Turkey, Cooked

Dear Rundown Reader,

Happy Friday folks.

Before we begin. A quick reminder…

Markets are closed Monday for Memorial Day.

As such no issue of The Rundown that day. We’ll pick up where we left off next Tuesday.

Travel safe, eat well and have a great holiday.

Now onto your Friday issue.

You read the headline… Turkey’s cooked. Political unrest, a tanking currency and a presidential election scheduled for June 24.

Break out the riot gear. Things could get ugly.

Your Rundown for Friday, May 25, 2018…

Erdogan’s Great Experiment Has Failed

Turkey is facing a major crisis.

Both politically and economically.

Economically, Turkey’s lira is down 20% against the U.S. dollar year-to-date.

In an emergency response Wednesday, Turkey’s central bank raised rates sharply, “by 300 basis points to 16.5%, temporarily propping up the currency,” according to Business Insider.

The move initiated a brief respite for the lira, but volatility remains high and losses still abound. You can see the price action here:

Source: Bloomberg

We know Erdogan is an outspoken critic of rate hikes.

A Bloomberg report noting: “Turkey’s president was adamant. The lira’s downward spiral was just a bout of temporary volatility.”

But many financial experts in Turkey’s Central Bank have voiced concern about his approach to the crisis, often at the risk of their own careers and safety.

The story of Mert Ulker, who suggested that Erdogan may have staged the 2016 coup attempt, is the perfect example of the KGB like tactics employed by Erdogan to censor critics.

After hearing Ulker’s comments, Erdogan systematically destroyed Ulker’s career, as a New York Times Report notes.

And Bloomberg doubles down on this reporting: “Turkey’s slide into authoritarianism is perhaps most evident in what analysts are too afraid to put to print.”

Erdogan’s democracy is looking more and more like a dictatorship.

History tells us dictatorships are bad.

The crisis is a dry tinder box on a bed of oily rags.

Turkey holds presidential elections on June 24. The lira’s slide has many pundits now questioning if Erdogan can win given current economic conditions.

And history tells us, bad things happen when authoritarians have their power questioned.

More pain could be on the way for the Turkey and its citizens.

When a government tries to artificially influence the markets things end in disaster.

We have examples of this across the globe from Argentina to Zimbabwe.

And now we can add Turkey to the list.

Erdogan’s great experiment has failed.

Now, turning to the markets this morning…

Market Rundown for Fri., May 25

Yield on the 10-Year Treasury sits at 2.955% this morning, down 0.026.

S&P 500 futures are down 3.00 at 2,724.

Oil’s down $1.55 to $69.16.

Gold’s up $0.90 to $1,305.

Bitcoin goes for $7,453 this morning, according to CoinDesk.

And just a reminder… Markets are closed Monday for Memorial Day. No Rundown until next Tuesday.

Have a safe and happy holiday!

We’ll talk again next Tuesday.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown. Aaron’s been with Agora Financial/Seven Figure Publishing for 13 years. He's been covering technology and markets for over a decade.

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