Fed selling off assets / Turkey currency situation

UglyCasanova

Lifer
Mar 25, 2001
19,275
1,361
126
https://www.businessinsider.com/turkey-lira-crisis-caused-by-the-us-fed-2018-8


Good overview of what's driving the currency markets, particularly in Turkey. I'll try to find more later when I have some time. We knew this was coming but it's somewhat uncharted territory (just like the rescue was in the first place) so it has the potential to cause lots of waves across the world. I read something from Jamie Dimon a few weeks ago that unwinding all of this is one of his biggest fears.

5b741f1b1982d8c4308b4c1b-750-311.png
 

FelixDeCat

Lifer
Aug 4, 2000
29,159
2,034
126
The fed's policy of "quantitative easing" - keeping rates artifically low (near zero), by buying trillions in mortgages and treasuries was a bad idea to begin with. It is long past time to normalize fed policy and hopefully never repeat that fiasco again.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
The fed's policy of "quantitative easing" - keeping rates artifically low (near zero), by buying trillions in mortgages and treasuries was a bad idea to begin with. It is long past time to normalize fed policy and hopefully never repeat that fiasco again.

Please. Quantitative easing restored liquidity to the banking system. They all bought each other's bullshit to the point that investors wouldn't accept questionable assets for cash, particularly in the repo market. It locked up. So the Fed paid cash for those assets at undisclosed markdowns. The only way the banks could make money lending in a crashed economy was at low rates.
 

FelixDeCat

Lifer
Aug 4, 2000
29,159
2,034
126
Please. Quantitative easing restored liquidity to the banking system. They all bought each other's bullshit to the point that investors wouldn't accept questionable assets for cash, particularly in the repo market. It locked up. So the Fed paid cash for those assets at undisclosed markdowns. The only way the banks could make money lending in a crashed economy was at low rates.

The difference between providing emergency liquidity like "opening the Fed window" at a discounted money rate to lenders who then loan it out at a low rate and BUYING assets that are priced BELOW normal bids is Quantative Easing. The economy started to turn around starting in late 2012, yet they were pressed to do more so they only thing left was to depress the rate market artificially.

In other words, they had already lowered Federal Funds Rate so low (used to calculate the Prime Interest Rate), they had to start buying bonds and mortgages in such gigantic amounts yields went NEGATIVE worldwide:

https://www.ft.com/content/86e1e87e-81ed-11e7-a4ce-15b2513cb3ff

Led by the US Federal Reserve, central banks have themselves become huge buyers of bonds, driving up prices and pushing yields below zero. This policy of quantitative easing was meant to reduce interest rates for business and personal borrowers, stimulate growth, buoy inflation and force money managers out of safe haven investments. From less than $1tn in 2007, the Federal Reserve’s balance sheet has more than quadrupled in size.

The point was to encourage people to invest in other assets like Real Estate and the Stock Market(s), which created capital for businesses to tap, growth in the financial industry and most importantly - jobs.

But they went too far. They racked up too much debt - and are now unwinding that debt it in a strong economy. They are also took too long to start raising rates.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
The difference between providing emergency liquidity like "opening the Fed window" at a discounted money rate to lenders who then loan it out at a low rate and BUYING assets that are priced BELOW normal bids is Quantative Easing. The economy started to turn around starting in late 2012, yet they were pressed to do more so they only thing left was to depress the rate market artificially.

In other words, they had already lowered Federal Funds Rate so low (used to calculate the Prime Interest Rate), they had to start buying bonds and mortgages in such gigantic amounts yields went NEGATIVE worldwide:

https://www.ft.com/content/86e1e87e-81ed-11e7-a4ce-15b2513cb3ff



The point was to encourage people to invest in other assets like Real Estate and the Stock Market(s), which created capital for businesses to tap, growth in the financial industry and most importantly - jobs.

But they went too far. They racked up too much debt - and are now unwinding that debt it in a strong economy. They are also took too long to start raising rates.

