Turkish Lira Resumes Plunge After Erdogan Grants Himself Power To Appoint Central Bank Governor

One day after a newly sworn in Turkish president Erdogan, now with sweeping executive powers, shocked investors and sent the lira plunging when he unveiled a new cabinet that featured his son in law Berat Albayrak as the country's new Minister of Finance and Treasury while excluding the current Deputy Prime Minister Mehmet Simsek, who was the only market-friendly official and the de facto economic czar, overnight Erdogan completed his sweep of undisputed economic control with a presidential decree which granted the president the power to appoint the central bank governor, deputies and monetary policy committee members for a 4-year period.

Three presidential decrees, published in the country’s Official Gazette, set out the structure of the new presidential system and the regulations governing the appointment of officials by the president. They replace the existing framework according to which there was a five-year term for the central bank head, however the decree scrapped this stipulation as well as a requirement that deputy governors have a decade of experience.

Most saw this final takeover of a supposedly independent central bank by the president coming as soon as the earlier decrees starting hitting:

The announcements deepened worries about the bank’s independence and triggered near record losses in the lira, which has been hit this year by concerns about Erdogan’s drive for greater control over monetary policy.

Investors were spooked by Erdogan - a self-described "enemy of interest rates" - and sold off Turkish assets on concerns that his push for cheaper borrowing costs will mean he will look to take greater control of monetary policy under the new system, unleashing even higher inflation and sending the lira soaring.

“I’d have expected Erdogan to have learned the bitter cost of messing with markets,” Atilla Yesilada, economist at GlobalSource Partners in Istanbul, told Bloomberg in an emailed report. “Apparently, he does think that with his new powers he can best the markets.”

As a reminder, on Monday Erdogan was sworn for a five-year term as president with enhanced powers after winning re-election under an amended constitution, setting the stage for him to follow through on a pre-vote promise to take more direct control over monetary policy. The 64-year-old leader has repeatedly clashed with the central bank over borrowing costs that he is determined to keep low under almost all circumstances.

Erdogan's power grab also spooked Turkey’s largest business association, Tusiad, which has been urging the government to respect the rule of law and independence of institutions, and cautioned that central bank autonomy “is very important for a strong Turkish economy.”

It is however, not very important to Erdogan.

Meanwhile, amid all the chaos, Bloomberg notes that it is no longer clear how the central bank will respond to further inflation gains, which just a few days ago printed at the highest since 2003, and was running more than triple the official target at its next monetary policy meeting on July 24.

“Key is independence from influence and ability to do what is needed. Given the tough decisions needed to be taken, with the new cabinet and changes with decrees, that ability may have been impaired, especially on increasing interest rates to control inflation,” said Verda Partner portfolio manager Michel Danechi.

The markets, however, had no interest in waiting, and one day after the Turkish lira suffered its biggest drop since the failed Turkish coup of 2016, the TRY resumed its slide following news of the latest decree, sending it near all time lows...

...after it had recouped much of yesterday's losses, as it becomes clear to investors that Erdogan no longer cares about the viability of the overall economy, and instead plans on making its his own family fiefdom, no matter the cost.

Meanwhile, confirming which way the currency crisis winds are blowing, the Turkish 10Y yield just jumped to a new all time high.

 

 

Comments

CriticalUser spanish inquisition Tue, 07/10/2018 - 15:11 Permalink

Explain me how (((the jooos))) control the Turkish CB? They have secretly infiltrated it?

Even foul-mouthed Erdogan has never claimed that the Turkish CB is under Jewish control, and lord knows he is quick in the blame game, insulting everyone in the process. Yet here you both are, weak minds incapable of critical thought, spewing an idiotic conspiracy theory too outlandish for Erdogan... Uneducated lowlife losers!

In reply to by spanish inquisition

IvannaHumpalot Tue, 07/10/2018 - 07:36 Permalink

Get the nukes back from Incirlik, kick turkey out of NATO. Retask NATO to repatriate migrants as we aren't in the cold war any more. Any migrants erdogan sends to europe, put on the NATO warships and shuttle to the coast of Libya/Tunisia. Dump. Put NATO to work.

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In reply to by Yellow_Snow

el buitre OliverAnd Tue, 07/10/2018 - 11:04 Permalink

The central bank of Turkey of course has been Rothschild controlled.  What we are seeing now is Erdogan trying to wrest control of the bank to his own upstart crime family.  Of course the Cabal is using its weapons, probably spearheaded by Goldman Sucks to counter this by lowering the forex value of the lira.  What is confusing though is that most countries on the planet are in a race to the bottom of the forex of their currencies to improve their exports and improve their balance of payments.  So GS may be doing Erdogan a favor in the longer run.  The fact that he appears to have repatriated his gold shows that he is not totally oblivious to the winds of the coming GFC v. 2.O.  But it should be as entertaining as the gang wars in NYC in the 70's such as the Gallos vs. the Gambinos.

