Piling On To The "Surreal" Response To Turkish Turmoil: Here Comes The Central Bank

Tyler Durden's picture

Update: Turkey's central bank indeed cut, and by 25 bps, in line with expectations:

  • Turkey central bank cuts top end of its rates corridor 25bps to 8.75%, as expected
  • Holds benchmark repo rate at 7.5%, as expected
  • Holds overnight borrowing rate at 7.25%, as expected

* * *

In less than half an hour, the Turkish central bank will steal the public spotlight, if only very briefly, from Erdogan when it announces whether it will cut rates by 50 bps, 25 bps, (or - less likely - it won't cut at all). But in light of the recent stunning transformation in the country's political landscape, does this decision really matter? According to the market yes; according to Bloomberg's Richard Breslow, it is simply one more indication of how surreal the response to the Turkish turmoil has become.

Here is his full note.

Turkey Shouldn’t Be Confused With a Penny Stock

Much of the response to the turmoil in Turkey has been surreal, to say the least. While President Erdogan was rounding up thousands of alleged plotters, shuttering media, closing down a bank and accusing the U.S. of harboring the ringleader there has been a lively debate whether this means the central bank should cut 50bps today or only 25.

Do we possibly think it will make a difference? Apparently a lot of people do. In this age of monetary policy uber alles, every setback somehow gets sold as a buying opportunity. There are no long-term ramifications ascribed to anything.

“Valuations look cheap. Yields look attractive.” Forget that the tourist industry will be toast. That business and consumer sentiment are likely to tank. The news cycle will pass. After all there’s great sports on the television.

There was no shortage of assurances that the impact was localized and no reason this couldn’t be a “risk-on” day for the rest of us. No reason to worry about the European banks that have been betting heavily on Turkey. And just wait until Europe gets a freshly topped-up bill for the Syrian refugee deal.

Moody’s and Fitch immediately warned on the country’s ratings, citing instability. Can’t have that. IMF Managing Director Lagarde countered that “quick action” by the CBRT has calmed markets. Move along, nothing to see here.

So what if the war on terror just got more difficult, they’re a member of NATO. Oh wait, didn’t U.S. Secretary of State Kerry warn that Turkey’s behavior may make it unsuitable to be part of that organization? Tough words. But when this stress test is evaluated they’ll be deemed systemically important and too big to fail. Erdogan is counting on it. Someone had better tell ISIS.

Monetary policy can cure many ills. Sort of. But to think it can eliminate all geopolitical risk and societal failings is a dip too far to buy.

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wildbad's picture

oh thanks for that draghi (via turkish proxy)..opine elsewhere pleeze

wildbad's picture

btw ..turkish tourism already IS toast

small towel's picture

It's the Monday morning following a failed coup d'etat in Turkey, and apparently the less the mainstream media reports about what's really going on at Incirlik Air Force Base, which hosts more B61 tactical nuclear bombs than any other single American installation in Europe, the better. This story about lax security surrounding U.S./NATO nuclear weapons in Belgium and historically at Incirlik AFB from The New Yorker published on Sunday, is the exception to the media blackout that proves the rule. Nobody's talking and few servicemen want to talk on their Facebook or Twitter feeds about what's been happening the last few days at the strategic NATO air base.

UPDATE 1 01:30 Eastern time July 19, 2016: It's Tuesday morning at Incirlik AFB, and as of six hours ago, the power was still off

new game's picture

I filed turkey in the venzuala basket(dumpster next)...

next dark age country. maybe merica could liberate turkey, ah shit thats right we don't need to liberate a nato country, they can liberate themselves.

liberetated liberals trying to liberate your freedoms

new game's picture

wow, looking at the deck i see some vacant chairs labeled venzuala, syria, pakistan, egypt, most of afria(multiple chairs disguised as couch), iraq and now turkey. i'm sure i missed a few, geez, nobody wants a seat. getting like nowhere to hide...

and what do they have in common? clue see ia, hitman, MIC...

merica an empire on the march.

BobEore's picture

I filed turkey in the venzuala basket

With ya there. Twas but a couple weeks back referred to the home of the failed coup .tm

as

"Venezuela with a water pipe!" And that was pre-coup. This author must have been drawing deep on the same smoke-filled device. The piece is devoid of any intelligence(in both senses!)or meaning. No one...

no one is going to be putting money into this place any time soon. Even Saudis are broke! Banks - drowning in bad loans - only the beginning as small business croaks big time. Consumers - stopped out on credit card debt. Campaign to repatriate nationals wealth to homeland - total abject failure. Central bank policy - handed to a lackey of the puppet in chief so as to practice weird variations on "islamic banking" with the nation's reserves as fodder for foolery. Agriculture? Higher and higher prices for meat but regime forced to allocate big $ from reserves for importing cattle and sheep. Domestic cattle and sheep producers leaving in droves at same time. Meat out of reach for 7 out of 10 families. Grains and beans same situation.

