Turkey Wades into the Global Currency War

by John Galt
December 4, 2016 12:15 ET

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With the recent massive devaluation of the Turkish Lira due to the political instability inside of Erdogan’s Islamic dictatorship, the flow of Western money out of the country has created a vacuum and a scapegoat for the upcoming surge in inflation as the Lira declines in value. The European Union and Turkey have been trading political barbs for months now and with Turkey looking less likely to win admittance into the Union, it would appear that not only is Erdogan preparing for life outside of the EU, but for a currency war against Brussels and Washington, D.C.

From the Turkish newspaper The Daily Sabah today:

Turkey aims using local currencies in trade with China, Russia, Iran, President Erdoğan says

Turkey is taking steps to allow commerce with China, Russia and Iran to be conducted in local currencies, President Recep Tayyip Erdoğan said on Sunday, the government’s latest effort to shore up the tumbling lira.

In a speech during an inauguration ceremony in the central city of Kayseri, Erdoğan also said that Prime Minister Binali Yıldırım would bring up the issue with Moscow during a forthcoming trip to Russia.

Erdoğan has called on Turks to cash in their foreign exchange holdings and buy lira to stem the Turkish currency’s decline.

The lira has lost a fifth of its value this year, hit by a resurgent dollar and widening concerns on Turkey’s economy and political stability in the aftermath of the July 15 failed coup by Gülenist Terror Group (FETÖ). The intensity of the clashes with the PKK terror group is at its highest during the 40-year-long armed insurgency, while Turkey also battles with Daesh terrorists in its south in Syria.

The ongoing talks between Turkish political parties regarding a possible referendum on switching to presidential system in spring also adds up to events pressuring Turkish lira.

While many political leaders in D.C. and Berlin might dismiss this as “bluster” the truth is that more nations are freeing themselves from the tyranny of the U.S. dollar by initiating bilateral trade agreements in domestic currencies. Eventually this means all of these American dollars will return home with dire consequences for the U.S. economy, especially if China continues its policy of global divestiture in trade using the dollar except with the United States.

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