Last week, an effort was made to shape the public perception of any damaging comments made about the Turkish economy by threatening jail sentences and monetary fines for such statements. Stories to this effect appeared in the media, followed by a speech by Treasury and Finance Minister Berat Albayrak the next day in which he laid the ideological groundwork, or “infrastructure of thought,” for prosecuting those who speak negatively about the economy.
was implied that a law like this was being drafted: “Anyone who
lies, misinforms, misdirects, or speculates about the economy, the
national currency, financial indicators, prices, values or ratings,
at a level that might have significant effect, will be punished by
six months to two years in prison and up to five thousand days worth
of punitive fines.”
this perspective, reporting on, commenting on, or questioning
economic data will be punishable by law.
a simple example of what this may look like: it can be debated
whether the Central Bank foreign exchange reserves are real or not.
Those who do discuss this question could be jailed for “creating
rumors.” On the other hand, officials in Ankara who cover up swap
transactions, do away with transparency, and fuel worries through the
ambiguity they create can also be prosecuted on the same grounds.
law doesn’t even have to pass. Two Bloomberg reporters in Turkey,
Kerim Karakaya and Fercan Yalınkılıç, were sued in June for
“trying to damage the stability of Turkish economy.” Three
journalists and many other social media users were also taken to
court for writing comments on Twitter.
Following the Pastor Brunson crisis with the U.S. in August 2018, Karakaya and Yalınkılıç had written that, with the increase in the dollar exchange rate, banks were no longer able to meet the demand for foreign currency withdrawals, demands would be met on the next business day, and the Banking Supervision and Regulation Agency (BDDK) would be holding a weekend meeting with senior banking officials.
prosecution indictment stated that the 36 defendants were being sued
on the grounds that they tried to create an environment of insecurity
in society regarding economic matters, and tried to “morally
benefit” from it. Cases were opened in connection with articles
regarding “Information-Based Market Fraud” within the
capital market law, but it seems that there was no evidence of the
accused having any monetary gain, so the new category of “moral
benefit” was added.
However, what the two reported was actually right. Both BRSA and Central Bank data showed on the day of the report that foreign currency deposits had a strong tendency of withdrawal (with 12 billion dollars withdrawn between August 3-17). Banks aside, Central Bank vaults were emptying rapidly to support banks with foreign exchange cash (decreasing by 1.3 billion dollars).
is very clear today that those who manage economic policy are after
an “infrastructure of thought” to ensure a widespread campaign of
question is this: At a time when all written and visual media
channels are government-controlled, every negative development in the
of “foreign forces,” any positive development is due to
economic management, and news of how great the economy is doing is
spread widely, why are criticisms being punished? Do they think that
despite all this media hegemony, “government propaganda” is
useless and those other “15-20 people” are listened to
more? Investors, people who save their money — were they listening
to those 15-20 people instead of the government?
Finance Minister Berat Albayrak said during a speech he gave in
Samsun last week about critics of the economy that, “They damage
the country,” “They are scaring the people,” “They are
creating anti-Turkey perceptions,” and “They are no different
than people we see at terror attacks.” He went on to say, “Despite
the 15-20 people who say nothing that holds up, we have performed
very well. People who criticize have some sort of political,
commercial, or intelligence interests — they’re working for
short, according to Minister Albayrak, those who commented negatively
about the economy had political or commercial motives, or they were
seeking to carry intelligence to foreign powers.
becomes more clear every day: the economy management in Ankara is
unable to manage the economy, but it is trying to show a good face to
the Presidency who appointed them and to the people, trying to paint
a picture of being “well-managed.” If something is wrong, it’s
because of foreign powers, or the economists, analysts and columnists
working for them.
is on their minds: “How well we could manage the economy if we
silence the criticism?”
people say “the dollar to lira exchange rate will be around 10 or
12,” it must show the insecurity of those in Ankara, those who
manage the economy, if they take these estimations seriously.
