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ECON FUNG RED ALERT: Turkish Meltdown as Lira Explodes...Panicked Sellers Spark Contagion
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  1. #1

    FUNG RED ALERT: Turkish Meltdown as Lira Explodes...Panicked Sellers Spark Contagion

    https://www.zerohedge.com/news/2018-...obal-contagion

    .


    .
    As it’s Friday we are bringing you a selection of some of the precious metals articles, graphs and videos that caught our eye this week.


    Turkey Meltdown: Lira Implodes As Panicked Sellers Spark Global Contagion
    .
    Fri, 08/10/2018 - 06:23
    .
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    The Turkish currency crisis is finally here and it is sending shockwaves around the globe.

    After weeks of a slow, but controlled collapse, investors finally hit the panic button overnight, when the Turkish lira crashed as much as 11.2% against the dollar as concern over contagion from Europe’s exposure to the Turkish economic devastation overshadowed promises by the Turkish government to bolster the economy.

    The Turkish Lira plunged to a record low of 6.3005 per dollar on Friday morning, before rebounding modestly to 5.88, and is now down more than 35% in the year to date.



    And a longer-term chart:





    Friday's fall has made the Turkish Lira the worst performing emerging market currency in 2018 and as the currency was headed for its worst week since 2001, its YTD collapse has surpassed even the Argentine Peso.



    "Seems like a complete crash, so they need to act now,” said a stunned Morten Lund, strategist at Nordea Bank in Copenhagen. “The lira will keep falling if they don’t hike rates today." Then again with Erdogan's stated preference that rates never go up, it is quite possible that nothing happens.

    The collapse also slammed Turkey’s bond market, sending the yield on 10-year government bonds soaring by 93bps to a new record high of 20.67%.

    Friday’s fall came after the Financial Times reported that supervisors at the European Central Bank are concerned about exposure of some of Europe's biggest lenders to Turkey, including chiefly BBVA, UniCredit and BNP Paribas. The FT reported that along with the currency’s decline, the ECB's Single Supervisory Mechanism has begun to look more closely at European lenders’ links with Turkey. The moves also came after the US showed no signs of lifting crippling sanctions despite the visit of a Turkish delegation to the US capital.

    According to the FT, the ECB is concerned about the risk that Turkish borrowers might not be hedged against the lira’s weakness and begin to default on foreign currency loans, which make up about 40% of the Turkish banking sector’s assets.
    .
    And while it does not yet view the situation as critical, it sees Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, which all have significant operations in Turkey, as particularly exposed, according to two people familiar with the matter.

    The ECB news hit Turkey like a rock: "The key to any hope of Turkish stability is the ability for banks to roll over syndicated loans -- so far, that’s been absolutely fine,” said Paul McNamara, a money-manager at GAM UK in London. “I think the FT thing about the ECB being worried about Turkey exposures is a huge new factor."

    Contagion quickly spread as the banks named by the ECB as exposed to Turkey saw their stocks plunge as the shockwave spread around the world: Europe’s banks opened on Friday under pressure. The Euro Stoxx Banks index dropped 0.5% in early trading, with BBVA, UniCredit and BNP Paribas among those drawing most scrutiny. Shares in BBVA, UniCredit and BNP Paribas were all down more than 3% on Friday morning.

    “We’re likely to see some weakness across the board,” said Kit Juckes, a macro strategist at Société Générale, noting the weight the issue has already imposed on the euro.

    Of course, it will be local bank that go first: as a reminder, earlier this week, Goldman published a research report, according to which a drop in the lira to TL7.1 against the dollar “could largely erode banks’ excess capital”.




    Renaissance Capital's chief EM economist Charles Robertson said: "The markets have lost confidence in the triumvirate of President Erdogan, his son-in-law as finance minister and the [central bank’s] ability to act as it needs to."

    Jane Foley, head of foreign exchange strategy at Rabobank, added that Erdogan’s “defiant” comments on Thursday night “had reduced the markets’ hope” that the Turkish government is willing to tighten monetary policy or begin economic reform.

    Meanwhile, Turkey continues to pretend that all is well, and on Thursday the Turkish finance ministry said that the banking sector was protected by its robust capital structure and balance sheets. “Contrary to the speculative statements being made in the market about our banks and our companies, our regulatory institutions do not see a problem posed by the exchange rate or liquidity risks."

    As the FT adds, according to cross-border banking statistics from the Bank for International Settlements, local lenders, including foreign-owned subsidiaries, have dollar claims worth $148bn, up from $36bn in 2006 and euro claims worth $110bn. Spanish banks are owed $83.3bn by Turkish borrowers, French banks are owed $38.4bn and Italian lenders $17bn in a mix of local and foreign currencies. Banks’ Turkish subsidiaries tend to lend in local currency.

