Turkey's undeniable lean toward dictatorship is a far worse source of woe for its future than the state of its investors' finances.
4
Seven years for it to get to this low point, BUT the article does say that after his “late 2011” (2012-ish) prediction: “Over the next five years, the economic situation in Turkey deteriorated, as he had anticipated.” So it started soon after he predicted it.
5
Let us not panic folks. This is another Greece type problem. Let the big bankers make a deal with them to paying down the debt via some lone deal. Do not make it out to be worse than it is. We do not need to get sucked into the vortex. This is Turkey's problem. Economists please grow up.
2
Wow - I just started one of the other NYtimes articles about this financial situation in Turkey . The caption under the photos reads:
"Turkey’s economy shows worrying signs: Merchants in Istanbul’s Grand Bazaar complain they must pay their rent in dollars and euros while selling their wares in the lira, which is dwindling in value".
Wow that would be horrible! It never occured to me that you could stick it directly to the citizens to bear the brunt of borrowing in a foreign currency!
8
this was a insightful article. Mr. Tim Lee has so far been correct on turkey, and has decades in the field. I will be looking him up, and researching Turkey. thanks.
I predict a bear market will follow a bull market...when? Eventually. I can predict stuff too. Basis for my conclusion - Sir Issac Newton - what goes up must come down.
3
this is an unfair reaction to this article and Tim Lee's prediction. his time in the financial services industry deserves to be respected and so does his prediction- which so far- is coming to pass.
5
@christian - Not unfair, because it points out the rather extreme time passed from prediction to occurrence, a time during which those who acted on Lee's predictions lost significant opportunities for gain.
1
you can be correct about the direction of a market but go broke waiting for it to happen
12
I suspect any prognosticator needs to order their doom and gloom in sequence of failure, and indicate whether a graceful failure or catastrophic failure.
It’s becoming clear to some of us that climate stress and crop failures will play a part in the breakdown of global order, though the press isn’t being candid and forthright.
For example, the first region to be rendered unfit for humans will be the Persian/Arabian Gulf, from what I’ve read.
Look it up, and then speculate “what happens next?”
7
Is this the final collapse in which as Marx and Engels predicted and Gracchus Babuef before them the coming Communistic Revolution?
Twenty five percent of all Turkish stocks and bonds are owned by US investors. So, what is the actual amount? Is it 1% of US GDP? Or less?
@SV Good question. I would guess that it's a lot less than 1% of our GDP - I certainly hope so.
3
Seven years is a very long time to be predicting a downturn, even in terms of the Bible's feasts and famines. What's his economic forecast for Turkey in 2025?
9
The worst part is that all this happened after the election.. Things could have been different if the people of Turkey knew this in advanced.. Many people liked Erdogan because the country was "better" financially.. Now what??
2
The Mafia govt. of turkey as succeeded in running off a lot of the people who made Turkey run as well as who had very successful businesses. The govt. basically stole those businesses and ran thrm into the ground.
Electing religious dictators usually does not work out well for the electorate but it makes for very wealthy dictators.
9
"...who warned of Turkey’s trouble in 2011." Really? Seven years early is just about equivalent to being wrong. Even a broken clock is right twice a day.
13
This is a ridiculous article. Times readers are ill-served by insinuating — as this article does, without evidence — that Mr Lee has any special insight.
The reader will observe Lee was wrong in 2011, 2012, 2013, 2014, 2015, 2016, and 2017. If you don’t think that a long time to sell short, try doing it. Or just ask why our vaunted analyst still works for a living.
The reader will also observe the article gives no hint as to the basis for the projection. It gets some basics badly skewed, though, including the seemingly ominous 25% of Turkish debt held by American banks. Divide that by total debt to discover a very small percentage of the US market.
Shame on you, NYT, for absurd, alarmist, nonfactual reporting.
19
@James K. Lowden.
Agreed it’s not accurate enough that you could go short, but that doesn’t mean it’s useless. His clients likely buy bonds and if they listened to his advice they didn’t buy Turkish ones.
Fixed income is a market with long time horizons so many bonds bought in 2011 will be on the books until 2021.
I think people tend to focus too much on the glitzy short sellers going for home runs and forget that there’s a large market of people buying stuff and just trying to be prudent by hitting singles.
3
@James K. Lowden
I think the fact the loans are denominated in US dollars is perhaps more significant than the % of money that has been loaned by US banks?
