A report of the journalist revealed in Wall Street JournalJared Malson, on the tendency of many Turkish traders to pump money into foreign currencies, gold and cryptocurrencies, due to the deterioration in the value of the local currency, the lira, which has lost more than 80 percent of its value in the last five years.
There is an “air of panic,” says Malsen, quoting traders in Istanbul’s Grand Bazaar. “People think the dollar will go up, so there is higher demand at the moment.”
Buy gold
The Wall Street Journal quoted gold traders in Istanbul as saying that there was a significant increase in demand for the purchase of the precious metal.
Buyers use gold as a “financial instrument,” according to traders Malisen spoke to.
Turkey’s economic turmoil has put pressure on the merchants in the bazaar, who have played a central role in the economy since the construction of the vast covered market during the days of the Ottoman Empire more than five centuries ago.
Gold traders are concerned that the profits from the high demand for the metal do not offset the negative impact of the turmoil in the Turkish economy.
Turks and other traders must contend with a complex web of rules imposed by the government in recent years to scare off foreign currency and prevent the country from sliding toward bankruptcy.
These include a rule that forces companies to convert 40% of their foreign currency earnings into lira, according to the report.
According to many economists, the collapse of the lira is the result of an era of economic mismanagement on the part of Turkish President Recep Tayyip Erdogan.
Erdogan has in recent years pressured the central bank to lower interest rates despite the country’s high inflation rate – the exact opposite of what central banks usually do.
Erdogan has tried to adjust course since winning a close election in May, in which his opponents attacked him over the purchasing power of Turks, and many cut back on meat, fish and even vegetables, according to a Wall Street Journal journalist.
And Malisen quotes analysts that the newly appointed central bank governor, Hafiz Gay Erkan, and Finance Minister Mehmet Simsek raised interest rates, but very slowly to control inflation.
The Turkish lira continued to decline after the central bank meeting in July, in which officials decided to raise interest rates by only 2.5 percentage points, a move that slowed the pace of interest rate increases and put the lira under further pressure.
The decision disappointed some economists and investors who had hoped Simsek and Erkan would be more decisive about tackling inflation, according to the report.
2023-08-07 03:18:31
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