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Turkey's economy - a glimpse of the future?


Frank Hovis
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King Penda
21 hours ago, Frank Hovis said:

Erdogan reminds me of Captain Rum from Blackadder: "Opinion is divided, all the other Captains Presidents say it is and I say it isn't"

 

The president and his allies says that lower interest rates will boost Turkish exports, investment and jobs.

But many economists say the rate cuts are reckless. Last month, the country's inflation rate hit 21.7%.

Normally, central banks raise rates to combat rising prices, but Mr Erdogan has called such tools "the mother and father of all evil".

Although the bank has attempted to bolster the value of the lira by using its dollar reserves to buy the currency, analysts have said it does not have enough firepower to stop the slide.

https://www.bbc.co.uk/news/business-59681825?at_medium=RSS&at_campaign=KARANGA

 

And the poor get poorer.  Coup anyone?  The last attemnpt was in 2016.

 

"Half of the country is trying to make ends meet with the minimum wage. There is a capital transfer from the poor to the rich. Those who have money add more to their dollars. Other people are trying to make ends meet with their small wages.

"What matters for the people is to stockpile cheese or chickpeas before their prices increase again. People worry because they don't know whether they will be able to buy things that they can buy now. The minimum wage has supposedly increased but the purchasing power is eroding day by day. The poor who live in rental homes are getting poorer day by day."

https://bianet.org/english/economy/255086-interest-rates-are-decreasing-but-turkey-s-debt-is-multiplying

 

Mortgage interest rates at 20%; central bank rate at 16% (down from 18%).

Turkey has been running huge and growing current account deficits, $33.1 billion in 2016 and $47.3 billion in 2017,[17] climbing to US$7.1 billion in the month of January 2018 with the rolling 12-month deficit rising to $51.6 billion,[18] one of the largest current account deficits in the world.

https://en.wikipedia.org/wiki/2018–2021_Turkish_currency_and_debt_crisis

https://tradingeconomics.com/turkey/interest-rate

 

Most of us are captain rum where covid is concerned and on tos regarding a house price crash

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This thread is spot on highlighting currency moves.  It is, apart from importing inflation, a central banker's wet dream.  The problem has been all CBs have been devaluing in union, but IMO even so UK houses, etc really have not done that well if one looks beyond the £ value.  But few do!

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8 hours ago, spunko said:

Would you put your faith in a foreign government though? I wouldn't. 

If i embezzled a couple of million in the UK, i'd sleep better at night with it being in another so called civilised western country, more so then it being sat in a  UK bank .... or in the case of a Chinese person, a Bejing apartment.

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Green Devil
On 02/01/2022 at 10:35, Frank Hovis said:

What does a low interest rate policy despite high inflation equal?

A collapsing currency is what.

 

Turkish lira just had its worst year in 2 decades

Turkey’s national currency lost nearly half of its value against the US greenback in 2021

 

And a President begging his people to sacrifice their savings by holding lira.

 

On Friday, Erdogan urged citizens to stick to the lira for their savings, claiming that market volatility was under control.

As long as we don’t take our own money as a benchmark, we are doomed to sink. The Turkish Lira, our money, that is what we will go forward with. Not with this foreign currency or that foreign currency,” he said, adding that his government will continue pursuing a low-interest rate policy, which it sees as a means to lower prices, but is highly criticized worldwide

https://www.rt.com/business/544981-turkish-lira-worst-year/

 

The first thing a fucked up government does when its currency is collapsing is ban bitcoin... Turkey just did, this is your leading indicator of hyper or high inflation.

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Frank Hovis
9 hours ago, Funn3r said:

I am not normally keen on this guy but think he has got something with this story.

Recep Tayyip Erdogan is a lunatic but he’s a lunatic with a plan.

https://tomluongo.me/2021/12/23/is-this-erdogans-exit-strategy/

 

It's a nice piece if original thinking but he's spinning it horribly. He says Erdogan built up foreign reserves and closed the current account deficit in 2018 but neglects to say that they have both since collapsed.

The point with which I do agree with him is that there comes a point beyond which raising interest rates has little positive effect.

I noticed in the stories about Turkey being reckless in cutting interest rates that what the rates actually were not being quoted; it put a very different light on it when, unlike the UK cutting from 0.25% to 0.1%, Turkey was cutting from 18% to 16%.

Similarly I agree that stopping the central bank raising from 20% to 30% was the right move. It would have been much pain for little gain.

 

As to the rest of it well yes Turkey has importance through its location but the rest of it reads like Max Keiser's dollar hit pieces for RT.

Turkey had just this kind of inflation through the 90s; it impoverished Turkish people then and it is doing the same again.

Erdogan is a lunatic.

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Axeman123
11 hours ago, Funn3r said:

I am not normally keen on this guy but think he has got something with this story.

Recep Tayyip Erdogan is a lunatic but he’s a lunatic with a plan.

https://tomluongo.me/2021/12/23/is-this-erdogans-exit-strategy/

I cannot really fault his assesment of the big picture, or even his conclussions about Erdogan's likely plans. Where I differ is that Erdogan is A) reacting rather than playing out a masterfull strategy of controlled chaos, and B) likely to fail.