There were no bids higher than what the Fed was paying. Otherwise the banks wouldn't have gone for it. The Fed window was already open & that wasn't enough. They needed liquidity desperately to keep the doors open. Your article is a complaint that the price of bonds didn't fall far enough for vultures to profit.
 

crashtech

Lifer
Jan 4, 2013
10,523
2,111
146

Bitek

Lifer
Aug 2, 2001
10,647
5,220
136
Appointing your son in law as finance minister didn't help either.

Thank goodness our country isn't so backwards as to allow leaders to put family members in positions of power.

Turkey was in a bad position anyway, corruption and incompetence will make it worse.
 

alcoholbob

Diamond Member
May 24, 2005
6,271
323
126
Quantitative Tightening will cause all kinds of liquidity problems in the emerging markets when this business/credit cycle ends since most of these countries borrow in dollars. There's been talk for years about moving off the dollar and a international currency like the IMF's SDR. That way global liquidity isn't dependent on what the Fed does.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
It seems clear that investors want what the Fed is selling. Otherwise they wouldn't buy.
 

Oric

Senior member
Oct 11, 1999
880
53
91
Turkey does have deep economical problems but the current devaluation of TL is mainly because of a tug-of-war between Trump and Erdogan.

Strategically Turkish state seems to have made a decision to move in an alternate path, different from the last 70 years (since 1950). US - TR relations will not be as close as it was before. There can be long debates on this but in short new pacts have to form after the cold war because the new world after the cw has been very unstable and painful for the region we are living in. Vision for the future of Middle East/Eastern Europe of US and TR are completely different and some ways -opposite-. Turkey's moves in a more independent political stance are not welcome by US so comes the tensions.

1. Future of Syria
2. Future of Kurds in Syria, Iraq, Iran and Turkey
3. Gas & Oil pipelines
4. (Economical and military) war on Iran
5. Military industry of Turkey
6. Purchase of non-Nato weapons (like S-400),

are a few of the long list of disputes, the two countries have.

Erdogan and Trump are so similar in profile, both nationalistic and faithful, figures of national unity, are playing their role in deeper struggles between the Global force and nations. Both have been elected democratically (similarly alleged for having cheated) and they are here to stay for the foreseeable future. Therefore the stress between US and TR might increase or come to an end surprisingly fast, we will see.
 
  • Like
Reactions: maddie

Exterous

Super Moderator
Jun 20, 2006
20,368
3,444
126
I'm not convinced that Turkey's crisis is the result of the Fed selling off assets (although that will increase interest rates) so much as Erdogan's takeover of Turkey's monetary system has eroded investor confidence there.

My understanding is that it also has to do with many Turkish companies over leveraging (or fears they over leveraged) in USD but mainly doing business in Lira. So now that the Turkish economy is slowing and the Lira is weakening their existing debt in USD is getting progressively more expensive at the same time they have lower revenue to pay it down\off
 

fskimospy

Elite Member
Mar 10, 2006
83,963
47,857
136
My understanding is that it also has to do with many Turkish companies over leveraging (or fears they over leveraged) in USD but mainly doing business in Lira. So now that the Turkish economy is slowing and the Lira is weakening their existing debt in USD is getting progressively more expensive at the same time they have lower revenue to pay it down\off

Yes this is the right answer and it’s the same song we have seen in a zillion other emerging market crises. Run up a bunch of debt in currency you don’t control, run into moderate economic problems, watch those moderate problems explode because you can’t handle those debts anymore and you can’t discharge them.
 

kage69

Lifer
Jul 17, 2003
27,207
36,163
136
Turkey's problem is Erdogan's ego and his fixation on growth. Trump is providing salt for their wounds and thus is a helpful scapegoat. Autocrats love to blame America for everything, justified or not.
 

maddie

Diamond Member
Jul 18, 2010
4,738
4,667
136
Turkey does have deep economical problems but the current devaluation of TL is mainly because of a tug-of-war between Trump and Erdogan.

Strategically Turkish state seems to have made a decision to move in an alternate path, different from the last 70 years (since 1950). US - TR relations will not be as close as it was before. There can be long debates on this but in short new pacts have to form after the cold war because the new world after the cw has been very unstable and painful for the region we are living in. Vision for the future of Middle East/Eastern Europe of US and TR are completely different and some ways -opposite-. Turkey's moves in a more independent political stance are not welcome by US so comes the tensions.

