lightweight brain has ordered a million barrels yet!