1
If Americans own 25% of Turkish bonds and stocks, does that mean Trump just shot himself in the foot? If Erdogan is going to be a stubborn goat, his best bet is to go to the Chinese and beg for a bail out in return of turning over all American Bases in Turkey to China, so Chinese soldiers can dip their feet into the "turquoise" (which means Turkish Blue) waters of Mediterranean for the first time and get their own shares of Middle East oil! China already wants to revive the old Silk Road with $1 trillion “Belt and Road” initiative. So, here is the golden opportunity for them! I think USA is making the biggest mistake she ever did in Middle East, worse than invading Iraq and then handing it over to Iran, WORSE!
8
Turkey has a war machine (5th largest) and the most corrupt and oppressive dictator anywhere. Its major exports are agricultural, like the US, but sadly it borrows in dollars and can't print any of them. Trump is blundering around with weird sanctions that may be the spark to a meltdown.
Debt is the problem, of course. Debt that needs to be repaid in ever more expensive dollars. The Donald is the King of Debt riding on an ocean of debt. How could it be otherwise with money so cheap for so long?
There is a lot to criticize Erdogan for: sponsoring the jihadists in Syria against the US allies, eliminating the free press, persecuting the Kurdish minority, his $250 million presidential palace, but in terms of debt, he is just one of the gang. This doesn't end well.
28
Gosh! Too bad about Turkey and all that debt stuff. I sure am glad that our government doesn't do stuff like that. Thank goodness for Paul Ryan's dedicated financial genius and our key actuarial wonder boy Mitch McConnell, a paragon of fiscal virtue and deep concern for us average citizens. They'll keep helping our prezident as he applies his own 'genius' in just the right places, be it North Korea, Russia or that Turkish bad guy Erdogan. Don't worry. Be happy.
17
I believe that Mr. Lee is right. (and, thanks, NY Times for a great article !) Turkey has gone far too deep in debt to tap dance their way out of it. And, the domino effect will certainly pull other Countries/economies into the trouble.
"Progress" is one thing. Cities grow larger, populations grow as well. Too often, this is done without a concept of Balance. Rather like the building Contractor who has had a few hot/profitable years, and goes out and buys ALL the toys ... the boat, the motorcycle, another truck, whatever, and all on Credit. Then (big shocker), here comes the bill, and that "contractor" already spent it all. Oops.
A City should not expand beyond it's infrastructure of good roads, schools, clean water, and housing. If it does, everything goes out of balance, and nothing works as it should. Things fall apart, without repair. Employees go unpaid.
Ditto with individuals, or Nations. Balance. The concept of "easy money" is an easy one to think of, but once you step on board the Easy Money Train ... its a whole different one to ride.
Maybe another 2008 will wake up America's Banking system, AND "our" government.
7
If the economy crashes, we’ll probably see Democrats in the driver’s seat trying to right the ship. They’ll also try to put some controls on the players who were taking advantage of the opportunities the expanding economy presented, but over did it.
Then, as the economy starts recovering, and after the Republicans have been complaining long enough about how slowly the recovery is going, people will start to believe them that the Democrats are trying to control everybody’s life. They will vote the Republicans back in (even if not via a majority of the popular vote). And even if the economy had been recovering for years the Republicans will claim that they’ve been the engine creating the recovery, and some new bubble will get to a point that the economy crashes.
Wash, rinse, repeat. And don’t learn a thing.
46
What goes up must come down, particularly when you’re talking about “other people’s money!” These financial conditions could well have been predicted. The question is: who stands to gain from the imminent crash? The answer is NOT nobody!
4
The only "analyst" whose opinion I'll respect is someone who invests his own money based on this speculation, or convinces others to short this thing somehow with his or her career and reputation on the line if there is failure. We won't know who those actors are until the dust has settled in a few years, after the fact, like those featured in The Big Short. Otherwise, you're just someone else with an educated opinion typing on a laptop, like the rest of us.
4
Mr. Lee made a prediction regarding cracks forming in Turkey's financial foundation. He was correct in his assumption. He saw certain details, which he pointed out, that caused him to warn readers of his newsletter to be very weary. For instance, the duration and depth of the decline of the Lira. Convertible at 1.9 to the dollar in 2013 has had a precipitous decline. Today it takes 6.5 Lira to purchase a dollar. This makes it virtually impossible for Turkish banks and corporations, whose loans were configured in US dollars, to pay back their loans. Please note that it's Western Banks that are on the hook for those loans. To make matters worse, Trump hit several of Turkey's exports with high tariffs. A quick review of the outcome of the Smoot-Hawley Tariff Act is enough to put the fear of god into knowledgeable financial professionals. Add that to the flattening yield curve and the aura of financial uncertainty and associated risk is growing deeper on a daily basis. Turkey is on the precipice of financial Armageddon and Erdoğan, like Trump, is stubborn and has little knowledge of financial history.
