Here Are 350 Billion Reasons Why Banks Want You To Ignore Turkey's Turbulence

Tyler Durden's picture

Despite Erdogan's paranoia over "an interest rate" lobby or blaming the Lira's collapse on the Fed, as Gavekal's Nick Andrews notes, Turkey is showing no signs of stabilization. As the sell-side scrambles to explain how this is all priced in and "contained," it is very apparent from the following chart just how vulnerable to contagion the world is if Turkey defaults. The country's liabilities have multipled dramatically in recent years with over $350 billion of foreign bank exposure to Turkey on an ultimate risk basis.


Fragile and Complacent... (and in denial)

Gavekal notes - Turkey is not, however, showing any signs of stabilization. The lira continues to fall, and policymakers are doing little to contain the situation.


With soaring inflation, a plunging currency and a run for the exits, one would think Turkey would do what other emerging markets did during last year’s taper tantrum, and hike rates.


Instead the new economy minister said recently that this is not necessary, since the country is in tip-top shape. “We couldn’t create an economic crisis in Turkey even if we wanted to, it’s that strong,” said the minister, whose predecessor was purged in the recent corruption scandal.

Turkey has some uniquely bad problems...

Not only is its current account deficit at nearly 8% of GDP - the highest in the MSCI’s emerging markets universe—but the country is also geographically closer and thus more dependent on the eurozone, whose economic recovery is painfully slow. Its political situation is also clearly very unstable.

Still, as the chart below shows, the country’s liabilities have multiplied in recent years - adding to global contagion pressures if Turkey defaults.

Indeed, already fragile Greece is particularly exposed to the Eurasian republic. Turkish credit as a proportion of total Greek bank assets stands at over 5%, compared to 0.7% for the next two largest (Dutch and UK banks).



As Gavekal notes though - Europe’s exposure would likely be mitigated by the European Central Bank with their now standard response of pumping excess liquidity into the euro system to ensure no bank runs out of cash. This might explain why the peripheral eurozone countries are not suffering more fallout from Greece’s exposure to Turkey.

However, with the new template in place, depositors in Europe's banks exposed to Turkey may well prefer to pull their cash than trust their will be no haircuts for ECB aid...

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algol_dog's picture

Ugh, I got a headache ...

DoChenRollingBearing's picture

Well, if Turkey wants to mess around with buying oil for gold with Iran...

disabledvet's picture

we've been through this in New York... I wish i could say "i barely remember" and while it was a long time still seems like yesterday.

2008 is "nothing" (historically speaking) to the USA. For the rest of the World? I'm not sure even I understand it anymore.

BandGap's picture

Assholes are close enough to the EU they expect a freebie.

Fucking US isn't going to do shit, even if they are a part of NATO.

joego1's picture

Having Syria for a neighbor how can you loose?

Colonel Klink's picture

Good question, but how can they lose with AlCIAduh on the loose?

new game's picture

hey don't judge a people by their english/prose. i'm challenged in this area, but i can multiply 356 x 48(or any 3 digit number u throw at me) in my head in 30 seconds or less.. can you do that  fuck head? seize reality- and be nice to people...

Seize Mars's picture

I am nice to people. Loose / lose is something I have seen on the internet only in recent times. I'm not sure where it came from, but there are many who do this.

Also, why would you tell me a nice little story about multiplying numbers? I am combatting the slow destruction of our culture into a dimwitted heap of loose/lose, one internet denizen at a time.

So fuck your self.

kevinduhand's picture

US Fed still prints 75 billion per month

Groundhog Day's picture

350 billion? that's it. The US, EU, and japan could break out the checkbook and write a check for 3-4 months and it never happened.   The power of the CB's

Dewey Cheatum Howe's picture

Turkey it is what is for dinner and the BRICS are hungry. If the US/EU doesn't bail them out the BRICS will. Turkey is for sale to the highest bidder, another potential USD hedgmoney back breaker if they defect, they lose the entry point for the Nabucco pipeline at that point and the Russians/Iranians can call the shots which one of their gas fields feeds that whole system. Russia pretty much completely controls all the natural gas flowing into Eastern Europe at that point. Not only that think of the headache that causes NATO.

