Understanding Turkey: Lower Banking Sector Profitability Ahead

Key takeaway—Over the next five years, Turkey’s banking sector profitability is expected to slow, as ‘return on equity’ will decline from 18.4 (10-year average) to 13 percent; however, banks’ balance sheets will remain healthy, with a capital adequacy ratio above 12 percent. Over the next five years, Turkey’s economic growth will slow. Over 2015-19, despite […]

Credit Bubbles Redux

Central banks insist that there is no credit bubble. But like politicians, where a central banker denies something vigorously and repeatedly, it is usually true. To resurrect the global economy from the Great Recession, central banks implemented a policy of ultra-low interest rates and quantitative easing (“QE”) to restore growth. The policy relies, in part, […]

Sounding the Alarm on Japan

I just returned from ten days in Japan and boy, I’m worried. The country is facing major challenges on at least four critical fronts: the economy, demographics, energy, and national security. This “quad-fecta” is truly a crossroads for a country ill prepared to address any one of them, let alone all of them. I had […]

The Sanctions Against Russia Do Bite: But Are They Having Their Intended Impact?

Often, the problem with many policy actions employed to influence the economy is their unintended consequences. In the case of economic sanctions, it is not always easy to tell whether half a success is any better than a failure. On March 21, 2014, under the new sanctions regime, both Visa and MasterCard froze the card […]

China’s Shadow Banking System

Chinese debt concerns are complicated by two structural issues – the rise in borrowing by local governments and the increase in the role of the shadow banking system. Both sectors are testament to Chinese entrepreneurial spirit, but also point to deep problems in China’s financial system. Local But National… Outside of security matters or foreign […]

O (Turkish) Consumer, Where Art Thou?

Most of the analyses of the Central Bank of Turkey’s rate hike last week concentrated on its impact on banks and corporates. There was surprisingly little mention of consumers. Starting my latest Hurriyet Daily News (HDN) column with this sentence, I go on to explain why consumers might get hit worse than businesses and banks […]

How Central Bank of Turkey Saved PM Erdoğan’s Derrière

I couldn’t help but notice several misconceptions about Tuesday’s midnight’s emergency rate hike. Here is the introduction to my latest Hurriyet Daily News (HDN) column. One of those misconceptions gave the column its title. To quote directly from the column: “Some have also argued that the rate hike hurt the ruling Justice of Development Party’s […]