23
Sadly, most of the rest of the world will be glad to see the US fall, if that where this is heading.
It seems like Asian countries are in a better position here.
6
It's impossible to predict the timing of a crisis or the size of its impact, but more tractable to recognize the ingredients of the crisis and its trajectory toward eruption. This is what Mr. Lee has done, and his perspective on it makes sense.
The key immediate problem is the mismatch between the currency the borrowers earn and the currency they need to repay the loans. When the former devalues the latter revalues and the repayments become unaffordable. When that happens, the borrowers default. Those defaults trigger cross-default provisions in other loans. Investors and fund managers observing this get nervous and start heading for the exits. Their incentive is to sell quicker than the next person so that as values fall from all the selling, they lose less the sooner they can liquidate Turkish assets. In more usual parlance this is called a "run on the banks".
It spreads internationally because while the borrowers are Turkish or enterprises located in Turkey, the lenders are from all over the world. So their books get devalued according to the devaluation of their Turkish assets. How bad the impact depends on the size of their Turkish holdings relative to their overall portfolios. As several international lenders go shaky, it triggers panic selling more generally. With today's instant communications, over-reaction magnifies the damage of rapid liquidation. So yes, potentially real trouble on the horizon, the extent of it hard to know for sure.
32
A stopped clock is right twice a day.
7
He was right about the risks of over borrowing in foreign currencies but missing in his analysis was the real catalyst, Erdogan and his political play of steering billions in business to his allies, many of whom are in construction. This encouraged more borrowing with the idea that some deals were safe because they were implicitly backed by politics.
Erdogan’s authoritarianism and spiting of the US is the match that sets off the bomb. My guess is that if Erdogan had been less authoritarian and a better US ally Turkey would be getting a bailout. It also stands to reason that he also wouldn’t have engaged in the kind of corruption that encouraged so much borrowing as well.
7
"Yet he is doubling down on his doomsday message: The river of global cash will dry up, the dollar will spike and there will be a series of financial seizures. Investors, he thinks, will flee developing economies, then Europe and eventually the American stock and bond markets.
“It won’t be a banking crisis this time around — it will be a financial market crisis,” Mr. Lee said. “And I am very confident that it will happen.”"
No, I don't think so. It's not as though all that money will just dry up and vanish. It will search the world for a decent return, or, at least, safety, as it always has. We are doing fairly well since '08. Equity markets are up, big time. Housing never really crashed to a level it should have. Sure, the lucky rich will get richer, as long as they don't freak out and sell at the bottom, and the poor will be poorer, but, sorry, Turkey is important, but not that important.
And '08 was not just a banking crisis, it was a very intense worldwide financial crisis. Lehman and Bear Sterns were not banks.
5
@Mike M
Dear Mr. Mike,
I am afraid that you state an incorrect proposition when saying "it is not as though all that money will just dry up and disappear."
The problem is, as I see it, that the money will indeed just disappear. In fact, that money never really existed except as new credits on a balance sheet when a loan was made. Those credits, denominated in dollars, only have value, are "money," as long as the debt is being repaid. If the debt defaults, those credits, the "money," simply evaporate and disappear. Gone. A vacuum. And if that happens on a large scale, and if as is likely, there are then chain-reaction defaults, there indeed can be an economic collapse, the extent of which would be in relation to the total of the defaults. It is simple mechanics, the function of the physical world.
Respectfully,
TBM, College Station Texas
14
@TBM
If we survived '08, we'll survive this.
1
@Mike
Actually we haven't yet survived '08.
1
Off the investment/economic perspective, is that the Sunshine Skyway Bridge in the background, and is Mr. Lee on the beach at Ft DeSoto?
1
@G Field
This appears to be a photoshop of him standing in front of the Mackinac Bridge in Michigan. The sand has even been altered to look more ‘Floridian’
1
Turkey has been doomed by the systematic disassembly of the Kemalist legacy. Modernity has given way to pandering to rural conservatives by a strongman. Sounds familiar, doesn’t it?
52
I’ve have never believed that any debt was “good debt.”
7
Maybe its time to bite the bullet and buy that tiny home with the solar panels before dog doo hits the fan.
