TR Economy & Updates

[Huelague]

Iam not in favour of a low lira
Iam just sharing a perspective that is all
However, most of the time, Robert brooks used to be really pin point on the fair value of the lira

1€ - 4 Lira, 1$ - 3 Lira is a good and middle value.

 

[TheInsider]

Erdogan is trying to increase the dollar to 10TL and decrease the interest rate to %15 as step 1 and lira to 12TL and interest to %10 as step two. Workers will pay a huge price for this policy. Turkish workers will be cursed with poverty for at least a decade. If successful TR will increase exports hugely and will replace China in some fields as Turkish national products will be very competitive in price and after the covid-19 pandemic, most countries will be left with small coffers.

 

[Nilgiri]

It would seem that the government is trying to pull a China. It's a sound strategy, but for the consequences for the common worker. Since government has refugees to feed into the machinery I assume they don't give a rats ass.

Central bank has lowered the interest rate. Mind-blowing stuff.

It is not a sound strategy at all. Doubly more so with this I/R decrease just done. I'll tell you what it really is a bit later.

A sound strategy needs sound core admin+bureaucratic acknowledgement of two things:

1) A=>B=>C type processes as far as the major bureaucrats involved vis a vis free market force leaders/reps (Whats best steered and whats best left alone)

2) Realising that tinkering (govt wise with govt levers) with C and leaving/entrenching both A and B "as is" (in a negative reform-deficit way) does nothing productive long term (and in fact can harm greatly) and must be eschewed in greater interest of the nation.

One can then visualise part (D) in chain as being the selective news reel the govt+proxies puts out.

Tinkering ratios and percentages is not what Deng's team (and subsequent CCP admin teams) did on first basis (it was done, but it was done simultaneously with A and B rather than ignoring those "underlying bases")

There was a solid approach to getting investment rates as high as possible and capital formation as high as possible in sectors that were known to be labour surplus + competitive in near absolute way for China.

Then and only then was there downstream tinkering in various ratios to keep things lubricated and provisioned.

What Turkey's govt is doing here is very much a shakedown in status quo to buffer up/maintain forex level at hand by any means they can (without upsetting too much i.e incrementalism).

Forex that they hope will tide the inflation from the import-reliant side at least. Also tide the loan crunch payments and other forex needs on horizon. Its reactionary "survival afloat mode" stuff in the end, not strategic plan. (and interest rate lowering just confirms it, as they likely wanted to do that come hell or high water, thus needing more forex to counter that effect).

Its all a thermometer reading of a fever if you look at some crucial numbers and things not being done.

Actually fundamentally changing the elasticities underlying entire swathes of economic activity (that determine export and import "responsiveness" to then harness to an export model of growth) needs huge chunk of investment (from local and foreign sources in researched competitive crucial areas) over 10 years that had transpired from 2010 - 2020 (for there to be a strategy now to shape further).

Something which did not happen.

Turkeys average fixed capital formation % (of GDP) that decade never went over 30% and is now around the 25% mark...and I wonder about the qualitative nature of even that % (given the FDI rate and other parameters).

When you are developing country, this is literally the fuel you are putting in the tank to sustain a journey. Every % counts.

China's case (during the formative bulking up of the 90s and 2000s)....one would have to really search to find a year where it dipped below 35%.

Can compare the two here:

Gross fixed capital formation (% of GDP) - Turkiye, China | Data

Gross fixed capital formation (% of GDP) - Turkiye, China from The World Bank: Data

data.worldbank.org

Also even with the HK+Taiwan "round tripping" issue for FDI artificially bumping up that number, they still had good level of solid proven FDI quality and quantity.

I say this as no friend of CCP ....in fact quite the opposite---I just study the opponent very closely with all tools at my disposal (incl language).... and respect the things done correctly and well.

To become a exporting industrial power (Japan and South Korea saw these trends too in earlier years) one needs a GFCF of 35%+ for about 20 years..every % counts in end over these time periods and downstream time periods and baked cake etc.

This is a broad chunk of what (A) in the chain is all about.

It is why you have to build a pyramid base first, before you can build a pyramid top.

Little point making icing if you dont have a cake.

Can go on and on about this....but one more:
You have to bulk up and train, before you can punch hard and run flat out.
Purely C==>D stuff is just some light shadow boxing in end...will it get you into the ring that matters to unleash and prove stuff of note though?