    Curiously, ahead of the ECB's warning, all the named banks with exposure to Turkey were rather sanguine:

    Carlos Torres Vila, chief executive of BBVA, which owns just under half of Turkey’s Garanti Bank, said last month that the group was “really very, very well prepared for the situation”. He said the bank had reduced the weight of its foreign currency loan portfolio and increased the weight of inflation-linked instruments.

    Separately, earlier this week, analysts asked UniCredit whether it would need to write down its €2.5bn investment in its 40.9 per cent holding in Turkey’s Yapi Kredi, after the lira’s depreciation dragged the stake’s market value down to €1.15bn. UniCredit responded that Yapi Kredi’s underlying performance was good and the foreign exchange impact would be absorbed by its own reserves. But Goldman analysts said this week that they viewed “Yapi Kredi as the weakest positioned of Turkey’s biggest banks” in terms of capitalisation.

    BNP Paribas holds 72.5 per cent of retail bank TEB. One person close to the French lender said its exposure to Turkey was “very limited” at close to 2 per cent of overall group commitments.

    * * *

    The unprecedented turmoil threatens to scare away the foreign capital Turkey depends on to finance its large external deficit, and hampers companies’ ability to repay foreign-currency loans. Not helping, the government cut its 2018 growth target Thursday to less than 4% from 5.5%, a sign that it is willing to accept a more moderate pace of expansion in an effort to rebalance the economy, Bloomberg reported .

    There is some hope for damage control: Treasury and Finance Minister Berat Albayrak, the president's son-in-law, is due to hold a press conference this afternoon, although it is unlikely he will announce what analysts believe are the appropriate measures.

    The revisions are unlikely to be enough “to lead to a recovery in markets,” said Erkin Isik, a strategist at Turk Ekonomi Bankasi AS. “If the currency remains at current levels, headline inflation is likely to approach 18 percent year-over-year by September. As a result, current policy rate at 17.75 percent is not tight enough.”


    .
    Sow the Wind....Reap the Whirlwind

  2. #2
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    So does it look like it is being contained to Turkey's currency or do you think this is the first fiat currency domino? Are the Turkish banks tied into the global debt and derivatives?
    Patriotism is supporting your country all the time, and your government when it deserves it. - Mark Twain

  3. #3
    I'm not a financial guy, but am always curious.

    The Lira in Turkey is falling. The currency in Iran is falling, about to cause a revolution (heard that before). Inflation in Venezuela is expected to reach One Million Percent by the end of the year.

    A week or so ago we had a thread about the dollar coming under attack.

    A lot of stuff going on around the world, is any of it going to hit us (US)?

  4. #4
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    I would expect some type of intervention around 6.5 USD/TRY

    The big problem is the lack of hedges against a currency collapse by the banks.

    I don’t mean the Turkish banks. I mean by the EU and US banks. Turkey hasn’t traditionally been considered a risky emerging market from a currency standpoint.

    For people that like to vacation in Turkey (yes there are stupid people) it just became a lot cheaper to go there.

  5. #5
    Quote Originally Posted by Old Gray Mare View Post
    So does it look like it is being contained to Turkey's currency or do you think this is the first fiat currency domino? Are the Turkish banks tied into the global debt and derivatives?
    I will go on record that I believe that this is a serious set of circumstances......and could impact other economies throughout the world...including the economy of China.....

    Concerning derivatives exposure....no information yet....will post this after I've done some research......that being said...THIS IS SERIOUS.
    Sow the Wind....Reap the Whirlwind

  6. #6
    Tune into to Squawk box or Bloomberg for up to the minute news on this subject...THE RED ALERT IS FOR REAL.
    Sow the Wind....Reap the Whirlwind

  7. #7
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    Quote Originally Posted by doctor_fungcool View Post
    I will go on record that I believe that this is a serious set of circumstances......and could impact other economies throughout the world...including the economy of China.....

    Concerning derivatives exposure....no information yet....will post this after I've done some research......that being said...THIS IS SERIOUS.
    Oh s#!t. This would be a really good time for you to be wrong.

    Being that Turkey like the UK still use their own currency I hope the problem can be contained to Turkey and will not drag the rest of the EU down as well. Is there any form of reciprocity/treaties in place that tie the value of the Turkish liar to the EURO?
    Patriotism is supporting your country all the time, and your government when it deserves it. - Mark Twain

  8. #8
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    nvmd

  9. #9
    Quote Originally Posted by night driver View Post
    Here ya go Doc.

    I'll clean it up in a sec.