DoChenRollingBearing's picture

Nice analysis.  Russia has a great situation re Nat Gas and Europe.  Some of that would be feasible for Europe to work-around, but most would be very hard.

On the other hand, Russia has may problems that many people do not luch talk about.  Like demographics.

As far sa I am concerned, the USA can sit back and just watch this show.

Dewey Cheatum Howe's picture

It is more than that. Syria doesn't become so important now as a cockblocker for the Arab Gas pipeline. Changes the whole focus and war drum beaters need to look elsewhere, most likely shifts next to Cyprus over control of the Aphrodite gas field that is primarily in Cypriot waters but also sits in Turkish waters. That will throw a major monkey wrench in Israel's attempt to set up their own little mini EU with the other 2 and Greece concerning that gas field by hooking together infrastructure through a proposed peace pipeline. It puts in jeopardy EU's plan of having Israel as the secondary option to keep Greece and Cyprus from falling under BRIC influence if they implode. Regardless of what anyone else says the ECB going after Cyprus was to chase out Russian money and influence to keep Gazprom or some other Russian controlled gas company from being able to set up shop and cut a deal with Cyprus to pump that gas field.

Egypt and Qatari gas are still going to get pumped into Europe just up through North Africa through the Muslim Brotherhood corridor into Italy and Spain serving primarily Western Europe so they don't really have any vested interest to get involved once Turkey goes over to the BRICS.

Dewey Cheatum Howe's picture

It gets even worse. Erodgen is nothing more than useful Muslim idiot for the military. They call the shots no matter how much he may jawbone.

Turkey goes to the BRICS. First thing they do is send the troops in through Turkish Cyprus and unite the whole island under Turkish control. What is NATO going to do legally if Turkey is still part of NATO when it happens? They just took the whole Aphrodite gas field in one fell swoop.

There is only one set of guns you can send in there and that is Israel. Minute Israel fires a round into that show every Fundamentalist maniac they training along with the West to overthrow Assad is going to turn their attention to Israel directly. Those guys are being trained stealthily using special forces and the Mossad to fight in small enclosed area like Israel by the Muslim in Chief in the White House on the sly. The can overrun Israel easily like a cockroach infestation and negate any military advantage Israel has by turning it into a smalls arms/knife guerilla fight in a tight space with a civilian population they have no quams taking out at the same time. Is Israeli going to use their big guns and take out larges sections of their population at the same time just to deal with this sort thing? That is how they roll over there because the West doesn't learn their lessons. Muslims only respect one thing which is power they have no overarching loyality otherwise. They will easily put aside all that sectarian shit to attack a bunch joos once the jooos fire a shot at an Islamic government like Turkey if Erdogen is still in power. When you trip down the conflict lines elimiting Israel is number 2 above raw naked power and you no longer are viewed as top gun in the region anymore.... The best part is the Muslim in thief used you to train the jihadists in the first place. That is how subterfuge and deception rolls.

Dr. Engali's picture

Think about the insanity of it all. Every fucking country in the world is in debt up to their eye balls, and nobody knows who owns what debt. Yet the banker's "solution" to the whole thing is to take on more debt. And the dumb fucking iSheeple buy it..... We are so screwed.

BuddyEffed's picture

Well, usually the best way to fix debt is with real shit.  I'm guessing that real shit is hard to come by so they turn to the alternative and hedonically substitue in rehypothecated shit, where that's a different story and not so hard to come by.

JR's picture

Currency devaluations and depreciations, resulting in killer inflation, are tricks by international bankers to shuffle the money while you’re standing there and the minute they’re in charge of the money, they end up with the value and you end up with nothing.

This is the end of their game, the primary reason they took over management and control of the political systems.

Logically, currency wars are really manipulation and manipulation is really theft.

Where is the manipulation coming from? It’s coming from the manipulators. And who are the manipulators? They are the international bankers without country, without borders. And like the insider George Soros, they use currency changes in order to steal money from the people.

