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Turkish Lira Plunges To Record Low After Erdogan Lambasts Central Bank "Independence"
"The honeymoon is over," warned SocGen overnight as "the trade of the year" turned into carnage after, essentially, a big policy error on the part of the central bank in the context of serious political pressures. Just today President Erdogan explained to whoever would listen that "interest rates are the cause of inflation," and "some are trying to hold Turkey back with interest rates," adding that "you can't decide interest rates based on inflation." However, his conclusion was what really sent the Turkish Lira spiralling... "unfortunately, this is the result of an independent central bank."
Erdogan-land...
- *ERDOGAN: SOME TRYING TO HOLD TURKEY BACK WITH INTEREST RATES
- *ERDOGAN: YOU CAN'T DECIDE INTEREST RATES ACCORDING TO INFLATION
- *ERDOGAN: INTEREST RATES ARE THE CAUSE OF INFLATION
- *ERDOGAN: UNFORTUNATELY, THIS IS RESULT OF INDEPENDENT CENBANK
The Turkish Lira collapses almost 5 handles today to new record lows against the USD
As SocGen warns, The honeymoon is over
Turkey was supposed to be the big trade of the year. After all, it did look particularly good at some point, with the sharp decline in inflation and the collapse in oil prices. Somehow, Turkey had become the new darling of global emerging markets (GEM).
Fast forward a month or two and this is now all over.
So what happened? Essentially, a big policy error on the part of the central bank in the context of serious political pressures. The emergency meeting saga caused tremendous damage to the credibility of the policy framework and to investor confidence.
I am in the US visiting investors right now, and nobody is bullish on Turkey any more.
Last time I was there, everybody was. If I had been in the governor’s shoes, I would have stayed quiet and continued easing normally at each scheduled meetings. Nothing wrong with that, and in fact, Mr. Market was going to love it. I would also have looked up the definition of “emergency” in the dictionary.
The TRY selling off by 2% each day, causing serious stress in the local financial market? An emergency.
Inflation declining a bit faster than usual, helped by fortunate external factors? Not an emergency.
Overall, this was a highly disappointing experience and now the CBRT has moved to my list of “fading” central banks from that of the “following” ones. What I mean by that is I want to position for policy backtracking in Turkey at this point, given the heightened risk of policy volatility. Our 1s5s curve steepener has been struggling quite a bit, as it was a bullish trade on market-friendly policy easing. We just elected to close it at flat PnL.
Meanwhile, I believe that positioning is still heavy on the Turkish bullish side, even if sentiment has sharply deteriorated, which represents a major technical risk.
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Never ever let bankers control the money supply. Much better it be politicians.
Central bankers ARE politicians. Don't really see how you can grasp what is going on in the macro economy unless you understand that.
Am I to understand that my offer of 20 goats for Amir's daughter has been debased?
yea it's 23 goats now. get to work breeding them bad boys. i hope you got a horny stud.
I know it's all 'statist' <rolls eyes> and everything to point this out, but using the politician worked a helluva lot better for the little guy as far as I can tell, at least judging by wages and national balance sheets prior to Basel I subjugating the Central Banks.
Who is more likely to fear the populace, an elected politician or a wholly unaccountable, inscrutable international private banker?
As a rule people don't shit where they eat.
Of course since we've allowed so much debt to be privatized (for our own good, I'm told), naturally the lion's share of today's politicians have morphed into little more than private bank reps themselves.
But in this case the bank has not been printing money. In this case it is Ergodan who is inflating the money supply by deficit spending and trying to blame the central bank for it.
Or lawyers or cowboys and such
RED ALERT. Jeremy Sigal is bullish!
These piss ant rouge nations need to get with the program. The Central Banks have done a great job modeling our economic pardigm. Why are we allowing these small nations to dictate thier will and jepordize the world's future. Time to send some troops or drones to get them inline.
Please, enlist and get going!
I would but I am much to old and I dispise guns and violence. I'm sure there are some young kids who grew up playing video games that will fit the bill. I'd be ok if someone else did the dirty work for me. I'd be cheering for them hard from the homefront though. God bless our troops.
I'll sign on as long as it's brown kids instead of white ones.
Just following my goobermenit's policies here, "folks"
I am thoroughly enjoying your trolling today. Well done.
Central Banks - independently serving the banks and not the citizen for 100 years.
Basel I was 1974. Once the private banks became the ones financing the group of 10 a curious thing happened: all their national debts 'blossomed' parabolically (or diabolically, if you prefer)
Prior to that the gov'ts were fairly frugal despite the nations' respective Central Banks providing the financing; McGeer's method served many nations reasonably well for a decent chunk of the 20th century, because as the nations repaid any debts they incurred to themselves it strengthened their economies
While both systems are inherently inflationary, guess which system has proven to be much more 'inflationary' (monetarily), not to mention with little or no benefit of repaying debt going to the nation that does so
There are a lot more moving parts to this machine (Eg.Nixon 1971), natch, but 1974 was the TSN turning point, IMO.
ps. I didn't downvote you, I think you have the right idea
buffett now sets monetary policy
The margin of error is getting mighty slim for the CB's. While everybody is watching Greece and crude, the next "Black Swan" could come from something just like this, sending the whole house of cards into the crapper.