    Turkey Meltdown: Lira Implodes As Panicked Sellers Spark Global Contagion
    Profile picture for user Tyler Durden
    by Tyler Durden
    Fri, 08/10/2018 - 06:23
    140
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    The Turkish currency crisis is finally here and it is sending shockwaves around the globe.

    After weeks of a slow, but controlled collapse, investors finally hit the panic button overnight, when the Turkish lira crashed as much as 11.2% against the dollar as concern over contagion from Europe’s exposure to the Turkish economic devastation overshadowed promises by the Turkish government to bolster the economy.

    The Turkish Lira plunged to a record low of 6.3005 per dollar on Friday morning, before rebounding modestly to 5.88, and is now down more than 35% in the year to date.



    And a longer-term chart:





    Friday's fall has made the Turkish Lira the worst performing emerging market currency in 2018 and as the currency was headed for its worst week since 2001, its YTD collapse has surpassed even the Argentine Peso.



    "Seems like a complete crash, so they need to act now,” said a stunned Morten Lund, strategist at Nordea Bank in Copenhagen. “The lira will keep falling if they don’t hike rates today." Then again with Erdogan's stated preference that rates never go up, it is quite possible that nothing happens.

    The collapse also slammed Turkey’s bond market, sending the yield on 10-year government bonds soaring by 93bps to a new record high of 20.67%.

    Friday’s fall came after the Financial Times reported that supervisors at the European Central Bank are concerned about exposure of some of Europe's biggest lenders to Turkey, including chiefly BBVA, UniCredit and BNP Paribas. The FT reported that along with the currency’s decline, the ECB's Single Supervisory Mechanism has begun to look more closely at European lenders’ links with Turkey. The moves also came after the US showed no signs of lifting crippling sanctions despite the visit of a Turkish delegation to the US capital.

    According to the FT, the ECB is concerned about the risk that Turkish borrowers might not be hedged against the lira’s weakness and begin to default on foreign currency loans, which make up about 40% of the Turkish banking sector’s assets.

    And while it does not yet view the situation as critical, it sees Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, which all have significant operations in Turkey, as particularly exposed, according to two people familiar with the matter.

    Trending Articles
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    The ECB news hit Turkey like a rock: "The key to any hope of Turkish stability is the ability for banks to roll over syndicated loans -- so far, that’s been absolutely fine,” said Paul McNamara, a money-manager at GAM UK in London. “I think the FT thing about the ECB being worried about Turkey exposures is a huge new factor."

    Contagion quickly spread as the banks named by the ECB as exposed to Turkey saw their stocks plunge as the shockwave spread around the world: Europe’s banks opened on Friday under pressure. The Euro Stoxx Banks index dropped 0.5% in early trading, with BBVA, UniCredit and BNP Paribas among those drawing most scrutiny. Shares in BBVA, UniCredit and BNP Paribas were all down more than 3% on Friday morning.

    “We’re likely to see some weakness across the board,” said Kit Juckes, a macro strategist at Société Générale, noting the weight the issue has already imposed on the euro.

    Of course, it will be local bank that go first: as a reminder, earlier this week, Goldman published a research report, according to which a drop in the lira to TL7.1 against the dollar “could largely erode banks’ excess capital”.




    Renaissance Capital's chief EM economist Charles Robertson said: "The markets have lost confidence in the triumvirate of President Erdogan, his son-in-law as finance minister and the [central bank’s] ability to act as it needs to."

    Jane Foley, head of foreign exchange strategy at Rabobank, added that Erdogan’s “defiant” comments on Thursday night “had reduced the markets’ hope” that the Turkish government is willing to tighten monetary policy or begin economic reform.

    Meanwhile, Turkey continues to pretend that all is well, and on Thursday the Turkish finance ministry said that the banking sector was protected by its robust capital structure and balance sheets. “Contrary to the speculative statements being made in the market about our banks and our companies, our regulatory institutions do not see a problem posed by the exchange rate or liquidity risks."

    As the FT adds, according to cross-border banking statistics from the Bank for International Settlements, local lenders, including foreign-owned subsidiaries, have dollar claims worth $148bn, up from $36bn in 2006 and euro claims worth $110bn. Spanish banks are owed $83.3bn by Turkish borrowers, French banks are owed $38.4bn and Italian lenders $17bn in a mix of local and foreign currencies. Banks’ Turkish subsidiaries tend to lend in local currency.

    Curiously, ahead of the ECB's warning, all the named banks with exposure to Turkey were rather sanguine:

    Carlos Torres Vila, chief executive of BBVA, which owns just under half of Turkey’s Garanti Bank, said last month that the group was “really very, very well prepared for the situation”. He said the bank had reduced the weight of its foreign currency loan portfolio and increased the weight of inflation-linked instruments.