With all the media hegemony, trying to put people in jail for social media activities shows that they think these policy and decision makers, the public and companies, don’t find them convincing. It’s problematic to think that these audiences and companies will buy these “skyrocketed” estimations without question.
kind of pressure and defamation of critics only helps strengthen
gossip. Those who don’t see the negative developments in the
mainstream media lose confidence. This loss of confidence turns into
a whisper network involving far-stretching rumors. This pushes
citizens to buy foreign currency and erodes the financial system.
Say, Ankara which says “foreign powers are trying to destroy our economy”, what do they think about resident citizens buying 40 billion dollars worth of foreign currency in 1 year?
The gist of the story is this: Economic management, unable to overcome the crisis, is trying to find an “enemy” to cover up its incompetency in front of the people who are seeking solutions and asking questions.
are over, it’s been more than seven months. It’s November, but the
economy is still the same beyond the base effect. Any new number is
seen as “recovery” after the heavy drop we experienced. All
the damage has been imposed upon households and companies.
collective suicide of two families from İstanbul and Antalya were
reported by state-friendly newspapers as “let’s not hurt the
government.” Those who mentioned urban poverty and unemployment as
root issues behind the tragedies were accused of “inciting things.”
Both pieces of news had unemployment and heavy debt burdens behind
people who govern Turkey, not only can they not stop the economic
crisis: they are making it deeper with their incorrect decisions.
They are trying to stop people from talking about it and threatening
those who do so with prison.
end with some words from British Central Banker J.C. Stamp: “It
is easy to dodge our responsibilities, but we cannot dodge the
consequences of dodging our responsibilities.”
The Central Bank of the Republic of Turkey (CBRT) continues to be a part of the economic policy conducted by the government. The ground of the economic crisis was laid with the fire of a political crisis. It moved to a new level with the pandemic. Now, there is no possibility left that the Central Bank helps bounce back or curbs the situation.
The effort of “trivializing the issues” demonstrates the stance of Turkey's economy administration of “intervening on the symptoms and not on the issues.” It is the effort to sooth the society, to narcotize them by saying, “If you do not know, have not heard of it, if you do not care, then you are happy.”
Our economy administration wasted billions of cash foreign currency of the Central Bank and public banks just to maintain a self-styled economy policy and to keep the foreign exchange rate at a certain level. It is a pity that now, this economy management, with its collapsed economy policy, is resorting to the monetary tightening of the Central Bank.
Unlike what those in Ankara who are managing the economy believe, 51 percent of the economy is not psychological perception, it is trust. Empires of fear do not generate trust.
Those who are ruling the country are spending so much energy on blaming vague foreign powers for all the wrong and bad management. If they could have channeled this energy to understanding the problems of the country, then we would have gone a long way and truly would have made these “foreign powers” envious of ourselves.
Turkish Treasury is “printing” forex bonds to create additional foreign currency for its own operations. Public banks, on the other hand, are spending their cash foreign currencies and replacing them with forex bonds the Treasury is printing.
For a long time, Ankara had eroded foreign currency reserves worth near 100 billion to hold the rate. Now, it has come to the end of the road. It has spent its last penny and left the rate to the markets. Thus, the “unheard of” invented exchange rate regime has collapsed.
Can the forex loss in Turkey be recovered without sending the bill to the public? If first signs of the establishment of political normalization, democratization and rule of law emerge in a powerful way in Turkey, then the “shrunken” foreign currencies will come back to the system.
If the ruling Justice and Development Party (AKP) sees an increase in erosion of their votes and the increased possibility of losing power in a possible election then it would "use all the ammunition till it is finished" for their own political continuity. But this would indeed mean leaving a “gigantic wreckage” for the citizens of the country.
The trend in that started just before the presidential elections in 2018 and accelerated after the elections changed the chemistry of the economy in Turkey. Private sector in Turkey was restricted in every aspect. From pricing to sourcing, to investment licenses, all regulatory higher bodies worked to make the entrepreneurs feel that ‘the party state’ was watching them at every step.
