The Turkish Lira (TRY) has continued falling, down to 7.94 per dollar now and close to overtaking that resistance line of 8 TRY per USD.
That’s the latest in a years long fall in value, with TRY’s price more than halved in just two years from 3.7 to the dollar as can be seen above.
The country continues to suffer from high inflation at 12%, with interbank lending rates nearing 15% there.
However government debt levels remain low at 33% of GDP with public debt being just 15% of GDP.
Raising the question of what is going on here, and the answer appears to be somewhat obvious after looking at the data:
The Turkish central bank balance sheet has been growing and very fast especially more recently but overall during the past decade.
However this balance sheet amounts to “just” $140 billion out of a GDP of $700 billion, but it may be more the speed of growth, than its level, which might explain this TRY weakness and the persistent high Turkish inflation.
The country has a trade deficit of $6 billion as well, with it trying to address that by opening new logistic centers across the world as well as new shipping routes with the strategically located Djibouti in Africa just off Ethiopia.
More exports than imports would address some of the fall in value of their money, but it’s not clear how this over-enthusiastic printing can be addressed.
Recep Erdogan, the Turkish president, has been in a political battle of sorts with banks and to some extent western media over his demands to lower central bank interest rates.
He got his way for a bit and a fall in inflation followed, but a slight uptick in inflation has now seemingly given the banks the upper hand with a recent increase in interest rates.
That means a lot of money continues to be printed, and therefore bitcoin can serve a very useful case in Turkey as a global asset that is generally able to maintain value regardless of country or even region specific monetary factors.
That’s especially the case as this situation has been going on since at least 2018 when Erdogan fired the Finance Minister and then the central bank chief with a bitcoin premium developing after a German paper stated at the time:
“The ‘Sultan of Ankara’ has set himself one of the strongest opponents imaginable: the global financial markets.”
As it happened they were unable to do much with a ceasefire agreement reached in Libya while Azerbaijan continues to “liberate” the Nagorno-Karabakh region which technically belongs to Azerbaijan but is inhabited by Armenians.
Securing that part should give Azerbaijan a greater role in the energy security of Europe, making Turkey an even more important country for the entire European continent, including the Balkans.
Where the latter is concerned, Turko-Greek negotiations appear to be moving with the two sides apparently meeting daily at the NATO HQ to resolve their maritime differences while a Turkish ship continues explorations in the area.
Turkish tensions with France seem to be growing however with Turkey seemingly taking the position of speaking on behalf of all muslims.
“What can be said to a head of state that treats millions of members of a religious minority in his country this way?” – Erdogan asked referring to the French president Emmanuel Macron who announced certain measures that affect muslims in France, with Erdogan calling it a witch hunt.
France for its part said Erdogan’s comments were unacceptable, but Turkey clearly comes on top from all this as many muslims think finally there’s a voice.
The question is of course what should Turkey expect now that it has seemingly achieved or is on the way of achieving what it wanted, at least so far.
The country can simply be accommodated, which some might see as appeasement while others might see as a necessary restoration of a balance of powers. Or, America in particular can become confrontational, but it would be very easy to make a mistake.
Russia for its part is seemingly just watching. More than anyone they know perfectly well the stakes, with it easier, and perhaps better, to see first just what is Turkey and whether they can indeed restore peace and dignity in that region after two decades of war.