The point raised over control of traffic between the black sea and mediteranean, and hence between Russia's navy and the rest of the world cannot be overstated. This actually makes Turkey far more important to both Russia and the west than the crimean peninsula. 

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7 minutes ago, Axeman123 said:

I cannot really fault his assesment of the big picture, or even his conclussions about Erdogan's likely plans. Where I differ is that Erdogan is A) reacting rather than playing out a masterfull strategy of controlled chaos, and B) likely to fail.

The point raised over control of traffic between the black sea and mediteranean, and hence between Russia's navy and the rest of the world cannot be overstated. This actually makes Turkey far more important to both Russia and the west than the crimean peninsula. 

I imagine that Russia are "very concerned" about that maritime choke point, to put it mildly!  I concede your point (A) with the implication that Erdogan is not smart enough, but I do think Putin is smart and resourceful enough to come up with such a strategy and put Erdogan in front of it as a puppet. 

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On 03/01/2022 at 09:40, WICAO said:

With Cyprus it worked well as we ended up essentially only wearing 2 x removal costs, a bit of rent and some car depreciation given we sold quickly to come back to the UK.

What went wrong with Cyprus?

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Axeman123
19 minutes ago, Funn3r said:

I imagine that Russia are "very concerned" about that maritime choke point, to put it mildly!  I concede your point (A) with the implication that Erdogan is not smart enough, but I do think Putin is smart and resourceful enough to come up with such a strategy and put Erdogan in front of it as a puppet. 

I have read before that Turkey has for centuries considered itself to have been trapped between competing outside powers, constantly struggling to remain independant and nuetral. Ironically the Western/Globalist overreach in trying to topple Erdogan in favour of a puppet seems to have pushed them towards Russian and de-dollarisation. This seems very reminiscent of Ukraine, where again a nuetral regime was toppled to install a puppet one and now Russia looks set to annex the crucial part of that country.

On the subject of Ukraine, I have often heard Putin needs it for a warm water port. However a glance at a map of the Black sea shows Russia has it's own coastline all the way down to Sochi. Is that coast completely unsuited for building ports?

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2 minutes ago, Axeman123 said:

On the subject of Ukraine, I have often heard Putin needs it for a warm water port. However a glance at a map of the Black sea shows Russia has it's own coastline all the way down to Sochi. Is that coast completely unsuited for building ports?

I really fancy going to Sochi, ever since about 5 years ago when they had the winter olympics. Looks great in summer and fairly cheap by my standards. 

I think the issue is not whether Russia could put a port there, but the fact that ships from that port need to be able to sail off somewhere outside the Black Sea. Istanbul the only option really.

I watched an unintentionally hilarious BBC documentary last night called Warship. A British fighting ship crewed with fine stalwarts, its mission to protect the UK against the "threat" from the devious and aggressive Russkies! The captain was prone to soundbites about his mission to prevent Russian ships from entering UK waters - this was whilst positioned somewhere off northern Norway! There was a cameo appearance from the Viktor Leonov, a deadly Spy Ship, which the well-trained matelots counfounded by advanced electronic warfare. Er, this consisted solely of all the crew having to remove their SIM cards.

Anyway, no Istanbul exit from Black Sea would mean crafty Russians no longer be able to perpetrate this kind of harassment.

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1 hour ago, gibbon said:

What went wrong with Cyprus?

Still have very fond memories of Cyprus as a country and a people.  Cyprus didn't go wrong we went wrong with some examples being:

- Didn't figure out how to get access to meaningful friends and family.  Also struggled to make new friends with similar interests as we didn't want to get into the Brit Expat scene which seemed to revolve around drinking beer in the local bar and our Greek wasn't good enough to really integrate with the locals.  We could have fixed that but to truly become fluent would have taken some time and we had a plan B which would solve that far faster.

- I struggled with finding purpose.  I had the resources to sit on the beach and drink margaritas for the rest of my life but there is far more to life than that.  Having had time in Cyprus to reflect I wasn't sure if I was done with my 'career' and also starting something new was going to be difficult given the industries in Cyprus and my lack of local lingo.  I've now confirmed that my 'career' is done but I had to come back to the UK to prove that unfortunately.

- Which leads me to we went at it too hard.  I went from South East England and a 60 hour a week job to Cyprus and no job in 3 days.  In hindsight what is working for me is to gradually transition into FIRE.  So I should have given up work and then waited for 6 to 12 months before moving to Cyprus.

So with those lessons Australia is working out really well:

- A previous stint in Australia, even though it was a long time ago, gave us a network we could rebuild quite quickly.  Also we really wanted to focus on outdoor life and the people we have access to where we are living very much allow that.

- I'm down to 4 days a week work which is 100% work from home.  I'll likely step that down to 2 days this year.

- Fluency in the local language is really helping me do some cool stuff with the time I've gained.  For example building my own home.

There's a blog post with the long and sorry tale if you'd like all the gore.

