Turkey’s cratering markets stoke speculation over extreme measures

Bloomberg/Constantine Courcoulas, Onur Ant and Tugce Ozsoy/8-7-2018

“Desperate measures are in the air in Turkey: trading rooms are awash with talk of a bailout by the International Monetary Fund and potential capital controls. But there’s a vacuum at the core of economic policy making. The central bank and government have remained largely silent as the currency plummeted to record lows and the U.S. imposed sanctions and threatened more.”

USAGOLD note:  One thing is clear about the meltdown in Turkey:  Those who own gold have weathered the destruction of the lira thus far and are likely to survive future debasement.  Meanwhile those who own Turkey’s sovereign debt are in the process of getting wiped out. Turkey’s sovereign debt is now the worst performer on the planet according to this Bloomberg article – down 38% thus far this year and worse than Argentina’s debt at a 36% loss.  As might be expected, the calls for an IMF bailout have risen in concert with Turkey’s demise.  We have to ask a couple questions:  How does the IMF go about structuring a bailout for a country under sanctions imposed by the United States? And what is the contagion effect elsewhere if it isn’t?

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