1. Future of Syria
2. Future of Kurds in Syria, Iraq, Iran and Turkey
3. Gas & Oil pipelines
4. (Economical and military) war on Iran
5. Military industry of Turkey
6. Purchase of non-Nato weapons (like S-400),

are a few of the long list of disputes, the two countries have.

Erdogan and Trump are so similar in profile, both nationalistic and faithful, figures of national unity, are playing their role in deeper struggles between the Global force and nations. Both have been elected democratically (similarly alleged for having cheated) and they are here to stay for the foreseeable future. Therefore the stress between US and TR might increase or come to an end surprisingly fast, we will see.
What a refreshingly sane post in this cesspool of a forum. I sometimes take a look to know the state of things.

I hope you don't get too discouraged with the banality of most, not all, posters.
 
Mar 11, 2004
23,070
5,546
146
What a refreshingly sane post in this cesspool of a forum. I sometimes take a look to know the state of things.

I hope you don't get too discouraged with the banality of most, not all, posters.

You should look into his post history before you declare him to be so sound of mind and "refreshingly sane".

Actually I'm not even sure why you're unable to see the insanity in that post. I think you missed that he's openly praising both Turmp and Erdogan and claims they're messiah figures trying to save their countries from the evil globalists that are doing the real evil. Also, you should've gotten a chuckle out of him acting like Turkey is just wanting to do their own thing, and that's causing tension between the two. He's hoping for your ignorance of the situation (like how the Turks have been murdering Kurds in the thousands over the past 20 or so years, while trying to justify it by calling them terrorists because the Kurds are daring to fight back). His point on the list about "disagreement" over Kurds in the Middle East is ignoring that Turkey would like to just murder them, while the US views them as an ally. He's deliberately trying to frame it like its just simple diplomatic misunderstanding and not a fundamentally much more extreme situation.

Plus, I laugh that he ignores that Russia is trying to meddle in both and its basically Turmp and Erdogan vying for Putin's blessing. Turmp is jealous that he can't do what Erdogan does (just tell his military to round up political dissenters and people that criticize him), and Erdogan is jealous because he's not leader of the world's most powerful country so he'll naturally have less clout with Putin. Plus there's the general tension over Turmp's anti-Muslim sentiment (with exceptions for those in power as long as they'll kiss his ass), and Erdogan's push for Islamic theocracy in Turkey.

He also outright denies the Turkish genocide of Armenians.

Just because he's eloquent doesn't change the flaws in his arguments.
 
  • Like
Reactions: hal2kilo

Oric

Senior member
Oct 11, 1999
880
53
91
Bad Turks .. Good Americans

Am I sane now ?

/irony off

Every story you hear, every opinion you have is shaped by those who tell those stories to you. They are telling their versions of the stories, may be for 100 years. It is hard for you to grasp the truth being told. I know, it is hard. I am not here to convince anyone. Just listen and hear some truths, maybe one day you will understand and said "I actually HEARD that before".

Cheers
 

maddie

Diamond Member
Jul 18, 2010
4,738
4,667
136
You should look into his post history before you declare him to be so sound of mind and "refreshingly sane".

Actually I'm not even sure why you're unable to see the insanity in that post. I think you missed that he's openly praising both Turmp and Erdogan and claims they're messiah figures trying to save their countries from the evil globalists that are doing the real evil. Also, you should've gotten a chuckle out of him acting like Turkey is just wanting to do their own thing, and that's causing tension between the two. He's hoping for your ignorance of the situation (like how the Turks have been murdering Kurds in the thousands over the past 20 or so years, while trying to justify it by calling them terrorists because the Kurds are daring to fight back). His point on the list about "disagreement" over Kurds in the Middle East is ignoring that Turkey would like to just murder them, while the US views them as an ally. He's deliberately trying to frame it like its just simple diplomatic misunderstanding and not a fundamentally much more extreme situation.