It would be far more useful if Turkish govt has think tank white papers that it releases on its actual strategy (concerning A and then B), authored by people that know these things and with tools to wield within the bureaucracy and/or corporate sphere on it.

i.e papers that analyse thoroughly the make up of Turkish industry and economy....and the critical reasons as to what, where, how, when and crucially why there is an investment deficit.

Not academia (these end up being a dime a dozen... as well intended as they are in every country), but the govt. This is important.
I do not know Turkish and my understanding of Turkish economy is fairly shallow at best...so I do not really know about this stuff (underlying white paper output) like I do for some other countries.

But from the results of 2010 - 2020 (and the fairly "hot money" flow model of 2000-2010 that AKP employed then), I can say the A and B is probably not covered and analysed by AKP admin as it should be, as you would see lot more firing of bureaucrats (at all various different levels) that dont perform (w.r.t core part of A)...and hire better ones that do.

If the system is more heres the bunch of favoured bureaucrats (and political favours to divvy up and pay out) that we're stuck with and we just have to make do (and work every which other way except the hard way.... to try project success to electorate).....then you (or any country) are in trouble.

Members can think and figure out for themselves which one happens more for Turkey....or maybe some know where to find the best thinktank TR govt analysis of the country, strategy and itself....rather than news article feeds on what the govt wants you to focus on.
In which case I'm all eyes/ears if they are in English/translated.

In any case I have harped on about the GFCF to @VCheng probably the most I know of anyone....here he can see its application to another country/perspective.

@tornadoss @Anmdt @xenon5434 @Sinan @UkroTurk 🚬 et al.

 

[Nilgiri]

Lowering the interest rate is a good idea if we have stable and relatively strong currency. Actually all Central Bank lower the interest rate, including Indonesia, in order to stimulate the economy and lower the burden of businesses during this Pandemic situation

Inflation is basically a fever for the body. It is literally the same thing.

Interest rate is the sleep medication to control the fever.

So yes you can take less of the medication if the fever is low/gone and the body wants to consume more to bulk up.

If you wanna stay in bed and rest (i.e invest that way), you can also keep the sleep medication going even though you dont have fever.

Like a game where you can fast foward time etc and receive the accrued benefit of rest/investment setting.

But that depends on your mind (knowing what you are doing and gonna be doing).

There are different combinations of all these various situations (and these are simplistic allegories)....but TR situation is one where there needs to be study on the fever side right now.

It (the govt at least) is simply not studying the fever....but rather arguing about thermometer used to measure it...and now even taking off the medication to say "see the body can get up consume + exercise more just like we say it should" etc etc.

Its nutty.

I dont know why Turkish currency is still weak that make them cannot implement this policy without getting negative effect from currency market. Trade deficit is one of the reason of weaker currency but countries like Bangladesh which has quite big trade deficit still has stable currency until Today. It could relate to much less exposure to foreign investor on BD stock market.

This is one layer below the inflation (fever) for TR. Studying its import and export basket, the % of those reliances in the economy, and how "elastic" they are (and basically how much investment and reform they need....i.e training and rest).

If you are stuck with heavy fever, getting out of bed is not good idea....you need to solve the fever by managing it and looking at the underlying cause...to address it and not do it again (over the time period you went unprepared and played in cold rain or something).

I also know Turkey has high inflation currently and this then relate to foreign investor and currency market. Currency with higher rate of inflation must be backed by high interest rate since the value is less than currency with low interest rate, thus decreasing the interest rate will also make people and businesses which hold Lira to sell it and buy USD

It is nutty what TR govt is doing (you are looking at the surface and you are right....but looking at deeper level it gets worse).

They didn't even wait for the yield curve (of their lira bonds) to un-invert (by solving the inflation first).

It is why I call this move criminal.

I don't know what TR govt will use to explain the worsening situation they are creating by own hand further.

To make Turkish economy stable then dont ever tried to go against the financial market like what happened previously. Currency depreciation can lead into higher burden to the business sector who has foreign debt ( which include foreign denominated bonds ), foreign investors in Turkish stock market would also sell their investment in Turkey to avoid further loss, and this can give second blow for the currency.

They have gone into a mode where they will shake down turkish domestic entities (refer to earlier reply I gave in thread). i.e keep bumping up the mandatory forex saving ratio.

They have gauged they can keep doing this without extra political cost for time being.

Its up to Turkish people to show there is a political cost.

If the depreciation is too extreme, it can create a catastrophic damage on the economy like what was happening in Indonesia during Asian Financial Crisis

True. But in the case of Indonesia, the chicken and the egg situation was decidedly the chicken (capital flight) that precipitated the immense depreciation in rupiah.

