Turkish Lira Crumbles After Erdogan Says He Will "Take Responsibiliy For Monetary Policy"

In the latest distress signal from one of the most troubled corners of the emerging markets, this morning the Turkish Lira plunged to fresh all time lows against the dollar after Turkish President Recep Tayyip Erdogan said he intends to tighten his grip on the economy and will take more responsibility for monetary policy if he wins an election next month, which he will.

In an interview with Bloomberg, Erdogan brushed aside the apparent collapse of his economy in a stagflationary vortex, where double digit inflation is racing with daily TRY devaluation, and said that after the vote transforms Turkey into a full presidential system, he expects the central bank will have to heed his calls for lower interest rates... which is bizarre as the last thing investors in Turkey want right now is lower rates. For context, the central bank’s key rate is now 13.5%, compared with 10.9 percent consumer-price inflation.

"When the people fall into difficulties because of monetary policies, who are they going to hold accountable?" the cartoonish president told Bloomberg. "They’ll hold the president accountable. Since they’ll ask the president about it, we have to give off the image of a president who’s influential on monetary policies."

In other words, in addition to having recently been granted quasi-despotic, "emergency" powers, Erdogan now wants to also take over the central bank.

Erdogan has routinely criticized the central bank for setting interest rates that he says have helped stoke rising prices, an argument that contradicts conventional economic theory. Central bank governor Murat Cetinkaya has said higher borrowing costs would help anchor the currency, a view in line with orthodoxy.

Bizarrely, expounding on his own unique brand of macroeconomics, Erdogan said that cutting rates would bring lower inflation because borrowing costs would decline.

“Of course our central bank is independent,” Erdogan said. “But the central bank can’t take this independence and set aside the signals given by the president, who’s the head of the executive. It will make its evaluations according to this, take its steps according to this. And I believe this will result in very beneficial steps in the future."

Someone should perhaps explain to Erdogan just what "independent" means.

Immediately after Erdogan's comments hit the tape, the lira slid to its weakest level ever against the dollar, losing 0.6% to 4.3942 at 7:32 a.m. Istanbul time, before retracting modestly then blowing out again

Last month Erdogan called snap sham elections for June 24, in which a victory (which is guaranteed) would consolidate his one-man rule of a country he’s governed since 2003. A 2017 referendum saw the role of parliament weakened drastically and gave the president sweeping authority in the most radical constitutional overhaul since the republic was founded 95 years ago; next month's election will seal Erdogan's full conversion to despot.

“From the moment we move to a presidential governing system, our effectiveness there will be very different,” he said. “We’re going to do this so we can be held accountable for the responsibility we’ve taken.”

* * *

Erdogan is visiting London, where he is meeting with executives, bankers and investors even as a financial and economic crisis in Turkey grows. Erdogan will also meet U.K. Prime Minister Theresa May and Queen Elizabeth II later on Tuesday.

The outreach comes as Turkey’s relations with its NATO allies fray and its diplomatic focus shifts toward Russia and Iran. The country faces the unprecedented risk of sanctions from the U.S., a risk that Erdogan downplayed.

Asked if he was prepared for U.S. sanctions should he consummate the purchase of a missile defense system from Vladimir Putin’s government, Erdogan responded that he "can’t cut off our ties with Russia" adding that “If we’re allies with the U.S., we need solidarity, not sanctions."

Meanwhile, the apparent collapse of the Turkish economy has shaken investor confidence, which is critical because Turkey’s current-account deficit demands steady inflows from abroad. The Q1 shortfall reported on Monday was more than $16 billion, almost double the same period last year.

* * *

Commenting on the interview, Ziad Daoud, chief Middle East economist for Bloomberg Economics said that sentiment has been the main reason behind the decline of the lira this year, and Mr Erdogan’s comments won’t improve that.

"Investors have been concerned about government intervention in monetary policy, which is compromising the independence of the central bank. The President’s latest remarks will indeed make some uncomfortable – unfortunately, unnerving investors is the last thing he needs to do if he wants to stabilize the lira."

Full interview below.

 

Comments

EddieLomax Pearson365 Tue, 05/15/2018 - 06:51 Permalink

I think its pretty clear than in a few years time this despot will be busy confiscating gold and whatever else in assets he can to keep the party going.

Still, the Turkish economy would have collapsed long ago if it were not for globalism, here its the Germans leading the way with Europe following to shift manufacturing from Europe into Turkey.

In reply to by Pearson365

new game mily Tue, 05/15/2018 - 06:53 Permalink

same template different country. Venzuela comes to mind. most of the world including merica comes to mind.

theocracy rulers, marxist sympathizers, thugs, liars, cheats, banksters, false democracies are all ruled by these fuks that are cut from from the cloth

of chronic narcissistic sociopath fabric...

25 percent of the population has these tendencies.

it is why the world is a conflict ridden killing field with voids of peace.

these voids are only temporary. enjoy your void or plan to vacate the next path of moar war.

step one: i have come to believe it will never change. 