As for Turkey, I saw this coming years ago. The country is led by a religious dictator who year by year has eliminated all of its hard fought democratic freedoms, imprisons and kills members of the press, destroys city parks to build shopping malls for personal gain, kills and imprisons dissenters and religious and ethnic minorities, and is trying to create a new caliphate from loans made by those Western banking 'infidels'. Meanwhile Westerners are too dumb and greedy, who have been feeding Turkey's unrelenting financial appetites for nearly two decades. This financial collapse was not not prescient but inevitable.
23
Yes, this is how the inherited/stolen wealth International Mafia Top 1% Global Financial Elite Robber Baron/radical religion Good Old Boys cabal intends to try to take over the world with their boy The Con Don as their American talking head.
Anyone how has their retirement funds in the stock market had better pull it out and put in in IRA CDs at their local bank or credit union and watch it like a hawk.
The meltdown will not be pretty but WE THE PEOPLE control investment, consumer and government/taxpayer money. WE can stop them and NOW is the time.
15
How will that work in the event of rampant inflation?
@njglea
Since my rather tiny retirement money connected to the stock market is finally "up".. I am thinking the same logic.. (talk about vanishing money) Pull some out now and stash it somewhere else while it still exists.
After 2008 Money in that account DID vanish!
Most people who call themselves financial analysts seem incapable of predicting the future consequences of financial policy beyond the next quarter. It's as if occurrences beyond that were out of anyone's control.
We can look back and see that an orgy of borrowing caused the Great Recession in 2008, and then we turn around and do exactly the same thing, somehow expecting different consequences ...
Einstein is commonly quoted, "Insanity is doing the same thing over and over again and expecting different results."
In 2008 it was housing loans; now it is commercial real estate loans. The same thing will happen in 2029. Congress refused to institute any changes that could minimize risk, primarily because of bank lobbying with the story that next quarter's profits were what would lead to political contributions.
14
Expectations of instant response for poor financial policies are wrong again. The foolish maintenance of low interest rates seemed perfectly safe because there was not an instant collapse. We seem unable to perceive the possibility of that collapse taking several years, or a decade, to evolve.
No instant collapse? so risky financial behavior is OK. But that is in the face of the fact that recessions have occurred in the US roughly every 10 years. People ride the short term payoff driven by greed, and get burned as the problem ferments.
In 2008 the financial community was in denial regarding the risks of real estate debt right up to the time that the collapse started.
Again, one sole bearer of bad news is the only analyst with the courage to predict the collapse that has resulted from ridiculously low interest rates and maintaining those low rates even after economies have begun to expand.
Not only will the low rates have caused the problem, but the fact that rates are still low means that one of the primary tools the fed uses for stimulating the economy, lowering rates, is not available.
13
Strangely, the words "S-400", "Putin", "Iran" are missing from this article.
Should we believe that geopolitics are not involved in the Turkish crisis, and we should see it only through financial terms?
10
@delaxo
I'm sure that geopolitics are going to be more important than ever. We participate in a global economy. I don't think the article was intended to speculate about all the geopolitical impacts or responses.
I think it is a key concept that Turkey promised to repay in DOLLARS. That, somehow, will effect the situation.
Even a broken clock is right twice a day. This genius predicted the devaluation of the Turkish lira in 2011??! Sorry, while I am operating cautiously in the markets due the flattening of the yield curve, I would not take any advice from this person.
9
I read this article yesterday and thought the man might be on to something. Perhaps add Iran to the mix?
Now today, I came back to only ten comments. Is this because the readers didn't understand what they were seeing or because they don't really care?
9
@Helen Lewis
Ms. Lewis: many readers haven't studied the real underlying causes of past financial debacles. This article points out the severe decline in the Turkish lira. In 2013 is was worth 0.56 US cents, today, just 0.14 cents. This makes it impossible for Turkish companies to pay back their US dollar loans. Add to that the Tariffs Trump placed on Turkish and other countries exports and one has to be reminded of the outcome of the Smoot-Hawley Tariff Act of 1930. The US is tightening the interest rate, Tariffs have been put into effect, foreign banks and corporations have loans in US dollars. As currencies devalue against the US dollar it becomes impossible for those entities to pay back their loans. Without having a foundation in financial history one would be at a loss to understand the the similarities of the US and Global economy leading into and during the Great Depression.
8
@Richard
Thanks for drawing this comparison between today's global economy and the US economy leading into the Great Depression, and clarifying some basics here.
Turkey will probably be unable to pay it's loans, because they must somehow raise money in dollars ...?....or default, or forfeit? or what?