    Separately, earlier this week, analysts asked UniCredit whether it would need to write down its €2.5bn investment in its 40.9 per cent holding in Turkey’s Yapi Kredi, after the lira’s depreciation dragged the stake’s market value down to €1.15bn. UniCredit responded that Yapi Kredi’s underlying performance was good and the foreign exchange impact would be absorbed by its own reserves. But Goldman analysts said this week that they viewed “Yapi Kredi as the weakest positioned of Turkey’s biggest banks” in terms of capitalisation.

    BNP Paribas holds 72.5 per cent of retail bank TEB. One person close to the French lender said its exposure to Turkey was “very limited” at close to 2 per cent of overall group commitments.

    * * *

    The unprecedented turmoil threatens to scare away the foreign capital Turkey depends on to finance its large external deficit, and hampers companies’ ability to repay foreign-currency loans. Not helping, the government cut its 2018 growth target Thursday to less than 4% from 5.5%, a sign that it is willing to accept a more moderate pace of expansion in an effort to rebalance the economy, Bloomberg reported .

    There is some hope for damage control: Treasury and Finance Minister Berat Albayrak, the president's son-in-law, is due to hold a press conference this afternoon, although it is unlikely he will announce what analysts believe are the appropriate measures.

    The revisions are unlikely to be enough “to lead to a recovery in markets,” said Erkin Isik, a strategist at Turk Ekonomi Bankasi AS. “If the currency remains at current levels, headline inflation is likely to approach 18 percent year-over-year by September. As a result, current policy rate at 17.75 percent is not tight enough.”

    * * *

    Today's meltdown took place ahead of a much-anticipated public address by President Recep Tayyip Erdogan.

    Speaking outside a mosque earlier today, Erdogan told followers “Don’t forget this: if they have got dollars, we have got our people, our right, our Allah."

    Commenting on Erdogan's statement, Bloomberg macro commentator Stephen Kirkland said that it signals he’s sticking to a nationalist message and uninclined to deliver the hard measures Turkish assets need. As a result, option markets are now pricing in a one-in-five chance of USD/TRY reaching 7 per dollar in a month, from about 1% probability yesterday, at which point Turkish excess bank capital is wiped out and the currency crisis becomes a full blown financial panic. Meanwhile, three-month USD/TRY risk reversals have shot up to the highest since 2009 and lira forward points have never been this high in Bloomberg data that goes back to December 1996.

    That market capitulation offers Erdogan an element of surprise to turn things around for the lira. Instead, it’s looking increasingly like it may have much further to fall before he takes the necessary action.

    As for Turkish Lira longs, Erdogan is right: Allah is indeed all that's left
    Many thanks N.D.

    https://papers.ssrn.com/sol3/papers....act_id=2126515

    This site covers Turkey's derivative exposure........somewhat...this info from 2012

    Abstract
    Recent developments in Turkish derivatives markets demonstrate the increasing importance of risk management not only for individual banks but also for the entire system. In this context, this study analyzes the counterparty credit risk of OTC derivatives. The analysis is based on a hypothetical portfolio that is characterized by key aspects of the instruments banks hold. Thus, the portfolio consists of vanilla swaps, which dominate banks’ transactions. By simulating market risk factors, we come up with proxy risk exposure figures for the whole banking system. After a proper adjustment, these figures have been compared with the risk weighted assets, which includes credit risk, as well as with the capital. Consequently, we observe that the counterparty credit risk resulting from the use of OTC derivatives is relatively small for the Turkish banking system. Nevertheless, in light of the new regulatory framework introduced by Basel III, the importance of credit and market liquidity risk for the OTC instruments in trading portfolios is expected to increase in the near future.

    Keywords: counterparty credit risk, OTC derivatives, swaps, Basel II, valuation

    JEL Classification: C15, E44, G21, G32
    Sow the Wind....Reap the Whirlwind

  10. #10
    Trump just increased tariffs on Turkish steel....minutes ago.

    This is economic warfare.....and normally speaking when widespread economic warfare takes place.. ACTUALLY WAR is always a possibility.

    Remember we have a base in Turkey which could be attacked at anytime.
    Sow the Wind....Reap the Whirlwind

  11. #11
    If Turkish banks begin to collapse.........we could expect a domino effect worldwide.....(that is just a guess)...no solid facts for this statement.
    Sow the Wind....Reap the Whirlwind

  12. #12
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    I would expect Turkey to announce the pastor will be released at any moment now.

    The financial pain isn't going to be worth a financial war.

  13. #13
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    Quote Originally Posted by CaryC View Post
    I'm not a financial guy, but am always curious.

    The Lira in Turkey is falling. The currency in Iran is falling, about to cause a revolution (heard that before). Inflation in Venezuela is expected to reach One Million Percent by the end of the year.

