Learning from the attack on the exchange rate - MEHMET ACET

Learning from the attack on the exchange rate

Yesterday, the U.S. dollar started with a second 5 percent loss against the Turkish lira compared to the previous day, dropping below 6 liras.

If we take it from Monday, we can say that the loss in the last two days has reached 10 percent.

Of course, if we were concerned about saving the day, we could have started a Mexican wave and shouted “hurrah.” Yet, the Turkish lira’s loss against the U.S. dollar compared to its position last month is currently over 30 percent. The real exchange rate index being 3.90, according to the Central Bank, which is accepted by economists as the most ideal method of measuring, shows that there is still a long way to go.

Let’s look at the full side of the glass. Even having shown that the attack wave last week could be thwarted in two days is of great importance.

The exchange rates continuing to head rapidly downward means that the damage caused will remain limited.

'Don’t blame us!'

Heather Nauert, spokesperson for the U.S. Department of State, who has recently been encountering a lot of Turkey-related questions in press briefings, said that the escalation in the exchange rate has nothing to do with U.S. sanctions on Turkey.

Her exact statement is:

“Economists would certainly tell you that what is happening in Turkey goes far beyond the United States and the United States' recent policies and impositions of various policies and mechanisms. The economic woes did not begin when we put in place global Magnitsky sanctions on two individuals on Aug. 1 of this year."

If we were to interpret this statement, she is saying, “Your economy is already in the dumps, don’t blame us.”

Of course, when you tell a half truth, when you try to show only part of the picture, the only word that describes this is “twisting the truth.”

Even the contents of the "scheduled" tweet posted by U.S. President Donald Trump on Friday were enough the reveal that the tweet was intended to shake the exchange rate balances.

Protecting the honorable stance taken under President Recep Tayyip Erdoğan's leadership against this reckless U.S. behavior should be the priority of everybody who is devoted to this country with the sense of belonging. But when doing this, it is also the perfect time to take lessons in a cool and calm manner.

What kind of lessons can be learned?

When we say lessons we can talk about the two fundamental problems that everyone could somehow label at the end of last week.

1-Our dependency on import-based products and inadequacy in terms of domestic production.

2-Our habit of living in debt, in other words, our chronical problems with respect to saving, spending within our means.

Turkey is making great achievements in export, but the majority of the products exported consist of import raw materials and intermediate goods. The way to go from middle income to the high income is through competing in international markets with high technology products. Yet our share of advanced technology products in export is no higher than 3.5 percent. Then, we can say that it is the perfect time to consider the incentives given to Research and Development.

Secondly, most of us aim to live in undeserved wealth. What is undeserved wealth? It is to always live in debt.

Turkey is not a country that has rich oil and natural gas reserves. It is a country that has to make efforts to gain wealth. Under these circumstances, the only option is to maintain financial discipline, which is the fundamental principle of the 16-year Justice and Development Party (AK Party) government.

Economy bureaucrats, whose views we requested, say that focus is on the Medium-Term Program that is expected to be announced in September. They say that similar to people, countries can also have fevers from time to time and, like people, countries' fever can be dropped using the right methods.

The course of the Turkish lira against foreign exchange in the upcoming weeks will primarily impact inflation rates.

The sooner the recovery, the less the impact of the exchange rate on inflation.


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