Plus, I laugh that he ignores that Russia is trying to meddle in both and its basically Turmp and Erdogan vying for Putin's blessing. Turmp is jealous that he can't do what Erdogan does (just tell his military to round up political dissenters and people that criticize him), and Erdogan is jealous because he's not leader of the world's most powerful country so he'll naturally have less clout with Putin. Plus there's the general tension over Turmp's anti-Muslim sentiment (with exceptions for those in power as long as they'll kiss his ass), and Erdogan's push for Islamic theocracy in Turkey.

He also outright denies the Turkish genocide of Armenians.

Just because he's eloquent doesn't change the flaws in his arguments.
It's not about if I agree with him or not. It's about how a lot of posters here act like they have the lowest IQ possible and can still type. He's putting forward his view, in a reasonable manner, and yes, there are many things I don't like about Turkey's behavior, but that is irrelevant in also recognizing that this forum is full of stupid posts.

The thing is, There are many things I don't like about pretty much all countries. So many here try to simplify everything into their 1-2 line snide statements that they never even see how ignorant they look to many. That is why I said banal, but who knows, maybe they think they're the epitome of knowledge. One thing I notice in the Western nations, and I also live in the West, is the repeated attempt to make every thing tied to a personality. Nobody recognizes that even the most brutal dictator only rules with the consent of his elites at the very least. That is why the common modern idiotic fix is to get rid of X, Y, or Z, and think all will be well. Then everyone wonders why things got worse. Recent history is glossed over, so a rinse and repeat ad nauseum, causing untold damage to human lives in the process.

I assume you're an American, so how about this thought experiment. Name a country this century better off after being touched by the US? How do you think those countries and their citizens feel about that? War, and military action, should be the absolute last step to take, not the first. This is not pacifism,as I do believe unfortunately, that there are cases when armed conflict is the only path.

On Erdogan pushing for a theocracy, he must be insane, as he's not a mullah and I fail to see how he can remain at the top, in such a political arrangement. I guess I learn new things everyday.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,681
136
I don't pretend to understand Turkish politics but I think Erdogan has over played his hand rather badly. Which is not to support Trump's actions at all. He doesn't GAF about anything but "winning" and has defined that as Turkey deporting Brunson. It plays well with his Fundie Christian base & we know Trump is all about pandering to his base.

For his part, Erdogan probably should have just deported Brunson in the first place but now it's a huge fracas he can't back out of gracefully.

It's hard to see how it's good for the Turkish guy in the street at all.
 

crashtech

Lifer
Jan 4, 2013
10,523
2,111
146
The only reason Turkey is as well off as it is today is because the West has needed and still needs it as a foil against Russia. If if wasn't for the Turkish Straits, there'd be little reason to favor a people who generally have far more affinity with Islam than with Western democratic ideals. Erdogan has, in his passion for the common people and for his true Islamist beliefs, lost the sense of who butters his country's bread, which can only be to the detriment of the Turkish people.

https://nervana1.org/2018/07/18/the-arab-audience-that-claps-with-one-hand-for-erdogan/
Since the failed coup attempt in Turkey in 2016, hundreds of thousands of people have been jailed, intimidated, and sacked, labelled as traitors, and declared enemies of the state. Turkey now has the unenviable reputation of being the world’s worst jailer of journalists. Even the judiciary has become politicised, and jailed pro-Kurdish leader Selahattin Demirtas has pointed out that fair trial is impossible in Erdogan’s Turkey. In 2017, Human Rights Watch described the constitutional changes in Turkey towards the executive presidency as “a huge threat to human rights, the rule of law and the country’s democratic future.”
 
Last edited:
Mar 11, 2004
23,070
5,546
146
It's not about if I agree with him or not. It's about how a lot of posters here act like they have the lowest IQ possible and can still type. He's putting forward his view, in a reasonable manner, and yes, there are many things I don't like about Turkey's behavior, but that is irrelevant in also recognizing that this forum is full of stupid posts.