The citizens do not instigate currency manipulation; they don’t say what we need is a depreciated or devalued dollar, or lira; they don’t say what we need is inflation. It comes from the top. It filters down from the central bankers through the politicians in order to take the people’s money.

In May, Argentine President Cristina Kirchner vowed not to devalue her country's currency for the remainder of her term because she said doing so would hurt most Argentines

Wrote MarketWatch,“She said Argentina's history of economic problems and currency crises have shown the devaluations benefit only a few rich people while punishing and impoverishing the masses.

“’Devaluing the currency would strike right at the heart of Argentina's ‘economic model,’ she said. Mrs. Kirchner said she would never enact a policy that redistributes wealth from the poor and middle class to the wealthy. And that, she said, is exactly what a currency devaluation would accomplish...”

The falling Turkish lira leads to rising energy prices for the people, altered cost calculations for companies, massive malinvestment, higher prices for inputs that are imported, delays in investments from scratch due to project cost increases, the transfer of wealth…

Sound familiar?

Bioscale's picture

Very well said. I noticed that ZH ignored the devaluation of Czech currency last November where the central bank brought down the value of crown about 15% in a single day. You would not believe the reasoning of the central banker scum for this step, it was all laughable. The guy who was in charge on CB even got a prize from the magazine The Banker magazine, see here:

It is fucking unbelievable how the central banking mafia is playing with the world.

JR's picture

The drift toward international socialism has become a rush. Interesting, this account regarding the central banker’s move by Czech Radio 7, Radio Prague :

"Czech National Bank governor Miroslav Singer is basking in the limelight after being named the European Central Banker of the year by the Financial Times group monthly, The Banker.

"Bankers and economists at the prestigious publication last week picked out Singer for his brave decision at the start of November to intervene directly on the currency markets by selling crowns and buying euros to push down the value of the local currency to a target of K? 27/euro.

"The foreign praise is a welcome change from the wave of domestic criticism that accompanied the intervention and announcement that the central bank will seek to maintain the low level of the crown for at least the rest of the year…"

matrix2012's picture

Bioscale,  your link has "404 - Stránka nenalezena"


But here is the working one in English...

and it's even more impressive that the Banker Award in 2013 went to the head of Turkey’s central bank Erdem Ba?çi :-)

looks like a Judas touch!


CNB > Media service > Press releases of the CNB > 2014 > Governor Singer wins The Banker award

Governor Singer wins The Banker award

3 Jan 2014

Governor of the Czech National Bank Miroslav Singer has won the Central Banker of the Year in Europe award for 2014. He received the award from the renowned monthly The Banker published by the Financial Times Group. The judges praised the Governor for the foreign exchange market interventions in November, which led to a weakening of the koruna with the aim to maintain price stability and facilitate economic recovery in the Czech Republic. According to the editorial board of the magazine, the award expresses the confidence of foreign financial markets in the Czech National Bank and its conduct of monetary policy.

“I am pleased to receive the award from The Banker, part of the prestigious Financial Times Group, above all because it represents acknowledgement of the work of my colleagues in the Bank Board and all the experts at the Czech National Bank. I am aware that such awards tend to reflect how our decisions are seen by the professional public and the relevant media rather than being a final evaluation of those decisions, which can only be made by history. However, this is confirmation that in the context of our current knowledge of the theory and practice of monetary policy, the steps we are taking are seen by the broad professional public as an appropriate and effective response to the current situation of the Czech economy,” said CNB Governor Miroslav Singer.

The Banker is a renowned monthly which has published information from the world’s banking and financial sector since 1926 and is part of the same publishing house as the prestigious economic daily The Financial Times.

The Banker awarded the 2014 prize to the CNB Governor at the decision of the magazine’s editorial board based on the opinions of a panel of experts. The panel consisted of selected economists and bankers, who, according to the editorial board, praised the Governor’s efforts to ease monetary policy through foreign exchange market interventions and his leading voice among Central European countries in the discussions on achieving financial stability in the European Union.

The head of Turkey’s central bank Erdem Ba?çi had received the European Central Banker of the Year for 2013 from The Banker.


TPTB_r_TBTF's picture

> I noticed that ZH ignored the devaluation of Czech currency last November ...


