Τρίτη 31 Δεκεμβρίου 2013

From the archives: Erdogan’s mythical economic miracle

The Slog

by John Ward

In yesterday’s Daily Telegraph, Ambrose Evans-Pritchard wrote that ‘Mr Erdogan has sought to bolster his popularity before elections next year with populist measures, while the central bank has burned through 15pc of Turkey’s foreign reserves to prop up the lira rather than tighten policy….The International Monetary Fund warned in October that Turkey must rein in spending to stop overheating and should abandon hopes for growth of 4pc to 5pc a year. “Foreign exchange rate interventions cannot substitute for the right monetary stance…The market reappraisal of advanced economies’ monetary policies has exposed Turkey’s main vulnerability — its external imbalance. A weakening or a reversal of capital flows present a major challenge,” it said’.
There now follows what The Slog posted about Turkish economics nearly two years ago as David Cameron was heaping praise upon this maniac’s fiscal policies.


Recep Erdogan….slight inflation problem
Another former high-ranking military officer was arrested in Turkey the week before last. General Ilker Basbug is the most senior officer so far to face trial in a series of investigations into alleged anti-government plots. He is also charged with ‘running a terrorist organisation’, although the Government is predictably vague on what or where it is.
But while Recep Erdogan is tightening his grip on the once secular State now heading for Islamist correctness, certain aspects of the Great One’s religious zeal have backfired. He won a third term last June by creating an unprecedented boom. Based on Sharia interest rules, the scam demands that interest rates should never be higher than inflation. It’s dangerous mumbo-jumbo rather than economics, but nevertheless it makes people feel generally well-off and ready to vote for him….until it starts to unravel.
Basically, Erdogan’s economic growth is just a Muslim version of the US after 2004: cheap money that should’ve been capped and cooled down has been allowed to rip ahead in order to enable re-election. But it can’t last much longer.
All the telltale signs are there in The New Turkiye. In 2011, the mergers and acquisitions sector grew 59% percent to $8.8 billion. The country’s $735 billion economy grew by more than 8%, as the Central Bank cut interest rates three times to ward off any EU-affected slowdown. And – most notable of all – the national deficit soared to a record $10.1 billion as imports jumped nearly 43% versus an 11.7% increase in exports. According to some data, for much of 2011 Turkey was the only large economy in the world growing faster than China’s.
Also the usual downsides of uncontrolled free-market economics are starting to appear. Since 2007, Turkish data has shown income inequality worsening…..yet more of that trickle-down wealth gushing upwards, I’m afraid: by Q1 2010, the richest 20% of the population had a household income 8.5 times higher than the bottom 20% – an imbalance that grew by 7% in just two years.
But now reality is peeping round the corner. Just before Christmas, Merrill Lynch added its voice to Goldman Sachs’ in warning of the risk of an imminent recession. “With the [Sharia] complexity of central bank policy and the need for corporates to absorb their foreign exchange mismatches, the result could manifest itself in a recession which we do not believe is fully appreciated by the market,” Merrill said. Turkish companies now have $59bn of dollars in short term obligations, many of which come due in the next few months. So ‘sensationally complex’ (aka zealous) is the interest rate policy, says Goldman, some bankers allege it has become hard to perform an old-fashioned carry trade, and that many portfolio investors are just waiting until the benchmark rate is increased to deal with Turkey’s bloated current account deficit and rising inflation. Then we are likely to see a very hard landing indeed.
‘Among all the dumb things said about the so-called Arab Spring last year, perhaps the dumbest was the idea that the new democracies of the Arab world might follow the Turkish model.
In fact, if you had invested in the Turkish model (that is, in the Turkish stock market) at the outbreak of the Arab revolts, you would have lost about half your money. If you leave your money in Turkey, you probably will lose the rest of it. Turkey is not a model. It is a bubble, and it is bursting, starting with the stock market and national currency. I am shorting Turkey not for any political motivation, but because the Turkish government economic policy is a clown show.’
But what did our Prime Minister David Cameron have to say on the subject of ‘the Turkish Model’ when he was last in Ankara?
“I can tell from your enthusiasm and the enthusiasm of the entrepreneurs that I met outside this incredible building that there is an enormous spirit of enterprise and entrepreneurialism and industry and business and trade here in Turkey, and that is one of the reasons that I want our two countries to build this incredibly strong relationship that I will be speaking about this morning.
“I will remain your strongest possible advocate for EU membership and for greater influence at the top table of European diplomacy. This is something I feel very strongly and very passionately about. Together I want us to pave the road from Ankara to Brussels.
“….protectionists see the rise of a country like Turkey as an economic threat we must defend against, not as an opportunity to further our prosperity….there are some who fear the growth of a country like Turkey…they seem to think that trade is a sort of zero-sum game. The whole point about trade is that everyone can benefit from it.”
You see, the trouble with Dave is that he is such an economic, social and geopolitical lightweight, if we didn’t nail his feet to the ground he would simply float away. As I have posted in the past, Cameron’s idiotic words in Ankara will come to haunt him as the years pass. But above all, they display clearly that he is just another braindead New Paradigm mercantile globalist: nothing wrong with the system, no alternative, everyone’s a winner, roll up yer sleeves, jolly good show, silly Socialists and tooth-suckers blah blah blah blah blah oh look, I’m halfway to Mars  how did that happen?
Meanwhile, Rambling Recep continues to drone on at will. He recently observed that
“If a leader is Muslim, he cannot commit genocide because Islam forbids murder.” The context was Erdogan’s defence of Sudan’s President Omar al-Bashir for his massive destruction in Darfur. Nobody seems very clear about why he said it, but for myself I have no doubts at all, and never have: Recep Erdogan is a madman. Even worse, our incompetent Foreign Office is mad for having anything to do with him.

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