Erdogan Demands Turks Exchange Their Dollars To Gold, Lira
by Tyler Durden
ZeroHedge.com
Dec 2, 2016
Early this morning, in yet another session of panicked selling, the Turkish Lira crashed to new record lows to just shy of USDTRY 3.60, momentarily going bidless as the currency plunged nearly 400 pips in seconds, after Turkish President Recep Erdogan said the path for investors will be opened with lower interest rates, and urged the central bank to imitate Japan and U.S. where rates are low: “why should we go around with 14-15 percent?”
The answer is simple: the currency tends to drop when an economy is seen as weak, the political regime unstable, or – yes – a central bank cuts rates, which Turkey, as shown in the chart below, can not afford if it hopes to maintain a stable economy with the lira already at all time lows.
Normally, any other country would find itself in a dilemma: how to lower rates as per the president’s demands to stimulate investment and the economy, without killing the economy… but not Erdogan. As AFP notes, the Turkish president “urged” his fellow Turks on Friday to convert their foreign currencies into gold and lira to stimulate the country’s economy as the lira continued its slide against the dollar.
“For those who have foreign currencies under the pillow, come change this to gold, come change this to Turkish lira. Let the lira win greater value. Let gold win greater value,” he said during a televised speech in Ankara.
It was not exactly clear how a few thousand Turks exchange lira for gold would “let gold win greater value”, nor how the same number of locals converting their dollars to lira would withstand another selling onslaught as soon the the Turkish central bank cut rates again, but that’s not really relevant for the Turkish president, who appears to have a far better understanding of how to wage “failed coups” than simple finance.
The Rest…HERE
