Yesterday, we discussed how Erdogan’s shocking “plan” to rescue the Turkieh lira – once it crossed the red line of 18 vs the USD – came into being, and how it will eventually make an already dismal situation even worse, because it really represents a massive stealth “rate hike”, one which will put huge stress on Turkey’s balance sheet and will make the government budget more vulnerable to future currency shocks.
“There has been an epic interest rate hike without calling it one ,” according to Refet Gurkaynak, a professor of economics at Bilkent University in Ankara. “There will be a big burden on the budget when there is a sharp increase in the foreign-exchange rate. This kind of burden usually gets monetized, which means even higher foreign-exchange and inflation rates.”
For those who missed our explainers of Erdogan’s cunning plan to stabilize the Turkish lira until the elections, here […]
Read the rest of this story here: www.zerohedge.com
