Bad News for the Empire

It is increasingly clear that global economy is slowing down.  And a few months ago the epicenter for that slowdown was Turkey.

The Turkish Lira melted down as fears over its massive pile of corporate debt, most of it denominated in dollars, began selling off.  And that had contagion effects into Europe since yield-starved banks went looking for some thanks to the ECB’s negative interest rate policy.

So, at the time everyone was losing their minds.  The very public tiff between Presidents Trump and Erdogan over geopolitical issues became acute. Days later Turkey’s currency is under extreme pressure.

At the time I called this a political hit to try and remove Erdogan from power.  I was right about that. I was also right that Turkey would be helped from all sides to survive this attack.

Turkey’s real allies — Russia, China, Iran and Qatar — came to its defense.  Qatar pledged some forex support,China upped its trade.  Bilateral swap arrangements were signed, trade deals cut, etc.

All This began shifting the Turkish economy away from the U.S. dollar and reorient itself with its biggest trading partners, which also includes the European Union.

So, imagine my shock this morning when Turkey’s latest debt numbers and how they’ve changed since the Lira crisis ended suddenly with the return of Pastor Andrew Brunson and l’affair Kashoggi.

The sector’s long-term debts reached $213 billion as of October, down $9.1 billion from the end of last year, the Turkish Central Bank said in a statement.
The bank also said the sector’s short-term loans — debt that must be paid in the next 12 months — fell $2.7 billion to $15.9 billion during the same period.

Those are the important numbers.  They aren’t good, but they are significantly better.  And exactly the kind of…

Read more