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In Our Chief Economist

Snap elections and other possibilities

THE SITUATION IS AWKWARD, even by the Turkish standards. Clearly neither inflation is under control nor is the exchange rate. And yet there is talk about rate cuts. This could only lead to a ‘chaotic’ trajectory – in the technical sense. This means non-linearity, complex dynamics and eventually chaos. Because the exchange rate is by...

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In Our Chief Economist

Interest rates and exchange rates

THERE IS NO ONE-TO-ONE correspondence between the rate of interest and the exchange rate. Still, more often than not the rate of interest is the only variable that can control the exchange rate. Thus, it is possible to defend the currency, both under a peg and under the float, up to a certain threshold beyond...

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In Our Chief Economist

What do central banks do? Or do they?

AS I PEN THIS, London interest rates on overnight s aps for TRY hit 1400, the highest in a decade. That may have limited the first impact on the level of the TRY/USD exchange rate. Because foreign banks demand TRY so they can sell and turn to dollars – and run – TRY scarcity has...

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In Our Chief Economist

Fixed income, Fed, and CBRT

THE SPREAD BETWEEN US 2-year and 10-year notes was 0.37 exactly a year ago. Now it stands at 1.47. This kind of normalization entails a strong expectation of genuine recovery, especially after the Biden bill passed. It also underlines a reflation scenario. With fiscal packages amounting to USD 5tn, nearing a quarter of the U.S....

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In Our Chief Economist

America: are times a-changing?

A HUGE PACKAGE and massive growth in money supply, along with near-zero interest rates, might do the trick. And it may raise inflation indeed. Although inflation is far from being a concern globally, it is potentially important for the following two reasons: First, monetary history tells us relaxing price stability targets and/or constraints results in...

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In Our Chief Economist

Low quality and below par growth

WE HAVE BEEN WAITING FOR Godot for a entire decade, if not two or more. On the face of it there is a strong and fluid dynamic that drives the business world. Here and there old town folk who were busy trading olives now produce olive oil machines, for instance. More people export, even SMEs....

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In Our Chief Economist

Cards, debts, and capital formation

THE 1996 Nobel Laureate William Vickrey once wrote that nobody should be afraid of debt. He basically meant public debt, of course. Yet in his opinion, issuing debt was sort of akin to issuing capital. Capital-ism, I won’t hesitate to add, is better called debtism, if this view is correct. Nevertheless, we aren’t talking about...

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In Our Chief Economist

2021 – The sign of the four

I HAVE TRIED to summarize four themes that might characterize 2021. The first is Trump’s legacy, or lack thereof. The second is Biden’s burden and what has to change in world trade and international politics. Third is the onset of COVID-19, both as a health issue and an economic problem as sovereign debt rises throughout....

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In Our Chief Economist

What may happen this year?

I HAVE SINGLED out two scenarios. They pertain to both global and local dynamics, which are intertwined in the days of COVID. The first encompasses a rapid amelioration of economic conditions due to the positive impact of vaccines. The second is based on a more pessimistic view that claims the outbreak won’t be easily contained...

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In Our Chief Economist

2021: A brave new world?

WELL, that is the end, folks! We have finally come to the anti-climax and first, all positive expectations, and then all the calamity forecasts are borne out by events; they have become realities. The new era is not only characterized by lower interest rates, but also by lower growth throughout the global economy. It is...