Posted Aug 17, 2018 by Martin Armstrong
The key to understanding Turkey is really simple – Erdogan has lost the confidence of his people and the world. The free-fall in the Turkish lira should be no surprise. After years of rampant dollar borrowing, running large current account deficits due to having to import military hardware combined with the lack of domestic oil production, throw in an autocratic-dictator with aspiration of empire building who then appoints a family member to dictate interest rates lower to bring down interest rates (he thinks is the source of inflation), and presto you get an economic cauldron that is impossible to survive.
Erdogan may be a dictator who rigs the elections, but that does NOT mean he can dictate that interest rates should be lower. He appointed his son-in-law Berat Albayrak Finance Minister to dictate interest rates. Erdogan thinks total power would enable him to order interest rates down. He actually believed that Interest Rates are not the SOURCE of inflation! He is drunk with his own power for he cannot understand the role of interest rates has always been the PRICE of inflation. He thinks that he can order interest rates lower and that will stop his economic crisis, but since he gained virtual dictator powers, the currency has entered a free-fall. It has been the collapse in confidence that is destroying Turkey. Just look at Venezuela. They have the largest oil reserves and that could not prevent the currency from going into free-fall. Once a state loses the confidence of the world and its own people, they can have ALL the resources of commodities to back a currency, but it doe4s not matter. The backing of any currency is always its PEOPLE and their ability to efficiently create the economic capacity of a nation.
Qatar should just kiss its $15 billion good-bye for there is NO HOPE of saving Turkey without a replacement of Erdogan. He will blame absolutely everyone BUT himself. The free-fall of the lira began with his swearing-in with sweeping new powers. His attempt to hunt down and prosecute anyone who speaks against him as treason is just a normal reaction of a dictator who has lost his mind. What comes next? Purges as with Stalin?