Every 1000 USD literally became 1 USD chasing the same amount of rupiah (locked into the system unable to go anywhere). It was horrid.

TR govt does not have someone like Habibie who took things by scruff of neck and made hard painful decisions. I lived through that time bro (in singapore watching), I remember it like yesterday still.

TR govt right now has too much autocracy....it is similar to suharto bad policy stuff in that regard.

The main issue is the policy should be really made by the Economist, Erdogan should understand that his understanding on economy is not as good as Turkish professional economist. From what I understand Erdogan only has real sector understanding and his understanding on financial sector and monetary policy is so limited. Indonesia economic crisis started from the financial sector that later effect the real sector so badly.

Private sectors should also be asked and there should be discussion with Turkish business association whether they can really bear Lira devaluation policy ?

This I bring Indonesian Data on Interest Rate policy and real Inflation

View attachment 32028

Yes this is basic MPC strategy. It is known ever since monetarist theory became the standard SOP (and well developed by folks like Friedman, Hayek et al).

F+H are 2 out of the 3 (Friedman, Hayek and Keynes in about that order IMO) and they really are the 20th century heavyweights at large in the domain.

TR govt under AKP admin has thrown out these books for some reason.

Media articles are trying to be polite in calling the approach "unconventional"....and "unorthodox".

I would use plainer "lunatic".

 

[Nilgiri]

If successful TR will increase exports hugely and will replace China in some fields as Turkish national products will be very competitive in price

Hate to be the bearer of bad news, but it wont.

You can have the same answers as someone else on the test.

Teacher can ask though, show your work.

In this case the work is the genuine underlying investment (quantity and quality) needed in these sectors.

Things like GFCF and FDI (and how they are further analysed sector and industry wise vis a vis labour and consumer profile).

That is the larger proof in the pudding to harness export competitiveness (by depreciating currency lever wise).

If it aint there, well you can see what happens for yourself.

 

[Turko]

If successful TR will increase exports hugely and will replace China in some fields as Turkish national products will be very competitive in price

Unfortunately you can't achieve Chinese export success by reducing salary and with cheap labor force. China thanks to foreign investment has been able to reach the success.

Look at poor countries with cheapest work forces.

Behind of Chinese export success there is huge amount of technological and industrial machinary investment whereas last decade Turkish manufacturer couldn't buy new technology due to lack of capital.

Although The Chinese don't have democracy , Chinese government is fully corporated with westerners as ally.
West world and China are literally trade partners. Chinese economy fully integrated globalism. Capital of Western companies in PRC are juridically safe.
Nonetheless PRC has a billion population which is big market and worth to invest.

Any western people don't want to invest in Türkiye as government hasn't been managed by professionals.

200 billion USD low value added export is nothing.

 

[Deliorman]

Whoever lives abroad should be happy. Next summer when they visit Turkey they would get their dicks sucked for 2 euros and a can of minced meat.

Long live Erdogan, hope he wins another term in 2023 again. This nation deserves nothing more than that. <3

 

[Ryder]

Erdogan blamed the economic woes on 2001.

These guys had 20 years to fix shit up.

Seriously man Erdogan has become like Arsenal!!! Please retire and let somebody competent come in or at least let the people do their shit.

He has become like a control freak who feels the need to control everything.

For people abroad for sure they are celebrating as they get to travel and enjoy Turkiye while the common people suffer.

Let me guess its easier to resort to conspiracy theories.

Even if the Turkish economy grows or records growth it will just stagnate as usual.

 

[Zafer]

Erdogan blamed the economic woes on 2001.

These guys had 20 years to fix shit up.

Seriously man Erdogan has become like Arsenal!!! Please retire and let somebody competent come in or at least let the people do their shit.

He has become like a control freak who feels the need to control everything.

For people abroad for sure they are celebrating as they get to travel and enjoy Turkiye while the common people suffer.

Let me guess its easier to resort to conspiracy theories.

Even if the Turkish economy grows or records growth it will just stagnate as usual.

Who is that person who will do better than Erdoğan did?

 

[VCheng]

In any case I have harped on about the GFCF to @VCheng probably the most I know of anyone....here he can see its application to another country/perspective.

There is no harping between us, only good discussion.

 

[Deliorman]

Who is that person who will do better than Erdoğan did?

At this point- everyone else. Erdogan completely lost his mind and his health and is not able to run a country. He is a paranoid senile man who surrounded himself with incompetent and corrupt family members, loyalists and counselors who just can't run the country anymore.

