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> All it needs to do is stop doing that and make it clear to the market that it will no longer do that. I think that after the sack of the previous governor by

> All it needs to do is stop doing that and make it clear to the market that it will no longer do that. I think that after the sack of the previous governor by Erdogan, it is clear to investors who is really running the Central Bank and what he think. For many investors the only way to make it clear that it will no longer do that is a change not in the CB, but in the Presidency. > What you have to do is make lira scarce. And you do that by putting taxes up, stop paying interest on lira savings [...] I disagree with this part. To make lira scarce you have to make it so people are willing to buy lira. If you stop paying interest on lira savings people will sell their liras and buy dollars (this is exactly what happened in the past years). On the other side if the interest rates are higher people and foreign investors will be more eager to change their dollars for lira, helping the exchange rate. Also higher rates means less people will take credit, reducing the amount of lira circulating. This was exactly was happening with the previous governor. More importantly, people will buy lira only if they trust the Turkish state and consequently the lira. Just imagine, simply by firing the previous governor (which was considered a competent person), Erdogan caused the Turkish Lira to lose about 10-15% of its value in a single night. I think that the situation will not improve much unless there are serious economic and institutional reforms, but I don't see them coming while Erdogan is still ruling the country.

neilwilson 6y ago
> To make lira scarce you have to make it so people are willing to buy lira. If you stop paying interest on lira savings people will sell their liras and buy dollars (this is exactly what happened in the past years). Which is what you want them to do since that puts lira back into circulation where it passes (higher) tax points which then drains the currency. Reducing government spending would do the same thing. When there is less lira in circulation, then obtaining it to purchase Turkish output becomes more difficult and the price rises. People saving in any currency is the problem since the lack of spending it represents denies somebody else an income. You don't want 'foreign investors'. Turkey has its own currency and can purchase anything available for sale in lira on its own. In fact 'foreign investors' have to obtain lira before they can buy anything so why not cut out the middleman? > More importantly, people will buy lira only if they trust the Turkish state Again a myth. People will obtain lira if Erodogan will otherwise jail them for tax evasion. The lira always has value to those with a tax liablity in lira and who are sufficiently scared of Erdogan's tax collectors.

neilwilson 6y ago

> To make lira scarce you have to make it so people are willing to buy lira. If you stop paying interest on lira savings people will sell their liras and buy dollars (this is exactly what happened in the past years). Which is what you want them to do since that puts lira back into circulation where it passes (higher) tax points which then drains the currency. Reducing government spending would do the same thing. When there is less lira in circulation, then obtaining it to purchase Turkish output becomes more difficult and the price rises. People saving in any currency is the problem since the lack of spending it represents denies somebody else an income. You don't want 'foreign investors'. Turkey has its own currency and can purchase anything available for sale in lira on its own. In fact 'foreign investors' have to obtain lira before they can buy anything so why not cut out the middleman? > More importantly, people will buy lira only if they trust the Turkish state Again a myth. People will obtain lira if Erodogan will otherwise jail them for tax evasion. The lira always has value to those with a tax liablity in lira and who are sufficiently scared of Erdogan's tax collectors.