So Tim Lee was right. Thing is, there are so many voices raised on lots of topics that, for some, hindsight will prove them perspicacious and brilliant.
Our interest rates have been kept artificially low for years. Borrowing has been out of control. People are getting behind on their loan payments and credit bills. The end of this run is coming and will most likely be catastrophic and might lead to an incredible backlash against the U.S. as so many will blame Trump and his tariffs due to his inflammatory nature.
26
@CA Dreamer Agreed, and nobody seems to be talking about the consumer credit bubble right here in the good old United States that has been a result of this low interest-rate lending environment.
5
@sfrom The variable interest rate has always been the secret killer.
@CA Dreamer
the variable rate creeping up has been killing me.
If we look at our economic health history doesn't the U.S. cycle from growth to slow growth or recession within every 10 years more or less? Predicting another recession in light of regional real estate booms, relatively rapid growth, wage stagnation, and uncertain global position seems relatively easy - even for a non-economist like me.
6
Mr. Lee is tooting his own horn quite a bit as there were many many analysts that foresaw Turkey's current crisis. The country has all the classic ingredients for a currency crisis: high external debt, a significant current account deficit, low savings, and a deteriorating political environment. These factors were well known in the financial community.
13
@LonghornSF "high external debt, a significant current account deficit, low savings, and a deteriorating political environment."
Yikes. That also seems to describe our own increasingly sordid state of affairs here at home...
2
@Keith
Yes- (sordid state of affairs here at home) Maybe that's why the article rated the placement on the front page?
. . . Or China can intercede on the theory that it's a cheap way to offset Russia, replace the U.S. with leverage, and supplant NATO in the Balkans, via a desperate Erdogan seeking bargaining power to stay in power.
The strategic value of Turkey to the Pentagon will weigh in heavily, and China may push this button in order to trade on this position in the
28
I think you are right on the money jwp. China has nothing to lose in bailing out Turkey and putting the ego maniac Erdogan into their thrall could easily tip the geo-political balance in that vital cross roads of Empires.
20
@jwp-nyc . . . Southeast Asian region and the Pacific.
@Birddog
- Ye olden silk road and Ottoman legacy, and an additional offset to the Russian play with Syria/Iran.
This piece is very misleading. In fact a lot of economists expected these financial problems for Turkey. If anything, many were wondering why it took so long. Turkey has lend a lot of debt in foreign currency, and that is a big vulnerability, because a weaker local currency will blow up the value of that debt, leading to a cycle of lower confidence, a weaker currency, and ever higher debt. Economists gave learned this very well from the Asian financial crisis in the 1990s. Moreover Erdogan has run up the debt even more recently to get himself reelected. In other words, this crisis was completely expected.
47
@Christiaan Hofman I think the point is that it wasn't being taken seriously by the investment community. Who listens to economists?
4
The way QE works is that the Fed goes out and buys securities that pay interest with cash. The problem with cash is that it pays no interest or dividend and is therefore a hot potato that every investor unloads on the next one. This hot potato gets tossed around until somebody in the system is willing to hold cash and accept 0 % return. When so much cash is created via QE, it drives down interest rates system wide and investors are forced to go further and further out on the limb to generate returns. The trouble with countries like Turkey, Pakistan, Argentina etc. is that the only reason they have not defaulted is because they still enjoy access to the capital markets. The moment they lose access to fresh money, all the rot is revealed. The securities industry conjures up stories of reform and growth etc., because it works on commission and needs to entice new investors every day. A decade of 0 % interest rates and QE have driven investors into bubbles in all kinds of places like emerging markets, real estate, commodities and social media. All these bubbles are bursting one by one.
60
sorry what is QE?
2
Quantitative Easing. An introduction of new money into the money supply by a central bank. The strategy the Fed Reserve used to avoid depression after 2008.
2
@Kate “quantitative easement,” I believe
A market crash is good as long as it happens BEFORE November. So that trump and his GOP followers will lose the mid-terms miserably. That is actually worth losing money over for me.
109
I do not agree, TermlimitsNow. The only ones who temporarily win are the International Mafia Robber Barons who are engineering this attempt to bankrupt countires and take them over, steal the people's hard-earned taxpayer dollars and resources.
HIStory is full of these greedsters who destroyed civilizations with their insatiable, demented greed.
Financial turmoil is never good for 99% of us. Never.
9
@TermlimitsNow
This is what political extremists of any stripe tend to say. MAny have never felt or suffered through a panic or a crash-many think they , (aside from millions of others) will never suffer-
I recall the NYTimes article about the shoemaker who hailed the crash of 1929, but within a year, he too, was out of a job and never worked again a day in his life.