The thing is, There are many things I don't like about pretty much all countries. So many here try to simplify everything into their 1-2 line snide statements that they never even see how ignorant they look to many. That is why I said banal, but who knows, maybe they think they're the epitome of knowledge. One thing I notice in the Western nations, and I also live in the West, is the repeated attempt to make every thing tied to a personality. Nobody recognizes that even the most brutal dictator only rules with the consent of his elites at the very least. That is why the common modern idiotic fix is to get rid of X, Y, or Z, and think all will be well. Then everyone wonders why things got worse. Recent history is glossed over, so a rinse and repeat ad nauseum, causing untold damage to human lives in the process.

I assume you're an American, so how about this thought experiment. Name a country this century better off after being touched by the US? How do you think those countries and their citizens feel about that? War, and military action, should be the absolute last step to take, not the first. This is not pacifism,as I do believe unfortunately, that there are cases when armed conflict is the only path.

On Erdogan pushing for a theocracy, he must be insane, as he's not a mullah and I fail to see how he can remain at the top, in such a political arrangement. I guess I learn new things everyday.

Its not about me saying you need to agree with him or not. Its me pointing out that you're blatantly ignoring that he's trying to hide some horrible opinions with eloquence. Like I said, eloquence can be used to hide terrible intent. Its far more important to actually understand the argument itself. If him putting forward horrible views is ever "reasonable" then sorry we just disagree. I don't care how you dress up genocide, its still horrible.

How is that irrelevant in a thread specifically talking about Turkey? Seriously? WTF? "The actual information doesn't matter in the argument as long as you say it nicely" is what you're actually arguing and it is absurd. That is my point. You're not addressing his post at all but you're praising it. Its incredibly bizarre to do. Its right up there with those comedic setups where they have someone out pushing for the "end of women's suffrage" and women, not understanding it, supporting it.

I have absolutely no idea what you're arguing in that second paragraph, you're just throwing out general "people argue stuff and they think that'll fix stuff but it doesn't" like its because of the poor argument and not a multitude of other issues that is to blame for it not working. It again is ignoring any actual argument, and that is what matters. But then you clearly are just wanting to run around saying this place sucks because you pop in and see people pointing out a lot of blatantly stupid comments made as though there's no such discussion happening on here. Just about every thread you can find exactly what you seem so impressed by from that post. And typically you can find it actually backed up with real information via objective evidence. I will say you won't find many people supporting the things he does that will write as eloquently, but that's actually reflective of the quality of his opinions more than anything.

Yes I am, not that that should matter, but I'm going to assume that you're a person that assumes Americans are idiots? Thought experiment? Besides it having nothing to do with this thread, I'll imbibe you if you can provide a single salient point relevant to this topic, by all means, actually spend 5 minutes to read an article about the situation even.

This Century as in since 2000 or in the past 100 years? Actually either way, its most countries. That you seem to think I'll just act like its all positive shows that its you who are starting from a horribly dishonest place. You want to assume everyone here only argues simple things, or will only rah-rah America. You clearly have not actually spent much time on this subforum if you believe that as there's tons of people doing the total opposite of that. Ok, back to your "experiment" (that you felt the need to frame it "thought experiment" like you either think you're furthering endeavors of people like Socrates or because you're being condescending and believe "thought" is an actual formal experiment that requires extra work on my part, yeah, not exactly inspiring that you're wanting honest discussion).

