WASHINGTON. Back in the mid-19th century, the once-powerful Ottoman Empire tottered on the edge of economic ruin. John Russell, a two-time UK Prime Minister, termed that country a “sick man.” And that epithet stuck. With a little embellishment. Other political wits Christened the Empire “the sick man of Europe.” Today, under Turkey’s modern dictator, Recep Tayyip Erdoğan, the Turkish lira continues its slide into oblivion. What remains of the old Ottoman Empire risks turning into “the sick man of Europe” yet again.
Part of the reason for Turkey’s continuing economic mismanagement is the monomania of Erdoğan, that country’s self-appointed dictator, Islamic fundamentalist and increasingly anti-U.S. antagonist.
Pulling a series of Venezuelan-style legal maneuvers based on a relatively recent real (or staged) coup attempt against his dictatorial regime, Erdoğan chose the typical route of most socialist dictators-for-life. He’s proceeded to wreck once-secular Turkey’s fairly robust economy. At the same time, Erdoğan feverishly persecutes, jails and / or eliminates his real or imagined enemies.
Erdoğan is also not beneath kidnapping and imprisoning foreign visitors who might prove effective bargaining chips against their countries of origin. And so it came to pass that Erdogan imprisoned a longtime American Christian minister to hold as hostage until the U.S. extradites an Islamic preacher back to Turkey.
Why? The Islamic preacher, Erdoğan alleges without proof, masterminded that real or fake coup attempt against the dictator. Erdogan needs him back to stage a show trial.
Not one to take this kind of nonsense, President Trump and his administration have been turning the economic screws on the dictator to get our American citizen released and back on U.S. soil. But without any quid pro quo, although that is what Erdoğan essentially demands.
Trump administration turns the screws on Turkish lira, Erdoğan
The administration turned another screw on Turkey’s dictator yesterday. And this morning, the already-weak Turkish lira howled in pain, as reported by CNBC.
“The lira briefly fell 20 percent after President Donald Trump authorized the doubling of metals tariffs on Turkey.
“Trump’s comment came after Turkish President Recep Tayyip Erdoğan asked citizens to ‘change the euros, the dollars and the gold that you are keeping beneath your pillows into lira,” noting this is “a domestic and national struggle.’
“Turkish stocks also fell on Friday as the iShares MSCI Turkey ETF dropped 14 percent. The ETF was already down 42.3 percent this year prior to Friday’s losses.
“The drop came after a Turkish delegation returned from Washington with no apparent progress being made on the detention of Andrew Brunson, an American pastor detained in Turkey in 2016. Turkish authorities accuse Brunson of supporting a failed coup attempt earlier that year.”
Once again, we have a case where either America’s or the world’s insane and ominipresent politics disrupts world stock markets. The decline of the Turkish lira may simply serve as the excuse.
Erdoğan: Another tinhorn dictator messing with his country’s economy?
Although Turkey’s government under Erdoğan has been acting a lot like a South American tinhorn dictatorship lately, that country has been a long-time member of NATO. And, as a country still partially located in continental Europe, it’s long been a strong ally of the U.S. and Western Europe and a notably stable economic force. At least after the end of the Second World War or thereabouts.
However, Erdoğan quickly turned all this success on its head with his increasingly anti-U.S. brand of religious and economic Islamist socialism. Unsurprisingly, he’s also busied himself toadying up to the U.S.S.R. Russia, while dissing Israel, meddling in the mess once known as Syria. He’s also been attacked the Kurds again, something Turkish governments have often done in relatively recent history. That kind of senseless aggression will not help Erdoğan or the Turkish lira.
In practice, Erdoğan’s nonsense destabilized a once-stable country and its once-stable currency. Now, U.S. and international traders and investors are acting nervous, a nervousness that showed up in Friday morning Wall Street action with a vengeance. Particularly among big American banks like JP Morgan Chase (symbol: JPN) that do business with Turkey.
U.S. markets react to Turkish lira decline. Negatively.
The Dow Jones Industrials exploded to the downside at the morning bell. That index of 30 big American stocks quickly dropped some 250 points before pulling back a bit to the negative 190s. But, as we write this article, circa 1:30 p.m. ET, the Dow approaches that negative 200 mark again for roughly a 0.07 percent loss at this point.
The broader-based S&P 500 and the tech-heavy NASDAQ are suffering current losses as well, but not quite as bad. Those averages are down 0.62 and 0.48 percent respectively.
As always, you can never tell where markets will end the day in this typically volatile August. Volume remains light, leaving both up and down moves questionable over the longer term. Low volume often indicates a lack of conviction, particularly true when so many active traders and investors leave town for their August holiday. After all, school begins in just a couple of weeks. Plus, the Labor Day holiday, which semi-officially concludes the summer, lurks just around the corner.
Markets are already nervous about the Trump tariffs. Erdoğan and the relentless decline of the Turkish lira don’t help matters any.
The administration’s ongoing disputes with the bulk of our trading partners doesn’t help either. We tend to view the president’s aggressiveness here as a plus, at least short term. Others with more money and / or influence tend to disagree.
In this writer’s opinion, our “friends and allies” – ranging from Turkey and Western Europe to our NAFTA trading partners in Canada and Mexico – have been free-riding on the American economy and the jobs of American workers for decades. It’s like we were still on some kind of Marshall Plan giveaway for these countries.
You can question Trump’s tactics all you want. But what president in recent memory has fought back against all our supposed “pals” to get back at least some of what they’ve been ripping us off for? At least since the actual (and laudable) Marshall Plan drew to a close?
Then, of course, there’s China. The Chinese relentlessly work to steal America’s technological and manufacturing secrets, the better to eventually beat us in our most successful industrial and technoligical sectors.
Trump’s trying to put an end to this grand theft with his aggressive tariff regime. Unfortunately, this could definitely hurt the U.S. economy, at least short term. Like the old U.S.S.R. and its allies, however, the Chicoms feel it’s best never to compromise on anything. And they could be right. After all, if any of their own citizens criticize their Communist government’s policies, they might never be heard from again.
But it could take months or years before this all plays out. Meanwhile, count on the Democrats and the media to tell us nonstop that Trump is Herbert Hoover and Smoot-Hawley tariffs rolled into one, as they whoop up their own brand of Venezuela-style socialism. The heck with jobs and the economy. The Dems’ one and only ongoing aim is to destroy Trump and retake Congress this fall. Forever.
Once there was a time when Americans would settle down after the Presidency changed party hands and give the new guy at least a chance, even if they didn’t vote for him. Sadly, those days are gone.
The good, the bad and the ugly
So between the bad actors and international turmoil we’re still forced to deal with abroad and the outright sedition of the Soros-supported left in this country, the American economy – and the American stock market – will continue to gyrate in a most uncomfortable manner. Now more than ever, investing remains hostage to headlines, real and fake alike. Earnings, profits? Who cares.
Today’s erratic end-of-week action seems typical for now as our yo-yo markets gyrate up and down. Perhaps we should just buckle up. August tends to be a nasty month for investors, anyway. Maybe Mr. Market’s roller-coaster is about to commence its first really steep move down in a long time. Maybe Recep Tayyip Erdoğan and the rapidly declining Turkish lira are just the excuse.
Headline illustration: Composite by the author. Left: Punch cartoon, circa 1896, depicting the Ottoman Empire’s ongoing status as “the sick man of Europe.” Right: 2016 photo of current Turkish president and dictator Recep Tayyip Erdoğan who may return modern Turkey to that same status soon. Image via entry on Erdoğan, CC 2.0 license.