    A week or so ago we had a thread about the dollar coming under attack.

    A lot of stuff going on around the world, is any of it going to hit us (US)?
    Most likely not, but then stranger things have happened.

    Iran is due to spending all of it's money externally and not enough to provide basic support for the populace.
    Turkey is due to the crack down and the bulling it has been doing to it's neighbors
    Venezuela is due to straight along the line of being stupid.

    This happens often, just not normally with countries we actually know.

    Some of the countries actually end up using the US dollar as their currency. There are about 12 nations doing so now.

  14. #14
    OT https://www.express.co.uk/news/world...na-Sea-US-Navy

    China fires warning shots at an American aircraft....told to leave the area.


    China fires SIX WARNINGS to US Navy in South China Sea ‘This is China...LEAVE IMMEDIATELY’
    THE Chinese military told a US Navy plane flying over the highly-disputed island in the South China Sea to “leave immediately”.

    By ALAHNA KINDRED
    PUBLISHED: 10:19, Fri, Aug 10, 2018 | UPDATED: 13:25, Fri, Aug 10, 2018
    Sow the Wind....Reap the Whirlwind

  15. #15
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    Gotta haul this back here.

    LOTS of pics and annoying vids at Doc's link.

    China fires SIX WARNINGS to US Navy in South China Sea ‘This is China...LEAVE IMMEDIATELY’
    THE Chinese military told a US Navy plane flying over the highly-disputed island in the South China Sea to “leave immediately”.
    By ALAHNA KINDRED
    PUBLISHED: 10:19, Fri, Aug 10, 2018 | UPDATED: 13:25, Fri, Aug 10, 2018

    WAY misleading lede. They "fired" radio warnings. NOT any kind of warning shots...sheesh(comment mine)

    The US Navy P-8A Poseidon jet was flying at 16,500 feet to get a view of low-lying coral reefs that have been turned into garrisons with five-storey buildings, large radar installations, power plants and runways sturdy enough to carry large military aircraft.

    During the flight that was giving journalists from CNN a rare look at the islands, the crew was warned six times by the Chinese military to get out of their territory.

    A voice said: “US military aircraft, this is China ... leave immediately and keep out to avoid any misunderstanding.”

    Each time the aircraft was challenged by the Chinese military, the US Navy crew's response was the same.

    The repsonse was: "I am a sovereign immune United States naval aircraft conducting lawful military activities beyond the national airspace of any coastal state.

    "In exercising these rights as guaranteed by international law, I am operating with due regard for the rights and duties of all states."
    CNN was granted the chance to see how the Chinese government is rapidly expanding its militarisation efforts from a US reconnaissance plane when the harsh threat was issued.

    The US Navy jet had flown over four key artifical islands in the Spratly chain where China has built up fortifications: Subi Reef, Fiery Cross Reef, Johnson Reef and Mischief Reef.

    The US military was given a harsh threat from China
    The US military was given a harsh threat from China (Image: GETTY)
    The Navy jet's sensors picked up on 86 vessels on the Subi Reef

    The Navy jet's sensors picked up on 86 vessels on the Subi Reef (Image: GETTY)
    Before the crew were warned, the jet's sensors picked on 86 vessels on the Subi Reef that included Chinese coast guard ships. On the Fiery Cross Reefs rows of hangars stood alongside a lenghty runway.

    LT. Lauren Callen who lead the air combat crew on the Navy flight said: "It was surprising to see airports in the middle of the ocean."

    Beijing has said it is necessary for the Asian powerhouse to keep growing its military presence in the South Chine Sea in order to protects its sovereignty.

    China also blames Washington and its allies for tensons in the region.


    The crew also flew over the Mischief Reef in the South China Sea (Image: GETTY)
    On the Fiery Cross Reefs rows of hangars were spotted on a runway

    On the Fiery Cross Reefs rows of hangars were spotted on a runway (Image: GETTY)
    It says that the regular US Navy patrols and flyovers of the South China Sea are efforts for the US to provoke China and therefore the country is justified in increasing its military presence.

    Chinese Foreign Ministry spokeswoman Hua Chunying said: "By playing up the so-called China's militarization in the South China Sea, certain people in the US are staging a farce of a thief crying 'stop thief'.

    "It is self-evident to a keener eye that who is militarizing the South China Sea."

    Parts of the South China Sea are claimed by Vietnam, the Philippines, Taiwan, Indonesia, Malaysia and Brunei.

    The South China Sea a highly-disputed part of the world

    The South China Sea a highly-disputed part of the world (Image: GETTY)
    The sea spans 3.6million square-kilometres and Beijing's claims extend more than one thousand kilometres from its southernmost province, which is almost the entirey of the waters.

