Giorgos Iliopoulos: Market talons grip the Turkish lira

In the midst of a relentless financial crisis centered on violent attacks against the Turkish lira and motivated by easy profits from the corpse of a self-destructing country, no one in the markets cares about the cause or causes of the collapse, as they are completely focused on profit.

The Turkish political establishment recognizes and trembles the prospect of a wider horrific financial blow given the collapse of the Turkish currency, with the first visible risk being $ 250 billion in private-sector loans. It also understands that exchange rate fluctuations are a barometer of the country’s financial health, with a particular impact on voters, most of whom are converting their savings into euros and dollars, adding to domestic and foreign exchange pressures.

Although Erdogan’s finance minister and son-in-law, Berat Albayrak, insists the country needs a competitive currency to expand its exports, he ignores the fact that, for example, in the automotive industry, in the textile industry or in the electrical appliance sector, raw materials and basic components and devices are always imported and paid for in foreign currency, while the same regime prevails in the energy sector.

At the same time, the main destination of Turkish exports, Europe remains under siege due to the pandemic, resulting in reduced consumption. At the same time, the country’s tourism industry, which has revenues of $ 35 billion in 2019, has literally plummeted, also squeezing the Turkish currency.

The expectation of tourism revenues to cover part of the current account balance is not realized, while the balance sheet itself is burdened by the expansion of borrowing costs. For a decade, the salaries of civil servants with a valuation in euros have lost two-thirds of their value, while unemployment, which is officially declared at 14%, is actually galloping at around 30%.

Digital investment media, such as Bloomberg, refer to Turkey’s war against the markets with the final big showdown emerging threateningly at the gates.

In this situation, if Trump fails to be re-elected further pressures developments, and towards the end of the first fortnight of December, the Erdoğan regime must cause a conflict and not just a hot incident (with Greece as the most likely candidate), in order to justify the mandatory conversion of the foreign exchange reserves of the country’s banks into Turkish liras invoking reasons of national necessity.

Although the Turkish president often boasts that there are about $ 200 billion in bank foreign currency reserves, in reality, they are ghosts and the only visible way out is now based on the supposedly forced conversion.

Blood bath

From the level of an exchange rate of 8: 1, the behavior of the markets indicated a change of behavior and there was a marked escalation of attacks on the Turkish currency. Until then, the Turkish president’s allegations of conspiracies at the expense of his country’s economy are more nonsense rather than conspiracy theories. The trading at that point only showed the turning of the markets against another currency that was vulnerable to speculative movements.

But in the current period, the attacks appear orchestrated and organized, with the result that the majority of financial analysts bet not on the reversal, but simply on when 9: 1 or even 10: 1 exchange rates will appear on the screens.

The central bank’s inability to wake up from the slumber caused by the Turkish president’s obsession with low-interest rates is forcing fund managers to take a more aggressive stance, arguing that the value of the currency in the markets will evaporate, with dire consequences for the country.

Even though the constant devaluation of the currency negatively affects the chronic high inflation, as well as the business activity in the country, the Turkish president insists almost paranoically on his choices. This is perhaps the only field in which he does not behave unpredictably, having often demonized interest rates and their use in the fight against inflation

Although the know-it-all Greek daily analyses in the media present the Turkish president in the form of a giant and leader of a regional superpower that seeks power in a convex geographical arc that includes the Caucasus, the Black Sea, the Aegean, the Eastern Mediterranean, Africa, and the Middle East, for the markets is nothing more than just another toxic poison dwarf …