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Axeman123

The accounting tricks have started:

https://uk.finance.yahoo.com/news/single-day-10-billion-profit-094442241.html

"The monetary authority had penciled in an annual loss of around 70 billion liras ($5.2 billion) on Dec. 30 but ended the year with 60 billion liras of profit, an unprecedented change of fortunes in a single day, according to its daily balance sheet. In February, the Ministry of Treasury and Finance -- as the central bank’s biggest stakeholder -- will begin collecting much of that sum as dividends."

...

"According to Turhan, a possible explanation for the sizable overnight profit boost could lie in the sale of foreign-exchange reserves to the Treasury. The lira’s depreciation makes foreign reserves more valuable in local currency, but that can’t be logged in the profit column until the reserves are sold, he said.

The same amount of dollars would then have to be bought back to maintain the reserves level, Turhan said."

Turkey sold its FX reserves to try and prop up the currency, and is now representing that as an increase in the balance sheet to be paid to the government as dividends. This seems very "death-spiral" to me!

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belfastchild
30 minutes ago, WICAO said:

- Which leads me to we went at it too hard.  I went from South East England and a 60 hour a week job to Cyprus and no job in 3 days.  In hindsight what is working for me is to gradually transition into FIRE.  So I should have given up work and then waited for 6 to 12 months before moving to Cyprus.
 

A lot of my friends are currently looking at early retirement (mainly high level IT bods).
That paragraph is the one thing I keep emphasising to them. Find something meaningful to do with your time. Yes you can do things around the house but they will run out. You can join a gym etc etc but having something you can carry through is worth a hell of a lot more. If you can go part time or have a hobby business that doesnt drain too much cash then you are on to a winner.

I do about an hour or two a day and maybe a day or 3 out with clients a month to keep my sanity if nothing else (throw in a coffee meeting/lunch a week and I dont know how I ever had time for a full time job!)

I can literally sit here and do f all (like now ;-)) but as mentioned above, if you are used to working all the hours God sends then you cant just go to nothing as it will do your head in/drive you to the poison of your choice.

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2 minutes ago, belfastchild said:

A lot of my friends are currently looking at early retirement (mainly high level IT bods).
That paragraph is the one thing I keep emphasising to them. Find something meaningful to do with your time. Yes you can do things around the house but they will run out. You can join a gym etc etc but having something you can carry through is worth a hell of a lot more. If you can go part time or have a hobby business that doesnt drain too much cash then you are on to a winner.

I do about an hour or two a day and maybe a day or 3 out with clients a month to keep my sanity if nothing else (throw in a coffee meeting/lunch a week and I dont know how I ever had time for a full time job!)

I can literally sit here and do f all (like now ;-)) but as mentioned above, if you are used to working all the hours God sends then you cant just go to nothing as it will do your head in/drive you to the poison of your choice.

100% agree.  Purpose is the holy grail of life.  Maslow called it Self Actualisation.  I know what I don't want to do which cruelly just happens to be what I'm good at and what I can be paid well for.  I've been trying to figure it out for years prior to FIRE and I'm still trying to figure it out. 

One tool that I've used that has helped me is something called Ikigai.  Crudely you've reached Ikigai if you're good at it, you love it, the world needs it and you can be paid for it. Only get two of those things and you have a passion, a mission, a vocation or a profession.  For me I was doing a profession and wanted/needed more out of life.

My FIRE journey itself was hugely motivating so that filled quite a gap on the journey but in hindsight it also masked the true problem I had to figure out - what is my purpose.  I'm getting better but I'm still definitely trying to figure it all out post FIRE which is why I'm still working 4 days per week for the man.  It's certainly not because I need the money.

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Bobthebuilder
2 hours ago, WICAO said:

100% agree.  Purpose is the holy grail of life.  Maslow called it Self Actualisation.  I know what I don't want to do which cruelly just happens to be what I'm good at and what I can be paid well for.  I've been trying to figure it out for years prior to FIRE and I'm still trying to figure it out. 

One tool that I've used that has helped me is something called Ikigai.  Crudely you've reached Ikigai if you're good at it, you love it, the world needs it and you can be paid for it. Only get two of those things and you have a passion, a mission, a vocation or a profession.  For me I was doing a profession and wanted/needed more out of life.

My FIRE journey itself was hugely motivating so that filled quite a gap on the journey but in hindsight it also masked the true problem I had to figure out - what is my purpose.  I'm getting better but I'm still definitely trying to figure it all out post FIRE which is why I'm still working 4 days per week for the man.  It's certainly not because I need the money.

Hi @WICAO, enjoyed reading your blog back in the day.

I put the remainder of my mortgage into an offset at 100% and went part-time 3 years ago. I still struggle to find direction sometimes. I used to work in construction 5 days a week installing central heating (self-employed), when I went part-time I switched to boiler repairs only. It's quite satisfying work to do, people are happy to see you when you turn up and really happy when you leave them with a working boiler. There is a kind of karma about doing the right thing.

For me, it was like I was running down that tunnel towards the light, then suddenly I was out of the tunnel into the open bright sunlight, but I kept on running, not knowing what direction to head towards. It took awhile, and I've still not quite stopped jogging yet.

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