    The United Nations has estimated that a third of global shipping passes through the waters.

    The South China Sea is also believed to be rich in oil and natural gas reserves that have yet to be explored.

    China reinforced its claims by contructing the artifical islands which are militarised with airfields and radar equipment.

    In April the military placed missiles on the Spratly island chain during naval exercises.

    This breaks a promise by President Xi Jinping to then US-President Barack Obama in 2015 that the Chinese govenrment would not militarise the artifical islands.

    Experts claim that time is running out to challenge China's claims in the South China Sea.

    Admiral Philip Davidson said in April that China is already very firmly entrenched.

    He said: "China is now capable of controlling the South China Sea in all scenarios short of war with the United States."

  16. #16
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    Quote Originally Posted by CaryC View Post
    I'm not a financial guy, but am always curious.

    The Lira in Turkey is falling. The currency in Iran is falling, about to cause a revolution (heard that before). Inflation in Venezuela is expected to reach One Million Percent by the end of the year.

    A week or so ago we had a thread about the dollar coming under attack.

    A lot of stuff going on around the world, is any of it going to hit us (US)?
    To answer your question- No. This is the consequence of unhealthy & corrupt economies meeting an America-first economic policy.

    Look for positive regime change and more winning
    "whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness"

  17. #17
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    If the only world problem was this Turkey thing, I would say it was no big deal. Unfortunately it is not happening in a vacuum. Here are a couple more headlines......................
    Canadian Oil Crisis Continues As Prices Plunge
    Core Inflation Soars At Fastest Pace Since 2008
    Russian PM: "New US Sanctions Would Be Declaration Of Economic War"
    As Anti-'Open Borders' Populism Spreads, Merkel & Macron's Poll Numbers Plunge
    "War In Front Of Me" - New Chinese Military Video Shows Off Range Of Advanced Weaponry
    "Looming Threat Of A Yuan Depreciation"
    Bankrupt America: A Fragile Nation Grappling With Unprecedented Debt Problems

  18. #18
    Quote Originally Posted by hiwall View Post
    If the only world problem was this Turkey thing, I would say it was no big deal. Unfortunately it is not happening in a vacuum. Here are a couple more headlines......................
    Canadian Oil Crisis Continues As Prices Plunge
    Core Inflation Soars At Fastest Pace Since 2008
    Russian PM: "New US Sanctions Would Be Declaration Of Economic War"
    As Anti-'Open Borders' Populism Spreads, Merkel & Macron's Poll Numbers Plunge
    "War In Front Of Me" - New Chinese Military Video Shows Off Range Of Advanced Weaponry
    "Looming Threat Of A Yuan Depreciation"
    Bankrupt America: A Fragile Nation Grappling With Unprecedented Debt Problems
    Good summation...thanks for the info
    Sow the Wind....Reap the Whirlwind

  19. #19
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    Turkey is using the tariff increase as the excuse for this whole thing...they were in trouble a long time ago.

  20. #20
    List of banks that have outstanding loans with Turkey?
    Sow the Wind....Reap the Whirlwind

  21. #21
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    The Turkey issue is basically all that is being talked about on Bloomberg radio this morning. FYI, IMO the bloomberg surveillance radio program from 7-10am is the best source for financial news there is.

    The president of turkey Erdogan gave a speech this morning basically saying all is well and for the people to convert their dollars and euros to the turkish lira. The finance minister who happpens to be Erdogan's son in law then gave a speech and said things were not well. So you have major differences in speeches by 2 high turkish officials within minutes of each other stating different things.

    This has some to do with turkey having a somewhat corrupt government and a weak economy. This has somewhat to do with them buying military equipment from Russia. This has somewhat to do with their allowing the pass through of folks from the mid-east to europe. This has something to do with the preacher being held.

    There are also a couple of other issues. But the thing is that currently the Turkey government is on the outs with the US and europe. Trump raising the tariffs is just a twisting of the knife IMO and hopefully is something he is doing to try to force a change of government to bring back a more secular government in Turkey.

