The Kapali Carsi

Turkish “interest rate wars” continuing

I agree with the disappointed reader who noted politely that my last post, my official answer to Sabah’s attacks to my newspaper, Bloomberg and myself, was not my best- she actually said it was “very bad”. I did lose my cool after Sabah’s baseless accusations, and always responsive to reader feedback, I took out the most offensive parts at the end, although another reader not too loving of Sabah told me I had not said enough:) But if nothing else, foreign readers got a taste of the polarization in Turkish society.

An Italian friend asked me once, during a visit by either ex-Prime Minister Tansu Çiller or ex- (headscarfed) Parliament Member Merve Kavakçı to Harvard, why we Turks always fight. As I told him at the time, we are a polarized society. Maybe even more than in the good old days. This is the same mentality that Benjamin Harvey tried to reflect at his Bloomberg column that drew Sabah’s arrows. There is unfortunately a “you are either with us or you are against us” attitude in Turkey. I have been a victim of this approach as well, as my objective economic analyses have often been labeled as anti-AKP rhetoric. However, such intolerance for criticism, while more prevalent in the pro-government camp, is not limited to them at all. For example, have a look at the remarks following my criticism of the main opposition CHP’s policies.

As a personal anecdote, I was almost starting to think I had been blacklisted by the Central Bank as well after I was denied access to the Central Bank’s monthly meetings with bank economists, under the pretext that I am a columnist and the meetings are closed to the press. Never mind that there are at least a dozen finance professionals present in those meetings who write weekly columns in various newspapers. My suspicions rose because the denial came right after Governor Basci’s harsh critic of Nomura I mention at last week’s column. But the Bank did invite me to a very interesting conference on incorporating financial stability to inflation targeting as a member of the press, to which I unfortunately could not attend, as I could not make it to Istanbul. Anyway, I am glad the Central Bank has not joined the witch hunt!

Leaving my own travails aside, the economics wars continued at full speed during this past week, even after Sabah’s attacks and my response to them: First, Fitch’s lowering of Turkey’s credit outlook to “stable” from “positive” got the usual high-quality sophisticated criticism from the usual suspects. Suluman the Economist claimed that Fitch was worried about Turkey’s economic success, while Economy Minister Zafer Caglayan, aka the Admiral, pointed to Fitch’s ownership structure.

To take a short detour, the real issue here is that Eastern Europe & Turkey, the region I friendly refer to EET, not to be confused with ET, is very vulnerable to Eurozone woes: The countries in the region, some of which are members of the Eurozone, export a lot to the Eurozone, so their exports are prone to a Eurozone slowdown. Moreover, they have borrowed a lot from Western Europe, so a Eurozone banking crunch is likely to hit them hard. Finally, most of these countries have significant current account deficits and external financing needs. Therefore, I would see the Fitch Turkish rating update in the same big picture with the recent Hungarian downgrade to junk by Moody’s. I am planning to devote a column, or at least a blog post, in the next couple of weeks to a comparison of different countries’ exposure to the Eurozone crisis.

Anyway, retuning to the “main road”, a Wall Street Journal article by Marc Champion discusses the Turkish zer0-rates policy. The part about Sabah is very telling:

“This is a ridiculous debate but there is a rising pressure.…In all topics people are censoring themselves,” said one Istanbul economist, who declined to be named. “When I criticize the central bank it might be published in Sabah [a large pro-government newspaper] and then I can’t get an appointment in Ankara and can’t do my job effectively.”

Just in case you did not find the arguments in my column or the Bloomberg article article not convincing enough… And if this isn’t enough, you can read about the PM recommending that I and my boss should be fired– from my days as a market economist.

Coming back to the economy wars, famous Turkish economist “Brave Cloud“, allegedly a distant relative of “Sitting Bull“, disclosed the recent increase in government bond rates as work of the high interest rate lobby that I introduced my readers to in the column. So the witch hunt is going full speed.

But coming back to Bloomberg, maybe they are after world domination after all…. So maybe we should be thankful to the Sabah columnists for blowing their cover in Turkey:)…

P.S.  I should have made this disclaimer in the previous post, but better late than never: I have never met Benjamin Harvey and don’t even know what he looks like. I have no business/other relationship with Bloomberg, so there is no conflict of interest here… But I earn most of income is USD, GBP and EUR, if you would like to go down Sabah’s route that I am manipulating markets to increase my purchasing power:). And in case you are wondering why I just didn’t keep quiet, and poked my nose into something that didn’t concern me in the first place, i.e. why I didn’t play it safe, history was my guide

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