Caligula turned up at Forex

Nothing excites markets as much as a president who tells a central bank what to do

Foreign-exchange crisis flares up in Turkey

– Doctor, your medicine helped me so much!

– Well, that sometimes happens.

Turkish president Recep Erdoğan came up with a new cure for high inflation – an interest rate cut. He says a softer monetary policy will reduce usury and make prices fall. It doesn’t matter that the rest of the world thinks the opposite: he is the head of government and can invent laws and dismiss personae non-gratae. And that person has been president for more than twenty years!

– Are you sure you want to divorce? You’ve lived 20 years together!

– Do you mean I haven’t suffered enough?

Every nation has a president it deserves. So, the Turks have to put up with the fact the lira has lost over 48% against the US dollar since the beginning of the year. How could it be otherwise when the central bank dropped the rate by 400 base points to 15% in September? At the same time, inflation soared to almost 20%, making real bond yields negative and resulting in a flight of capital from Turkey. The government and corporations have to repay $13 billion before the end of the year. That wouldn’t be easy with the current USDTRY quotes. 

– Is that true?

– It’s worse. It’s what the boss thinks.

When other central banks increase or plan to increase rates to handle soaring inflation, one Turkish man turns everything upside down. Recep Erdoğan is sorry for his international friends that defend high borrowing costs, but he can’t go the same way. He’s promising to free his country from high interest rates, and his crazy actions continue disturbing the world. It reminds me of Camus’s novel “Caligula,” where the emperor decided Death and not Life was the most precious gift. He executed his friends and forgave his enemies. He thanked his executioner during his murder.

Is there nobody who would explain to Erdoğan he’s leading Turkey to chaos? Those who tried lost their chairs, though. Since 2019, three presidents of the central bank and all those officials who voted to raise rates have been discharged from office. 

– What did your mum say after the parental meeting?

– She will send me to grandma if I do that again.

– That’s OK.

– But my grandma died a year ago.

The president’s interference with monetary policy has led to a severe monetary crisis. Not only has the lira fallen for nine consecutive years, but also it has lost 50% in value this year. Before September, they said the period of the lira’s weakness was over. The period of humiliation begins. Recep Erdoğan might have meant well, but it turned out as always. I hope this man will come to reason one day, although his current policy will cost much to his country. It’s another proof of the evil that a president’s interference with a central bank’s policy does.

   

 

Price chart of USDTRY in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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