In reply to by mily

GreatUncle new game Tue, 05/15/2018 - 09:29 Permalink

And one ring to rule them all ... the Rothschild one...

Never really thought about it until now and so much Rothschild stuff is appearing everywhere.

Now if I was a philanthropist worth billions and more like trillions you would think they would attempt to keep the system in piece and happiness.

Nope they do not think that way ... it is the slave master system where the slaves fight gladitorial fights while Rothschild puts his thumb up and down.

In reply to by new game

PrivetHedge GreatUncle Tue, 05/15/2018 - 10:15 Permalink

A smart Rothschild would bring trade and harmony into balance and turn the engines of industry and science toward space exploration and travel.

He is however a moron of the lowest kind so he's turning the Earth into a swamp and is happy to watch everyone fighting everyone else.

That's the Devil's price, the cost of satanism, they get given a substitute life to distract them from realising what a paradise they are missing out on. Pharisees like this are so dumb it's painful.

In reply to by GreatUncle

DingleBarryObummer Tue, 05/15/2018 - 06:37 Permalink

Andrew Jackson's Speech Against Central Banksters as True Today as in 1832 | Silver Doctors

" some of the powers and privileges possessed by the existing Bank are unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people, I felt it my duty, at an early period of my administration, to call the attention of Congress to the practicability of organizing an institution combining all its advantages, "

 

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!

SoDamnMad Tue, 05/15/2018 - 06:42 Permalink

I loved Marmaris. Sure wish if they had really wanted to depose him they would have wacked him there.  Nice vacation spot and you would get to piss on a monument to his assassination. 

EddieLomax Tue, 05/15/2018 - 06:47 Permalink

"Erdogan will also meet U.K. Prime Minister Theresa May and Queen Elizabeth II later on Tuesday."

Nice to know there are no red flags to welcoming this little despot.

Meanwhile the resistance to Trump is maintained, can't have that dangerous Islamophobe causing tension and who knows what problems.  Erdogan has hardly done anything apart from kill 100's of his own people and imprison 1000's more while allowing terrorists to invade southern neighbor (and when that failed he sent in the army).

 

And our very own nipple height mayor of Londistan will no doubt welcome Erdogan with open arms.

Catullus Tue, 05/15/2018 - 06:50 Permalink

Of course they’re independent, which is a word western academics like to throw around. But that doesn’t we can’t tell them what to do. 

surf@jm Tue, 05/15/2018 - 08:02 Permalink

A NATO democracy........LMAO!.....

Just like the rest of the European Soviet Union......Democracy in action......

And of course, when all these dumbshit countries go totally bankrupt from their own stupidity, they will cry for the American taxpayer to feed them once again......

To Hell In A H… Tue, 05/15/2018 - 08:29 Permalink

More international money markets machinations, fooling the plebs. What has happened in Turkey economically to justify this drop in the Turkish Lira? I'm no fan of Erdogan, nor the Turks, but this is pathetic. Turkey has less debt/ratio under every metric compared to the USSA. All this market volatility stories is bullshit. 

Wall Street and the City of London decide what the FOREX rates are and manipulate it accordingly at their discretion. It still amazes me how some people fail to grasp how money is not only created, but also how FOREX works. The central banking system controlled by the Rothschild's must be smashed.

marcel tjoeng Tue, 05/15/2018 - 08:29 Permalink

“Central bank governor Murat Cetinkaya has said higher borrowing costs would help anchor the currency, a view in line with orthodoxy. Bizarrely, expounding on his own unique brand of macroeconomics,

.. Erdogan said that cutting rates would bring lower inflation because borrowing costs would decline.”

Tyler Durden you cannot criticise Central Bank policy and doctrine in general, and then take the mickey out of this Erdogan factoid who is echoing here rather modern unorthodox monetary theory.

 

"Erdogan said that cutting rates would bring lower inflation because borrowing costs would decline.”

 

MMT Modern Monetary Theory and the likes, also modern academic research concerning interest rate setting by central Banks, found that Central Banks in general set interest rates post-fact of market conditions, following commercial bank rate volatility, not the other way around (sic, WTH!).

 

This is not to say Erdogan is right, this is to say this El Erdogan Duce might be right after one measures the result.

Measuring the result in real life is called evidence based policy, which isn't what economists orthodoxy is about, which is about hypothetical theoretical modelling presented as physical fact, and being swindlers, which you knew already.

My bet would be Erdogan is most probably right in his opinion about the interest rate

(if it would work out as hoped in an actual economy is a whole other matter altogether though, too many uncertainties).

PrivetHedge Tue, 05/15/2018 - 10:09 Permalink

Turkish Lira Crumbles After Erdogan tells Israel off for murdering scores of unarmed Palestinians protesting on their own land against the illegal invading pharisees.

Annoy the pharisees, your finances will suffer.
Destroy the pharisees and your finances will soar.

Ever since they tried to kill him Erdogan's not been their friend.