I noticed that you ignored ZH's coverage:

Czech Republic Enters Currency Wars With First FX Intervention In 11 Years, Koruna Plunges

Bioscale's picture

I missed that one, thanks!

limit_less's picture

When debt gets too much, the money centre banks get into hard assets. They collapse the currency to relieve debt on their biggest customer (the government) and then start again. Profiting on money lent to the government which is paid through taxes.

The only thing important in a currency devaluation is that the central bank still has its monopoly on the production of the currency and *a* government still has the power to extort people at the end, everything else can go to sh**

JR's picture

A superb analysis. So much for the essential function of money as both a storehouse and measure of value. The only way to make people accept worthless pure fiat is by government force. Hence, the central banks. They’ve addicted the politicians on the narcotic of creating money out of debt. And now they own them. The most blatant scam in history!

As Bioscale says, it’s “unbelievable how the central banking mafia is playing with the world.”

Peter Pan's picture

We DO know who owns the debt. It's the entities who have monies deposited in the first place in tax havens before those funds are re-directed back into the real economies.

So the solution is to either confiscate those deposits or bomb those bank havens. (the banks that is).

With some 30 trillion dollars in tax havens, I am sure the world would earn some much needed respite.

frankTHE COIN's picture

Perhaps this is always how it ends. The Economy Minister sounds like a remix of Bernanke, Bove or the Titanics Captain, all screaming how all is fine. Even as the ground is disappearing around their feet.

gwar5's picture

Fight in MENA primarily Sunni vs Shia, but interesting now also Secular vs Shariah.  Muslim Brotherhood (Obama, Sunnis) dealt a huge defeat in Egypt, with similar friction in Turkey.  Moderates rising up, not cowering. No big craving for Shariah fundamentalism anymore. Will take another 1400 years to sort it all out.


Muppet's picture

I can only offer that I was recently in Istanbul and the economy was vibrant and the city clean.  I have a Greek family, who distrust the Turks, but I could not help but notice how much better things were in Istanbul versus Athens.   Athens still hangs on to some tourism, but Istanbul is gaining it.  Just saying, from a boots-on-the-ground perspective.

Joe A's picture

Yes but the bubble in Greece has blown and in Turkey they don't realize it yet. Istanbul is a huge vibrant city but Turkey's wealth is only located there. The hinterland is really underdeveloped.

Peter Pan's picture

Turkey's population is far from homogenous. It has Turks, Kurds and a great many crypto-Christians. On top of that there is the divide between the secular Muslims and those who want a return to the traditional version of Islam.

Athens is a basket case and by extension so is Greece until they shake that odious debt that they are forced to carry without hope of servicing let alone repaying.

The cherry on the cake is the constant needling by the Turkish military making incursions into Greek airspace and Greek waters.

Northern Greece is festering with citizens who are Muslims seeking "reunion" with the Turkish motherland.

It's a great neighbourhood for arms dealers and for third parties wanting to benefit from conflict.

Joe A's picture

Turkey is not Uganda and 2014 is not 1914?

dunce's picture

Pipe lines as extortion tools have limited life times.

JR's picture

As do the bankers' extortion tools of  foreign currency interventions and tinkering with interest rates when they reach zero.

q99x2's picture

Is Greece going to default?

Peter Pan's picture

Yes, but not officially. When you can barely run a primary surplus, have negative economic growth and the debt pile is getting higher, what do you think is going to happen.

Greece's official default is being delayed so as not to cause an avalanche of more defaults.

TheRideNeverEnds's picture

350 billion is child's play, there are individuals that could pay that off in cash.  Now granted they would not do that and if turkey defaulted TPTB would 'bail out' those of their friends affected at the expense of the average man but still, that's not much money at all, certainly nothing to be concerned about.


Sheeit a few weeks ago the US debt went up nearly 350 billion in just one day.


Stay calm and just buy more e-minis; systemic risk is a thing of the past, volatility is finished, everything will be fine.

DOT's picture

Turkey just needs a bit more money to see them through this crisis.



^P          (feeling better now?)