The escalating war of words continued on Saturday, when speaking at a rally in the Black Sea town of Unye, Erdogan said that "it is wrong to dare bring Turkey to its knees through threats over a pastor," and blasted "shame on you, shame on you. You are exchanging your strategic partner in NATO for a priest." At the same time, Ibrahim Kalin, Erdogan’s spokesman, said that the U.S. is "facing the risk of completely losing Turkey."
And if anyone was hoping that Erdogan's temper would have cooled one day later with just hours left before FX markets reopen, they were sorely disappointed on Sunday when in his latest public address in the town of Trabzon, Erdogan doubled down on his belligerent rhetoric against the US once again, via Bloomberg:
- ERDOGAN: WE SEE THE GAME YOU'RE PLAYING; WE DARE YOU
- ERDOGAN: THEY'RE TRYING W/ MONEY WHAT THEY COULDN'T DO IN COUP
Here one assumes that by "they" Erdogan was referring to the US, even though the Turkish's president official line all along was that the culprit behind the "failed coup" was the exiled cleric Fethulah Gullen who has been accused by Erodgan of being behind the country's imaginary "shadow state" for years, and which gave Erdogan a green light to crackdown on any potential opponents, leading to an unprecedented purge of people in public positions, with tens of thousands of government workers either ending up in prison or unemployed.
Erdogan then continued by calling for all Turks to convert their foreign currency holdings, i.e. mostly dollars, to liras, and warning that "economic attacks will only increase Turkey's unity."
Among the other notable highlights, Erdogan said that "we will say bye-bye to those who are ready to give up their strategic partnership for their relations with terror organizations" and that Turkey can "
respond to those who started a trade war against the entire world and included our country in it by gravitating towards new co-operations, new alliances" i.e. China and Russia (which earlier today
said it was considering dropping the US dollar altogether in oil trade), and warned that "it is foolish to think that Turkey can be thrown off by FX" although with inflation set to explode as the currency collapses, the local population may have a different view of this.
Finally, anyone wondering which way the Lira will open later today, Erdogan did his best to make the ongoing collapse accelerate, stating that "
we know very well that those who say we should make an agreement with the IMF are saying we should give up on political independence", thus eliminating the possibility of an IMF bailout which together with capital controls were the only two options Turkey had left to arrest the lira's plunge.
As for higher interest rates, a critical requirement to at least slow down the country's economic descent, Erdogan had some words as well: "
- "They are trying to do with money what they couldn’t with provocations and the coup. This is clearly called an economic war"
- "Interest rates are tools of exploitation that make the rich richer and the poor poorer. As long as I’m alive, we will not fall into the interest-rate trap"
And the punchline:
- ERDOGAN SAYS READY TO RESPOND W NEW FINANCIAL TOOLS VS DOLLAR
It was not clear what those tools would be, but they certainly would not be welcome by the market. After all, as Bloomberg reported overnight, investors believe that Turkey’s central bank will have to flout Erdogan’s desires
and announce a significant increase to its benchmark 17.75 percent benchmark rate just to stop the currency’s free-fall as it touches levels that had been unimaginable even a month ago.
“Seems like a complete crash, so they need to act now,” said Morten Lund, a strategist at Nordea Bank AB in Copenhagen. “The lira will keep falling if they don’t hike rates.”
And after Erdogan's latest rant - which clearly crushed any speculation of either more rate hikes or an IMF bail out -
foreign investors may have no choice but to pull their capital out of Turkey, transforming what was already an acute currency crisis into a full blown financial panic.
Which leaves capital controls as Erdogan's last option. The problem, as we
reported yesterday, is that while the Turkish crisis was relatively contained in the context of emerging markets due to the nation's unique capital account funding needs...
L'intero articolo....
In Furious Rant Erdogan Lashes Out At Trump: "We See The Game You're Playing, We Dare You"