Too many individuals and political dreamers think everything in the future will be exactly like in the past, They are much like young children who wish they were grown up-NOW!!!-so they wouldn't have to wait or go to school , learn to read, write or do arithmetic. The reality is that so many kids , upon reaching the jump off line to adulthood wish they were infants once again, so they never had to worry about rent, salaries and getting up every day to be chained to the wheel of life in return for next to nothing.
I suspect it is many such people wishing for economic collapse, to fulfill personal agendas, who actually aid in allowing them to sneak up, smash us on the head and take our lives. Then they wonder"What was I thinking! My god! I had NO idea things would get THIS bad!
If only I had known. . . !
Like the angry shoemaker celebrating the downfall of Wall St. in 1929, They didn't see how all our lives are touched by such events.
4
@termlimitsnow, how wrongheaded you are. Setting aside our mutual desire to get this administration out of office, regardless of political affiliation, we should never root for such a calamity. It is not your wealth I am considered with as much as it is the millions of people who have no real agency in how the market turns and are barely getting by after the last economic crisis. I fear, too, the potential for violence should such a crisis ensue. And to those who dismiss this warning of a global economic crisis, I say the unlikely election of Trump should be enough to have you reconsidering that smug stance.
6
May be US is another big borrower in dollars. Doubling the deficit in one year isn't a good sign.
US debt is 100% its annual GDP for this year. This is the same range Italy was in 2010.
The treasury has to print money now otherwise the political system here may get unstable in US.
American pride will push to remove social security, education, medicare and other prepaid programs for increased military spending, which produces no return of goods into the economy. Who ever works in defense uses exclusively government money!
U.S. is in need for an enemy to avoid this scenario. President Trump is working on it so all is good, isn't it?
22
@Hw123
The US debt is entirely dollar denominated. US government debt is mostly owned by US people and institutions. As the US government controls the supply of dollars and can set interest rates, and the dollar is the world reserve currency, this is nothing like the problem that Turkey and others are facing. I'm much more concerned about the UK, whose currency is already fragile thanks to Brexit. A flight to safety in the capital and equity markets will hit the pound hard.
9
@Nullius
My concern is that Trump disengages the US to such an extent that the reserve currency becomes the Euro. It's far fetched but possible. Remember back in the campaign when he said he would have no problem if the US government defaulted on its debt? A big problem with Trump is he acts without listening to his advisors. Erdogan had the same problem and look where Turkey is now.
@Roger C
The euro is fragile. italy’s banks could go down. Italy could bring the euro down.
If there is another Financial crisis like 2008 there will be a major war on this planet. After Donald Trump, I am not sure the US would remain intact. Lets hope he is very wrong on this one.
7
Some day, I'm going to publish two pseudonymous books, "The Coming Boom" and "The Coming Bust."
Then, whatever happens, I'll be hailed as a prophet.
92
The remedy for 2008 was the printing press and real interest rates at zero or near zero. That produced a boom, but a price will have to be paid for the economic sugar high.
Economic growth since the 1980s has been largely (though not entirely) built on debt. Household debt is better than it was in 2008, but that's mainly because banks have turned off the spigot. Most of the non-rich are still living on a razor's edge financially. There's lots of bad debt swirling around in many markets, government debt is completely out of control, the quantitative easing card cannot be played again if there's another collapse, the derivatives market remains completely opaque, and Donald Trump is president of the United States. Looks like a perfect storm on the horizon to me.
84
Good article, but an important unaddressed question: can a government blow up the country's economy for political reasons and then get a bailout loan from IMF? Based on Erdogan's behavior, it's a fair bet that he'll lie to get the loan, and then ignore the terms. Is this a factor in an IMF decision or does the Fund presume responsible governance?
22
He was right, but he reminds me of the economist who predicted 9 out of the last 6 recessions :)
13
@Milo Minderbinder Issue with a lot of these guys— and you’d think over time they’d learn— is that timing is everything. A good options trader knows this very well. Just because his prediction is correct doesn’t mean he’s right. More so, if he didn’t short any Turkish debt with his own money then you know anything he says has little value, even if he got timing right!
4
Hmm, and I imagine much of the US investment will have been by "smart money" outfits like Goldman Sachs who, if things really hit the fan, will end up being bailed out by the US taxpayers.
11
You have to give credit to the multiparty democracies for leaving their spoils for the opposition parties to deal with.
2