China (we've massively helped their economic progress; but the proxy wars of the Cold War, not to mention stuff like the Boxer Rebellion probably give them pause; although I'm sure plenty are just mad because we regularly talk about their corruption when we have plenty of our own), Japan (ditto, economic prosperity even though it came about after WWII intense fighting), Germany (ditto), most of the EU (ditto), Saudi Arabia (super ditto, many of them are not happy about us pressuring them to change, but they definitely enjoy the money from oil), Iraq (certainly they have mixed feelings, but I know plenty of them are happy that we got rid of Saddam; even if they haven't returned to where they were before what helped him into power - which we also had a hand in), Ukraine (because we're helping them to try to do something about the overbearing corrupt Russian influence that dictated so much of their history), Mexico (certainly they'd have mixed feelings, and their cartel problems due to our drug and gun problems would be reasonable cause for them to not be super happy about us, but its more complex than that for sure), most of Central America (similar to Mexico, although we have sordid history with them too, be it Panama Canal), most of South America (but most would probably be favorable to many aspects even in spite of our meddling), maybe not Russia (although its hardly like all Russian hate America). Actually most countries (partly because we are a major trade partner and have helped foster stability that has helped the economies worldwide to prosper). Even countries where we fucked up badly (Vietnam, Korea, Iraq, Afghanistan) don't hate us absolutely and many have done well since in large part because of global economic work. Does that mean those countries like everything we do? Of course not. Does that mean America is perfect? Of course not. Hell, there's countries where they probably majority don't like us, but they reap the benefits of things that we enabled (be it economic progress, technological progress, or some other). Of course that's not absolutely positive (many American corporations have exploited foreign countries, and done some horrible stuff). For instance, even though its massively exploitative of its workforce, outsourcing has actually elevated billions of people out of poverty. You have to take the bad with the good sometimes. That doesn't mean people are ignorant of the issues, although often times they will be. So while America has fucked up plenty, and while I don't think we deserve all the credit or anything, but isn't it funny that as America became the dominant superpower, militarily, and economically, that the world saw peace and prosperity that it basically never had seen? Its not like wars didn't happen when we weren't around (not sure if you remember, but we sure as shit didn't start WWI or WWII), so that argument is just nonsense to begin with. That's not to say I agree with a lot of American foreign policy, especially that which used the military. Quite the opposite. And I am certainly not claiming that capitalism is perfect or magically made the world peaceful. There is no perfect economic system, no perfect government system. Technological progress (which the US fostered more than any other country in the past 75 years), and stability has helped the world thrive. America used to provide that, and it kept things progressing even in spite of the many many many many many many many many many many many many many many many many many problems that people face. America sure has plenty to deal with, but we also stop and when a country gets ravaged by disaster we go "can we help?". And we've been more open about those problems, and working to deal with them than any other country. And plenty of times our problems become other peoples' problems, or we screw up and make a problem where there was none.

I'm definitely concerned about America keeping with providing stability and pushing progress. But we're hardly the only place that change is evident, as alarmingly the world over is showing this descent into madness, because people would rather listen to someone telling them that someone else is to blame for their problems, so if we get rid of those people it'll fix everything. Things are complicated, to say the least. Which I think is what you seem to want to say, but you just generalized. Which is something that irritates me, as it makes your argument often look like the argument of ignorant people. Much like how many Americans complaining about the media sounds similar to how Turmp and other wannabe authoritarians complain about it, when it isn't, but because they don't articulate the issue it just joins the cacophony of people who have ill intent. You were doing the same thing you were chastising others for, but not actually forming a real argument and just casting dispersons. And that especially bugs me.

Is that enough thought for you?

Ok, now I'm sorry, because you genuinely just seem to be owning that you really are ignorant of Turkey's situation. But that also is why I was pointing out that you might not be so quick to praise someone for "sane" argument when they absolutely were not showing anything more than the ability to write more eloquently than is typical in online discourse.

Yes, Erdogan has been pushing for that. If you've been paying practically any attention to him, but especially in the past few years, you'd see it pretty clearly. I don't think there's anything preventing a theocracy from being ruled by a dictator, although I have little interest in arguing the specific technicalities - the point being Erdogan is citing Islamic beliefs as what should dictate Turkey's governance. Now, its gets more complex than that, as I'm not sure how much he actually is wanting that, versus him using it to gain power (which is quite common). Its kinda like with Putin, he wants former Soviet Union glory, but he's not an actual Communist. But he's settings things up to mimic a lot of Soviet methods and operation. But he's also changing (think he openly touts Russian Orthodox Christianity, which I think is probably mostly a ploy to appeal to conservative religious Russians; same deal with Turmp, I don't think he's very religious at all and he absolutely does not fall in line with what Christians claim to believe/follow, but he's somehow convinced evangelists in the US to support him). It boils down most simply that there are a glut of wannabe authoritarians (if not autocrats), and they are trying to seize power by exploiting problems and using simple xenophobia to stir chaos. You can argue the technicalities all you want, I prefer to focus more on the clear intent.
 
Last edited:
  • Like
Reactions: Victorian Gray