 

[Fighter_35]

Erdogan is trying to increase the dollar to 10TL and decrease the interest rate to %15 as step 1 and lira to 12TL and interest to %10 as step two. Workers will pay a huge price for this policy. Turkish workers will be cursed with poverty for at least a decade. If successful TR will increase exports hugely and will replace China in some fields as Turkish national products will be very competitive in price and after the covid-19 pandemic, most countries will be left with small coffers.

he has no clue about what he is doing!! you can not increase your export number as much as decrease in the dolar rate!! how much increase we had in exports in last 2 years, or lets say in the last 10 years compared to increase in dolar / tl ratio??
Beside you decrease value of your products by doing this instead of increasing the value of every product you export!!
you export 200-210 billion usd while you sell more than 700-800 billion usd to your people!! the decrease in selling to your own people can not be compansated by export increase!!
erdogan and akp like every body says are doing wrong like the every thing they have done in the last 10 years!!
there is no logical explanation to this!! akp members and assigned morons do not know better than economists or past central bank presidents!!

 

[Fighter_35]

our people will go on suffering more and more day by day, dolar will increase in leap and bounds. Central bank will require to increase rates more than they decreased now. we will end up same things like happened last year!!
- huge dolar to tl ratio
-huge interest rate than 19 percent!!
-bigger inflation!!

the ones can not see this are total morons!

today, central bank does not decide according to logic but according to orders it receive !! ,

 

[Nilgiri]

our people will go on suffering more and more day by day, dolar will increase in leap and bounds. Central bank will require to increase rates more than they decreased now. we will end up same things like happened last year!!
- huge dolar to tl ratio
-huge interest rate than 19 percent!!
-bigger inflation!!

the ones can not see this are total morons!

today, central bank does not decide according to logic but according to orders it receive !! ,

Welcome to the forum (I see you are new). Hope to see you contribute more to this thread and others. You understand things well.

 

[TheInsider]

Hate to be the bearer of bad news, but it wont.

You can have the same answers as someone else on the test.

Teacher can ask though, show your work.

In this case the work is the genuine underlying investment (quantity and quality) needed in these sectors.

Things like GFCF and FDI (and how they are further analysed sector and industry wise vis a vis labour and consumer profile).

That is the larger proof in the pudding to harness export competitiveness (by depreciating currency lever wise).

If it aint there, well you can see what happens for yourself.

I agree with you. But Erdo thinks Turkish goods will sell very well. Like defense industry products, ships, automobiles, machinery, textile products, steel, chemical products, and refined petroleum products etc. Erdo also thinks if minimal wage stays under 300$ investors will invest in the real sectors. He wants to curse workers to poverty and try to construct an economy literally paying nothing to them. But we are not China he can't win elections with that attitude. People will riot. AKP economists also think Turkey will pay less for energy needs starting from 2024-2025 with the Blacksea gas coming into play. This year Turkey passed 200billion mark in exports. The 2023 target is 240 billion and Over %5 growth is expected for the next 3 years in GDP.

 

[Lool]

I agree with you. But Erdo thinks Turkish goods will sell very well. Like defense industry products, ships, automobiles, machinery, textile products, steel, chemical products, and refined petroleum products etc. Erdo also thinks if minimal wage stays under 300$ investors will invest in the real sectors. He wants to curse workers to poverty and try to construct an economy literally paying nothing to them. But we are not China he can't win elections with that attitude. People will riot. AKP economists also think Turkey will pay less for energy needs starting from 2024-2025 with the Blacksea gas coming into play. This year Turkey passed 200billion mark in exports. The 2023 target is 240 billion and Over %5 growth is expected for the next 3 years in GDP.

While I agree that Turkish exports may soar to unprecedented levels as shown this year, I still think that throwing your ppl into poverty is just way too overkill
I mean, If you wanna go into full export overdrive, at least ensure that basic life necessities arent susceptible to change through 100% nationalisation while leisure products like make ups, phones, cars etc.... can have their values changed. However, in Turkey rn, it is the opposite! Turkey is producing cars, phones, trains etc yet its food supplies is dependent on abroad
If i was the president, for example, I would increase the lira's value to 1$=3 lira; take a loan and build massive food infrastructure. When I ensure that the ppl can feed themselves; then I can enter into full export overdrive
Idk how Erdo reached such a sudden conclusion of just plummeting the lira to the rock-bottom

 

[Abdelaziz]