Policies which have directly put the economy on the skids. Nobody talking about it. Let's talk bout 'basis points instead.' Joke.

Big reason to rush the phony coup before ready to produce a polished product? In two months the damage to this countries economic health will be so pronounced as to leave everyone gasping - in rage at the wanna be Caliph and co. So he had to move first. Last of the free media will be gone as of this week. Complaints department closed.

Second reason. Zarrab in custody in a NY jail - house arrest arrangements denied by judge - even with a $50 million dollar bond posted as proposed condition! That's a lot of shoeboxes of loot.... loot the trail to which would hang a crew of corrupt crony neo-liberal Islamist and blow the lid offa what got nailed down again after Gezi Park.

Zarrab is sitting on the goods. The whole Iranian gold deal. House arrest would have been his ticket to a swimming pool accident or hanging from a tie in the closet. Now they have to get him from inside the joint. If they fail - the skeletons falling out of that closet will be making more noise than a phony shoot out on the Bosphorus bridge!

All this talk about Gulen is hot air. It's Zarrab they need back - and so badly, they'll do anything to achieve the hand over- including making a grab for Incirlik nukes?

Stay tuned!

lakecity55's picture

That's the least of their problems. Bath House and Kemal WhattaTurk stole all the nukes and gave them to ISIS for some cheap oil.

"Haha, I'll show those Russians and Syrians. What are you gonna use yours on, Imam Blowbama?"
"Recep, I'ma use mine in any state where Don Trumpleone is leading."
"So that's why I got less than you did?"
"Yes, there are 57 states. I have race wars planned when I run out of nukes. All you have to do is blast Damascus and have a couple for insurance in case the whole Russian Army comes over your border."
"The Koran and Bible say Damascus will be wiped out. I intend to fulfill the Prophecy!"
"You've been listening to Imran Hosein again, haven't you?"
"I have all his CDs. He lets you get the CD and then send him the money. Idiot! I have the whole library, free!"
"Knock off some copies for me! Am I mentioned?? Huh?"

nmewn's picture

It is interesting, Obama has "lists" and so does Erdogan  ;-)

HenryHall's picture

Erdogan wants the Hydrogen bombs to be transferred to the Turkish side of Incirlik base in return for electricity and water supply.

snakehead's picture

and yet the US claims that it's still striking ISIS from Incirlik.

beijing expat's picture

No official statement on the status of the bombs, and no word about the missing 40 helicopters. Hmmmmmmm

knukles's picture

All I can say is that I wish they'd wash their greasy hands before fondling everything,

Infinite QE's picture

Rita Katz will win an Oshkarr for this production.

DeeZ_nutZ's picture

tear them rates downz, right now!

knukles's picture

Why is it 6,000 people who have absolutely nothing to do with the whole Brexit Transition are the very ones and the same weighing in at the rack of 100 Fahrenheit pasties

Montani Semper Liberi's picture

 I Googled 100 Fahrenheit pasties and all it came up with was a story on the difference between pasties that were cooked at 100 degrees Fahrenheit and 100 Celsius.

 Or maybe you are referring to pasties worn by strippers?

 Help me out here knuckles, I'm trying to understand the reference in your comment.

 Thanks.

heddahenrik's picture

Cutting interest rates and doing massive QE means one thing in particular: That the country will have no need for borrowing in dollars.

Guess what the CIA + Banksters + corporate media think about that!

arby63's picture

The world has become a very strange place. Nothing seems real. Events come and go like a daydream. Odd times. Something more ominous is brewing.

snakehead's picture

It felt a lot like this in 1970. But this time it's a little darker.

beijing expat's picture

Yeah, and in the 70s there was that bad weed going around that made everyone paranoid.

WmMcK's picture

Was that weed or acid?  Obviously, I don't totally remember.

lakecity55's picture

For Pete's sake, don't read any Biblical or Islamic eschatology. You'll really get scared. It's almost as if Shaitan is making his Last Stand ready.

Son of Captain Nemo's picture

In this age of monetary policy uber alles, every setback somehow gets sold as a buying opportunity. There are no long-term ramifications ascribed to anything.

In word(s)... Our Leaders are insane and so are "we" for allowing them to govern!

thefinn's picture

The only "setback for buying" lines I believe now are in gold and silver, as there's 10+ years of data to draw from as they continue to print money.

JailBanksters's picture

It's Christine Li-zard from the International Mafia Fund you need to worry about.

SpanishGoop's picture

Turkey Shouldn’t Be Confused With a Penny Stock

No indeed, that would be way to much credit.

It is just a big pile of shit.

No wait, even shit can be useful.