The relationship between the United States and its NATO ally Turkey has reached a deadlock. Turkey refused to release an American pastor, and U.S. President Trump then resorted to trade sanctions. The Turkish currency ( lira) plummeted on hearing the news, and fell sharply again on Monday morning. Downgraded to a historical record of 7.24. Turkish officials announced the implementation of an economic revitalization plan on Monday, urgently raising the price of the lira.
Trump announced on the 10th that he would double tariffs on steel and aluminum imported from Turkey. The lira plummeted 14% that day, hitting a record low. Turkish Finance Minister Berat Albayrak said in a recent interview with local media "Hurriyet" that the government has formulated an economic revitalization plan and will officially implement it on Monday morning local time.
However, Albayrak did not elaborate on the details in the interview. He only said that the economic revitalization plan will target some real economic institutions such as banks and small and medium-sized enterprises, because these objects are hardest hit by foreign exchange. He said that necessary measures will be taken on August 13, Turkey time, and an announcement of supporting measures will also be issued to the market.
The Central Bank of Turkey stated on the 13th that it will provide liquidity to banks if necessary. Banks will be able to borrow one-month foreign exchange deposits and may increase banks' foreign exchange deposit limits by US$50 billion. Deposit reserves for each period The lira deposit reserve rate will be reduced by 250 basis points, and the lira deposit reserve rate for certain maturities will be reduced by 400 basis points for up to three years. The central bank emphasized that it will pay close attention to the market and will take all possible measures if necessary.
Regarding the collapse of the Turkish lira, Nobel Prize winner Paul Krugman wrote an analysis in the "New York Times Column", saying that Turkey may repeat the 1998 financial crisis; he pointed out that the 1998 financial crisis was caused by A large amount of foreign capital flowed into a country's market, causing the country to generate a large amount of foreign currency-denominated debt; then the "party with large foreign capital inflows" stopped instantly. The outflow of foreign capital and the decline in confidence caused the country's currency to plummet, and the market was forced to pay more costs to repay the foreign debt, further Damage to the real economy, this situation repeats itself, leaving the country's economy facing a vicious cycle of "death spiral".
He believes that it is very difficult to break this vicious cycle. It must adopt "short-term unorthodox policies" and use temporary capital control measures to prevent the debt ratio from skyrocketing and curb panic capital flight. This may also be supplemented by rejection. Pay off some foreign currency denominated debt and sound fiscal management once the bleeding is stopped. At that time, Malaysia , South Korea, Iceland and Argentina survived the crisis in the above way.
Xie Jinhe, chairman of Taiwan Caixin Media, analyzed that if the lira cannot withstand it, Turkey will face an economic crisis. At present, Turkey's economic fundamentals are accelerating and deteriorating. The 10-year government bond yield has risen to 19.74%, the inflation rate is 15.85%, the proportion of foreign debt to GDP is 53.4%, and the foreign exchange reserves are only 80.79 billion US dollars. "Trump continues to put pressure on Turkey." There will be dangers everywhere."
He pointed out that the most obvious case of the power of this kind of economic sanctions is in Venezuela. Last month, the Venezuelan government announced the removal of "five zeros" from its currency due to vicious inflation. North Korea has also suffered the bitter consequences of economic sanctions to this day. "How will Turkey face the crisis this time? Will the collapse of Turkey's economy affect the global economy? This deserves everyone's close attention."
The lira plummeted. Global stock markets plummeted.
The lira plummeted and Turkey faced a financial crisis. Last Friday (10 Japan) European and American stock markets fell. Asian stocks plunged at the opening on the 13th. Hong Kong stocks once fell nearly 500 points, Japanese stocks also fell about 400 points, and mainland stocks and Korean stocks also fell by more than 1%.
The Taipei stock market once fell nearly 300 points, falling below the annual line of 10,700 points. It ended up falling 234 points to close at 10,748 points, with a trading volume of NT$157.4 billion. The
storm swept across emerging markets. The Indonesian stock market once hit its largest single-day decline since November 2016, and ended up falling 3.2% to close at 5,882 points; the FTSE Singapore index fell by about 1.1%.
Risk aversion dominates the foreign exchange market, and the Indonesian central bank has stepped in to intervene in the trend of the Indonesian rupiah. The South African currency fell more than 5%, once hitting a low since June 2016; the Mexican peso depreciated by more than 2.4%; the Argentine peso, and the Marin West Asian currencies and the RMB also fell across the board.