Here in middle east .. turkish goods increased significantly .. and they are nearly every where ... If they are sold with competitive prices like chinese .. most people will prefer turkish ..coz it has a kind of better quality .. but there is still far more sectors that i think turkey can compete with chinese at easily .. on the other hand we can see important technological projects that will further increase the turkish industry and take it to next level ..like engines , electric cars , helicopters .. machines .. weapons ..etc ..i mean big level exports which have high added value .. u cant rip without seed .. turkey is not a 1.5 billion like china .. so high exports and low imports definitely will reflect on people life quality ... Turkey is not a gulf country with massive oil reserves ...or EU member to get generous aids .. the only way for it is to manufacture and export .. no other way way

 

[Nilgiri]

While I agree that Turkish exports may soar to unprecedented levels as shown this year, I still think that throwing your ppl into poverty is just way too overkill
I mean, If you wanna go into full export overdrive, at least ensure that basic life necessities arent susceptible to change through 100% nationalisation while leisure products like make ups, phones, cars etc.... can have their values changed. However, in Turkey rn, it is the opposite! Turkey is producing cars, phones, trains etc yet its food supplies is dependent on abroad
If i was the president, for example, I would increase the lira's value to 1$=3 lira; take a loan and build massive food infrastructure. When I ensure that the ppl can feed themselves; then I can enter into full export overdrive
Idk how Erdo reached such a sudden conclusion of just plummeting the lira to the rock-bottom

In the end its going all in to throw-punch meatiness maybe (speculative given the inflation of USD that will go on for whole biden term at least).... but no development of the legwork.

The top heavy boxer will not last well in the ring.

I think most people on this thread have formed an overall consensus on this in their own method and manner of understanding inflation vis a vis foreign exchange sector.

Muhammad ali said you have to float like a butterfly (before sting like a bee)....

 

[Nilgiri]

how much increase we had in exports in last 2 years, or lets say in the last 10 years compared to increase in dolar / tl ratio??
Beside you decrease value of your products by doing this instead of increasing the value of every product you export!!
you export 200-210 billion usd while you sell more than 700-800 billion usd to your people!! the decrease in selling to your own people can not be compansated by export increase!!

This is actually an excellent point you have brought up. Well done.

This is known as a sensitivity analysis....and can be done in various appropriate blocks of resolution (time wise and/or composition wise)....and correlated to upstream factors (such as investment and MVA results) across same resolution downstream.

There is actually a number of papers that relate this to the underlying (price) elasticity of industries (export and import wise) that I am talking about.

Turkey's case for it has to be done by the govt as series of white papers....from as secure+independent central bank as possible (from the price stability side) and bureaucracy, legislature and executive side (from the policy side that competes with price stability).

It needs technocratic + well disciplined institutional force that must be put above political whims. i.e exact opposite of autocracy (an executive that wants to bend everything to his will and dominate it....and undermine whatever that exists to do that).

In the end for the human body, it is best if the arteries are elastic to be responsive to work-load input physically.
Similarly it is bad for the body to have hardened arteries.....given relation to cardiovascular disease. Performance of hardened arteries will also lacking in an ongoing long marathon obviously.

The same exact thing goes for elasticities in the economy....to actually take advantage of price change and price signalling (there are layers below this, but I will stop here for now)...that come about by say depreciation/appreciation (and govt attempted strategic/reactionary levering of this).

This is what you intuit with exports and imports as you have described....in relation to inflationary costs on larger body.

Non-disciplined autocracies are hardened arteries in the end. They do not respond well at all to burdens and challenges. Rather they want to become the loudest voice and seek greatest narrative control (easy cocaine route to power essentially - at terrible cost to nation).

The lessons are telling for Turkey even before formation of its modern republic. In fact it is why it was formed.

 

[Xenon54]

he has no clue about what he is doing!! you can not increase your export number as much as decrease in the dolar rate!! how much increase we had in exports in last 2 years, or lets say in the last 10 years compared to increase in dolar / tl ratio??
Beside you decrease value of your products by doing this instead of increasing the value of every product you export!!
you export 200-210 billion usd while you sell more than 700-800 billion usd to your people!! the decrease in selling to your own people can not be compansated by export increase!!
erdogan and akp like every body says are doing wrong like the every thing they have done in the last 10 years!!
there is no logical explanation to this!! akp members and assigned morons do not know better than economists or past central bank presidents!!

Yeah your right but it just sounds nice when you cherry pick numbers and can say that exports are rising.
Your voter base will be happy for another day until the next electricity bill flys in.
But who care about exchange rate, its not like you earn your money in dollar right?