Buy a rug from them that you see made in front of you..and they ship you a rug made in China....lol...rug merchants that is all they are...
Chances are they'd pulled one of those Chinese rugs apart just a liitle, waiting for someone like you to walk in... you gotta think like a Turk ;-)
German drugstore baron loses over 200 million euros after his bet on the turkish lira/ swiss franc currency pair went south:
http://www.focus.de/finanzen/boerse/vom-starken-franken-kalt-erwischt-dr...
this should make condoms more expensive in small German towns.....
Thank goodness we have reliable and honest banks like SocGen leading the way and telling us how and when to trade.
Is that the same SocGen under investigation for money laundering?....and also partnered with Goldman to loot Libya's investment fund?
I would think the banks think this is a great thing...you just give them 100..they give you back 95...easy money for them
"Independent Central Bank" ??
Too little "oxy" , way too much "moron"
K
Note to ZH intern: USD/TRY
And put. the. coffee. down. Coffee is for closers.
My friend started a cash for gold many years ago. Here was his statement to me. "People come in to me with $1000.00 and I give them $500.00 in exchange.........and THEY"RE HAPPY"
“unfortunately, this is the result of an independent central bank.”
So says Erdogan; unfortunately, he just doesn’t get it. Whether a central bank is “independent” or not is quite irrelevant. I mean, who cares whether bankers control the central bank, or their client crowd of criminals and useless? Hey, we get the same thing: rule by cutthroats and useless.
The purpose of central banks is to facilitate the cannibalization of following generations of taxpayers. Of course, this is never stated in polite company; instead, the captured nation is told the bank will maintain the value of its currency.
So, how does this cannibalization take place? When criminal and useless classes (some people refer to them as a “government”) need more cash to conduct their genocides and general plunders, the central bank simply prints more currency (or creates more computer impulses) AND EXCHANGES these for outstanding government debt. Such debt then becomes an obligation imposed on following generations of taxpayers; hence, cannibalization of the children and grandchildren of people then living.
Obviously, the measure of this cannibalism is the amount of outstanding government debt; and this total looks very bad for those who follow us.
Too bad; for criminal and useless classes tend to forget that a governor of Scotland, an Anglican bishop and an English king all lost their heads because they preached the “divine right of kings” and attempted to impose taxes, and debt, on people without the latter’s consent.
This is part of the legacy we inherited with the American Revolution; if we had not done so, we would have to invent the same.
Too bad, again; for, while Americans today have the same power their Founders had, hardly any of them know it.
Yet, while our central banks are guilty of tampering with the money via QE, in this case the central bank is innocent.
Instead it is Ergodan, he is causing inflation by not being able to balance his budget, his governments debt increases the money supply thus causing inflation.
As a typical lying politician he is simply trying to blame someone else for the problems he creates, the problem is that the sheeple swallow it and then wonder why after punishing the innocent (putting the central bank under the control of someone who cannot pass a balanced budget is utter folly). I am a strong believer in sound money, the central banks should be following a gold/precious metals standard, that is the change we need, not putting them under the direct control of economic incompetents like Ergodan.
You are almost there.
Erdogan is a politician, which means that he is a puppet of private interests that dominate Turkish governments.
The Turkish central bank monetized “his” debt because those private interests (Turkish criminal and useless classes) deemed his actions in accordance with their instructions.
Yes, I too, believe a sound money must be gold-based; and it should be managed by those who would be accountable for their failures just like any other civilized man. This means the currency should be managed by private interests.
Central bank independence = license to steal, nothing more. Invented by bankers for bankers.
That chart is USD/TRY, not TRY/USD
The One Bank has tenticles everywhere.
I doubt very much that a run on the currency has anything to do with that pipeline from Russia. Can't be.
I see a coup d'etat agaisnt Central Banks around the world.
Erdogan is lying, this is the typical socialist one too.
The cause of inflation is easy to spot, its in the name. Its the "inflation" of the money supply where there is more money chasing the same number of goods.
Who is inflating the money supply? Not the central bank in this case (unless they are doing QE/money printing), the cause here is Erdogan, he is inflating the money supply by deficit spending. How this works is the government needs to borrow to fund their spending, this would not increase the money supply if they simply borrowed from the population (in their own currency), but they do not, instead they sell debt on the international market and new local currency then enters the circulation thus increasing the money supply.
If Turkey wants lower inflation then they need to point the finger of blame at the ones causing it, the government by not being able to balance their budget.
(Our inflation will come from the central bank AND government, since both are creating money).