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A fiat currency's value mostly stems from the perception of if the country has the military/political might to enforce it's contracts. Given that Turkey's milit
by superkuh 6y ago
A fiat currency's value mostly stems from the perception of if the country has the military/political might to enforce it's contracts. Given that Turkey's military is a significant force I doubt their currency will dip so low as to not be useful.
That said, volitility for fiat currencies can get pretty high in these kind of situations. But even though the value is going down Turkey is still spending massive amounts of energy maintaining it's army to support the currency. That's the real signal to pay attention to. Individual economic policy administrators don't really matter since economic policy is mostly made up and irrelevant.
- psychlops 6y ago> A fiat currency's value mostly stems from the perception of if the country has the military/political might to enforce it's contracts. Bitcoin's energy consumption for its value now seems quite modest.
- JumpCrisscross 6y ago> fiat currency's value mostly stems from the perception of if the country has the military/political might to enforce it's contracts This is an unconventional theory. It does not have a good track record. Yes, having a monopoly on violence is a basic requirement for a functioning government. Its absence implies a failed state. Failed states aren't known for having useful currencies. But functioning states regularly trash their currencies.
- blueblisters 6y agoHuh? A fiat currency's value stems from a government's ability to repay sovereign debt and be responsible with the money supply. That's exactly why modern economies separate the treasury and the central bank - that system, however flawed, is the reason why investors are confident letting sovereigns borrow their money.
- Clewza313 6y agoThe army is kind of irrelevant here, because the Turkish government has a lamentable track record of printing money to pay the bills. The previous lira reached 1.3 million to the USD before they chopped off 6 zeroes (I once paid 6,500,000 lira for a kebab & a Coke at the airport), and the new one is rapidly heading the same way: https://en.wikipedia.org/wiki/Turkish_lira#/media/File:Euro_exchange_rate_to_TRY.svg https://en.wikipedia.org/wiki/Turkish_lira#/media/File:Euro_...
- pjc50 6y agoCurrencies aren't "supported" by armies. They're supported by either exports of real value or the ability to peg the currency to a "harder" currency by open market operations, which implies reserves of hard currency and/or gold. See the UK falling out of the Exchange Rate Mechanism in the 90s, for example. Argentina had plenty of military throughout its various currency and debt crises.
- iso1631 6y agoThe Turkish lira is a new currency - only in existence since 2005. Turkey had a pretty strong military in the 80s and 90s, enough to crush the Kurds, keep Greece at bay, and prevent Cyprus reunion. Its currency devalued 35% per year from 1985 to 1990, 70% per year from 1990-1995, 170% a year from 1995-2000, and 20% a year from 2000-2005 The same thing is happening again.
- ginko 6y agoThe new Turkish lira was simply a redenomination that got rid of six zeros compared to the old Turkish lira that goes back to 1923. It's not really a new currency.
- baybal2 6y agoFollowing your logic, Argentina should be a much wealthier country...