    Will this spread or get worse. IMO that depends on how much support Turkey gets from Russia and China. They, mostly Russia, have a chance to basically turn a NATO member into their spear of influence. This could seriously disrupt the balance of power in the mid-east

    I'm not to concerned with the exposure of banks in the US or europe as I believe that the governments will protect them and with the lira diving all this year I would hope that the bankers were smart enough to get mostly out. But having said that I personally would not have any investments in emerging market debt or stocks funds as I see this getting worse before it gets better.

    tbd

  22. #22
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    Quote Originally Posted by hiwall View Post
    If the only world problem was this Turkey thing, I would say it was no big deal. Unfortunately it is not happening in a vacuum. Here are a couple more headlines......................
    Canadian Oil Crisis Continues As Prices Plunge
    Core Inflation Soars At Fastest Pace Since 2008
    Russian PM: "New US Sanctions Would Be Declaration Of Economic War"
    As Anti-'Open Borders' Populism Spreads, Merkel & Macron's Poll Numbers Plunge
    "War In Front Of Me" - New Chinese Military Video Shows Off Range Of Advanced Weaponry
    "Looming Threat Of A Yuan Depreciation"
    Bankrupt America: A Fragile Nation Grappling With Unprecedented Debt Problems
    Yes, thanks. Now isn't the time to have tunnel vision. Taking everything into account, seems we are on the down swing of something major.

  23. #23
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    Quote Originally Posted by hiwall View Post
    If the only world problem was this Turkey thing, I would say it was no big deal. Unfortunately it is not happening in a vacuum. Here are a couple more headlines......................
    Canadian Oil Crisis Continues As Prices Plunge
    Core Inflation Soars At Fastest Pace Since 2008
    Russian PM: "New US Sanctions Would Be Declaration Of Economic War"
    As Anti-'Open Borders' Populism Spreads, Merkel & Macron's Poll Numbers Plunge
    "War In Front Of Me" - New Chinese Military Video Shows Off Range Of Advanced Weaponry
    "Looming Threat Of A Yuan Depreciation"
    Bankrupt America: A Fragile Nation Grappling With Unprecedented Debt Problems
    The oil prices already collapsed and recovered. Canada is just able to deal with the current prices. They will adapt just like we are adapting.
    Core inflation has been rising faster than anything since 2008. As under Obama, we have had only deflation.
    Russia, posturing.
    Germany getting anti open borders is no different than the US getting the same. This is actually progress.
    China is always trying to show everyone its big guns. Nothing new.
    The Yuan has been depreciating for decades. It has done so whenever China wants an advantage over a competitor.
    Bankrupt America... our failure to allow for normal banruptcies for the last 30 years is a big issue. That I would agree on.

  24. #24
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    Quote Originally Posted by doctor_fungcool View Post
    List of banks that have outstanding loans with Turkey?
    According to a Routers article I previously read just over 20 percent of the outstanding government debt securities are held by foreigners. The remainder of Turkey’s domestic bond market is dominated by local folks

    tbd

  25. #25
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    Anybody know if the US nukes at the Turkish air base have been removed? They are/were in "steel tombs" that would make the weapons non-functional if tampered with.

  26. #26
    I'm hearing that most of the bank exposure is in Spain and Italy.
    that which one man receives without working for, another man must work for without receiving." -- Kenneth W. Sollitt

  27. #27
    Donald J. Trump

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    I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!
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  28. #28
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    Quote Originally Posted by Warm Wisconsin View Post
    I would expect some type of intervention around 6.5 USD/TRY

    The big problem is the lack of hedges against a currency collapse by the banks.

    I don’t mean the Turkish banks. I mean by the EU and US banks. Turkey hasn’t traditionally been considered a risky emerging market from a currency standpoint.

    For people that like to vacation in Turkey (yes there are stupid people) it just became a lot cheaper to go there.
    Trump tweets and the USD/TRY jumps above 6.50

    Turkey calls Putin and magically the currency drops below 6.50

    This might get really interesting

  29. #29
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    Well, Turkey can always rely on their close economic ties with Iran to see them through this tough spot. Wouldn't it have been easier for them just to go along with the sanctions on Iran ? With Erdogan in power, it makes no sense whatsoever to pursue a close alliance with them. Can you imagine having to defend a NATO member like Turkey.

    Erdogan is just another ME dictator in the making. It won't end well.

  30. #30
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    Quote Originally Posted by Desert Fox View Post
    Well, Turkey can always rely on their close economic ties with Iran to see them through this tough spot. Wouldn't it have been easier for them just to go along with the sanctions on Iran ? With Erdogan in power, it makes no sense whatsoever to pursue a close alliance with them. Can you imagine having to defend a NATO member like Turkey.

    Erdogan is just another ME dictator in the making. It won't end well.
    No it won't. Then again, maybe with Trump sanctions will actually work.

    I always got the impression the previous sanctions were applied to areas where the lease damage possible would occur. That may have changed.

  31. #31
    I was noticing that the markets/banks that are exposed to Turkey, are the ones taking the biggest hits, earlier this AM.

    As 20guage noted some of the reports are in a nothing new situation. And Bloomberg does have a tendency to go nuclear when the markets turn red, no matter how small. What I was seeing early this AM was most non-effected markets/banks were only down about .50%.

    But there are some new things in view. Iran, and Venezuela, being the most notable.