The fact that NATO moved its nukes to Romania fills me with complacency and calm.   Actually, I have enter the ranks of the Insouciant.   Perhaps to the dungeons of Count Dracula's castle with Prince Charles standing guard.  What could go wrong?

In reply to by OliverAnd

DingleBarryObummer BigSwingingJohnson Tue, 07/10/2018 - 08:05 Permalink

Germany?  You mean the NSDAP?

Feder tried to convince Hitler to do what you suggested, by Schacht convinced him not to.  The Anti-usury platform of the NSDAP was unfortunately basically a farce.  Schacht used "Mefobills" to fund the military buildup, but those bills were available for discount at the banks.  Credit froze up for the common man and the economy was running so hot that Mefobills were frequently turned into the bank before maturing at discount.  It's complicated but basically, the banks still got their interest (just in a economic-wizardy accounting-trick different form), usury still prevailed, and the Reichsbank was never nationalized [the (((old establishment bank))) remained.]

The bank supervisory authority owes its existence to a law which I instigated when I was Minister of Economic Affairs in 1934. National Socialist agitators led by Gottfried Feder had carried on a vicious campaign against private banking and against our entire currency system. Nationalisation of banks, abolition of bondage to interest payments, and introduction of state Giro ‘Feder’ money, these were the high-sounding phrases of a pressure group which aimed at the overthrow of our money and banking system. To keep this nonsense in check the president of the Reichsbank called a bankers’ council which made suggestions for tighter supervision and control over the banks. These suggestions were codified in the law of 1934, which was strengthened in 1957 by increasing the powers of the bank supervisory authority. In the course of several discussions, I succeeded in dissuading Hitler from putting into practice the most foolish and dangerous of the ideas on banking and currency harboured by his party colleagues. – Hjalmar Schacht: The Magic of Money p 49

In reply to by BigSwingingJohnson

Jessica6 DingleBarryObummer Tue, 07/10/2018 - 09:40 Permalink

Schacht was the hero firefighter always putting out fires he himself set. Such as saving Germany from hyperinflation after heading up banks that failed. Credit where credit due though - this was a man who always knew when to get out to save his own skin. I don't know if you've read that book mentioned in what you quoted. It plays fast and loose with the timeline just like that all throughout. He also went to London to propose a loan program for all Jewish people to escape Germany; that they wound up preferring to take their chances shows what a scam it probably was.

In reply to by DingleBarryObummer

Captain Nemo d… Tue, 07/10/2018 - 07:43 Permalink

Jefferson's view on banks, even after correcting for possible made-up quotes

https://www.monticello.org/site/jefferson/private-banks-spurious-quotat…

And a similar review of Jackson's view of central banks taking care to question anything not reported at that time:

http://www.businessinsider.com/sorry-andrew-jackson-probably-never-said…

 

So why not let an elected official take responsibility for the most important aspect of economic policy? Should not the people be in charge rather than the bankers?

 

Money_for_Nothing Captain Nemo d… Tue, 07/10/2018 - 08:05 Permalink

Mr Jefferson didn't want any institution, including elected officials, controlling money supply. Specie and private contracts enforced by law. Spanish dollar is mentioned in the US Constitution. Thaler dollar was used in Europe for 400+ years and has mostly kept its value if not its usefulness today. Pieces-of-eight are 1/8th of a silver dollar. Doubtful Turkey will use specie except on the black market. Gold and Silver hoarders will be arrested and their specie confiscated. Think Iran recently made an example of one of these hoarders depriving a Government of what it likes to eat.

In reply to by Captain Nemo d…

LordWillingly Tue, 07/10/2018 - 07:59 Permalink

Time to play geography with the Trumptards. The contestant that gets the push pin closest to Turkey on the map of the world gets to have dinner with Sara Hucksterbee Sanders at Little Cheeser's Greaser Greaser pizza.

DarkPurpleHaze Tue, 07/10/2018 - 08:31 Permalink

On his current trajectory, and the ramifications that might follow, Erdogan might as well rename himself Arch Duke Ferdinand.

His eventual departure won't be voluntary nor quiet.

 

 

VideoEng_NC Tue, 07/10/2018 - 09:23 Permalink

"...when he unveiled a new cabinet that featured his son in law Berat Albayrak as the country's new Minister of Finance and Treasury..."

That's quite a dowry to keep the families together.  Good thing that stuff doesn't happen here...  /s

gdpetti Tue, 07/10/2018 - 11:42 Permalink

THis is why I've always called him Erdo the Idiot.... he knows not what he does... like most of us sheep.... some of us wake up and start to understand WTF is going on and why... not Erdo... at least not yet... things have gone too well for him, even that weak ass CIA regime change op using Gladio B operators... that choose not to shoot his plane down... Erdo and his New Ottoman Empire wetdream is still getting his sheets wet....

And he still hasn't learned his role.... idiot.