A currency, that is losing value and is not the good money to its own citizens, cannot be the good money of another country. Most probably those who declared they have switched to the Turkish Lira in Syria will be doing their payments in Turkish Liras and - even if it may be only a few pennies - they will keep dollars to store the value of their accumulation.
No matter how long or short the COVID-19 crisis lasts, a broad range of working masses, but especially the unskilled labor force will be the ones exceedingly affected. They will lose income and their jobs. As a result, inequality will spread on a mass scale and poverty will soar.
Ankara thinks it can obtain stability through the sale of foreign currency from the “back door,” which erodes reserves. Ankara has also resorted to bans and restrictions on foreign currency, but these are actually very old tools from the 70s.
The economy management in Ankara may have this thought of stopping the devaluation of the Turkish Lira by wounding the lira’s convertibility but actually it also damages the debt capacity of the Treasury.
What would we have included if we wanted to write a guideline for those who have the wish to intervene in foreign exchange rates but who do not have the adequate experience, but at the same time want to do it right? Taking into consideration today’s circumstances in Turkey, here is a list.
In those countries where it is presented as they have a “floating exchange rate regime,” if their central banks are intervening at the exchange rate, the name of this in economy literature is “fear of floating.”
Since the COVID-19 crisis erupted, Turkish Central Bank’s reserves fell nearly 20 billion dollars. Now, the thought of “Can there be a swap line opened from the U.S. Central Bank Fedreserve ?” is in question.
Turkey was caught with the coronavirus outbreak at a time when it was weak structurally. Just like in the COVID-19 epidemic, the underlying disease story is the story of those problems in economy which were “swept under the carpet” for a long time. Turkish government's economy policies after 2018 were based on bans, limitations and covering up of the symptoms rather than resorting to necessary steps to solve the problems.
Ali Babacan's unfulfilled desire, the “fiscal rule” theme features in the program of the newly established Democracy and Progress Party’s (DEVA) . Babacan had made preparations to start the practice of fiscal rule in 2010, until Prime Minister Erdoğan shelved this.
Even though its name is “floating exchange rate regime,” the current one in Turkey can only be called “commanded foreign exchange regime.” Some may object to that and suggest “managed floating rate regime.” If it was the latter, then the Central Bank would have openly done it. Everybody would have been informed of a rate regime which has targets, a framework and a system. But we do not know anything about this “dystopian regime.”
Talking about Turkey’s economy is like a stand-up show. Turkey’s Central Bank is as independent as the Fed, says the Finance Minister. This comparison can be uttered because of the mood created in Ankara where the government commands the economy. But even in regimes of command economic, there is interdict and logic.
Politicians may have an inclination to regard the Central Bank as a “cow of the government to be milked.” But it is logic blowing that those who have undertaken CB jobs have rolled up their sleeves and personally worked for that.
In the last two years, the economic policy team governing in Ankara that has been intervening on prices, interest and exchange rates with an iron fist has cost banking executives their jobs for making their own trade decisions in an open market. Turkey is supposedly an open market economy, but Ankara has been nudging market players under the table to the point that the market is “open” only in theory.
Both the consumption and investment data in the third quarter show a tendency toward “exhausted growth” in the private sector. I wrote at the end of October that this is the picture of weak, anemic growth. The economy is out of energy. With the economy in this weak and feeble state, Ankara cannot carry the country politically to 2023.
Russia's strategy is quite clever; it continues to accumulate reserves by using dollar and euro for its exports while using ruble for one third of imports. By receiving 7-8 percent of its net foreign trade in ruble, it creates demand for its currency at the same time.More so, Russia is trying to recruit Turkey as a customer for its Russian made SWIFT alternative SPFS and again homemade credit card system MIR.
The three-way wheel of the Turkish economy, which depended on the flow of foreign capital, domestic credit growth, and household consumption, has stopped. It seems like the politicians running the country in Ankara couldn't find the answer to "What awaits the Turkish economy in 2020?"—since they undertook a military operation in Syria to get back the votes they lost due to the economic crisis.