  32. #32
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    Quote Originally Posted by Warm Wisconsin View Post
    Trump tweets and the USD/TRY jumps above 6.50

    Turkey calls Putin and magically the currency drops below 6.50

    This might get really interesting
    Wonder if Turkey is looking to become this generations Vietnam? Or is this just more posturing?
    Last edited by Old Gray Mare; 08-10-2018 at 10:18 AM.
    Patriotism is supporting your country all the time, and your government when it deserves it. - Mark Twain

  33. #33
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    Quote Originally Posted by Be Well View Post
    Donald J. Trump

    Verified account

    @realDonaldTrump
    2h2 hours ago
    More
    I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!
    It's weird...a strong dollar is generally good for imports and not so good for exports. With Trump seemingly trying to encourage a return of industry, you'd think he'd want a weaker dollar to encourage exporting.

  34. #34
    fed tightening (the end of QE, raising interest rates, and unwinding the assets on the fed balance sheet) have sucked US$ liquidity out of foreign markets. Money supply is the problem here.

    This has created tectonic problems for all 'emerging markets' like Turkey who have similarly over leveraged themselves when interest rates were 0%.

    As rates rise due to fed tightening and liquidity dries up it gets harder to roll maturing debt over, and when it does roll it is doing so at interest rates that are killing the EM's.

    This has very little to do with trade wars, although tariffs for Turkey that diminish revenue during a credit crisis greatly exacerbate the problem.

    erdogan could've gotten out of the tariff fight by releasing the US priest he is keeping as a political prisoner, but his pride prevented him from acting smart.

    Acting like an ally might have gotten them out of tariffs.

    But their stones would still be getting squeezed from the liquidity crisis.
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  35. #35
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    Quote Originally Posted by CaryC View Post
    I was noticing that the markets/banks that are exposed to Turkey, are the ones taking the biggest hits, earlier this AM.

    As 20guage noted some of the reports are in a nothing new situation. And Bloomberg does have a tendency to go nuclear when the markets turn red, no matter how small. What I was seeing early this AM was most non-effected markets/banks were only down about .50%.

    But there are some new things in view. Iran, and Venezuela, being the most notable.
    Agreed.

    I was reading other articles where they were panicking about the same 0.50% of market down turn. I think they are trying really hard to talk us into a recession. It maybe their last hope to make Trump a one term President.

  36. #36
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    Quote Originally Posted by Old Gray Mare View Post
    Wonder if Turkey is looking to become this generations Vietnam?
    More like Germany. They are looking to expand their country into an Empire. Like the Ottoman Empire they had previously.

  37. #37
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    Quote Originally Posted by Blacknarwhal View Post
    It's weird...a strong dollar is generally good for imports and not so good for exports. With Trump seemingly trying to encourage a return of industry, you'd think he'd want a weaker dollar to encourage exporting.
    A strong dollar does have an impact, but a strong economy with basic protections will have a much larger impact. That is what Trump is after. If he succeeds, we will have the best of both worlds.

  38. #38
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    Quote Originally Posted by Adino View Post
    fed tightening (the end of QE, raising interest rates, and unwinding the assets on the fed balance sheet) have sucked US$ liquidity out of foreign markets. Money supply is the problem here.

    This has created tectonic problems for all 'emerging markets' like Turkey who have similarly over leveraged themselves when interest rates were 0%.

    As rates rise due to fed tightening and liquidity dries up it gets harder to roll maturing debt over, and when it does roll it is doing so at interest rates that are killing the EM's.

    This has very little to do with trade wars, although tariffs for Turkey that diminish revenue during a credit crisis greatly exacerbate the problem.

    erdogan could've gotten out of the tariff fight by releasing the US priest he is keeping as a political prisoner, but his pride prevented him from acting smart.

    Acting like an ally might have gotten them out of tariffs.

    But their stones would still be getting squeezed from the liquidity crisis.
    Funny, I remember when emerging markets were hurt by 10+% interest rates. Now it is a simple 3-4%. How times change, but remain the same.

  39. #39
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    I see many European markets closed down as much as 2%. In these times a 2% drop in one day is hardly even news but it could be at some point.
    I think the markets are getting scared. They all know bad times are coming but no one knows when or what the trigger will be. So everyone is jittery. I don't think this Turkey deal will be the trigger but it is possible and if not this then what? Something different next week or something the week after that?
    For now the markets are still the place to make money but they are also a ticking time bomb.

  40. #40
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    I wonder if this is the economic trigger Pastor David Wilkerson was talking about a few years back. Erdogan is a very evil man, and there is no telling how much, or what he will lash out at during this crisis. After all, the man is trying to create a restored Ottoman Empire, and won't let an economic crisis go to waste.
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