Saturday, August 11, 2018

Michael Roberts — Turkey: total meltdown

How can Erdogan get out of this currency crash? The capitalist solution is to hike interest rates to an astronomical height so that further borrowing is stopped. Then the government should dramatically cut government spending and raise taxes (ie fiscal austerity) and use the ‘savings’ to bolster the banks and meet foreign debt repayments. Turkey should also turn to the IMF for a loan – Greek style. Under IMF rules, it could borrow up to $28bn to fund future debt repayments but then be subject to the dictats of IMF austerity measures. This capitalist solution means an outright slump in the Turkish economy, hitting its citizens hard and seriously damaging Erdogan’s support in the country.
The government could introduce capital controls and block any money leaving the country. But this would mean that foreign lenders would just stop lending, driving the economy into a slump anyway. Or Erdogan could try to get funding from Russia, China or Saudi Arabia (as Pakistan has just done). Unfortunately, he is on bad terms with all these countries. Erdogan is resisting all these options so far, telling his supporters to ‘trust in God’ and him.
The bigger issue is the growing emerging market debt crisis. This is what I said in May after Turkey’s general election. “Rising global interest rates and the growing trade war initiated by US President Trump are going to hit the so-called emerging capitalist economies like Turkey. The cost of borrowing in foreign currency will rise sharply and foreign investment is likely to reverse…..Turkey is now near the top of the pile for a debt crisis, along with Argentina (already there), Ukraine and South Africa.”
So there’s more to come.
What's the lesson likely to be drawn in the emerging world? Capitalism doesn't work and comes with the price of Western control of the emerging country and exacting of tribute.
The bottom line is that the price of entry into the US market is US control of your country's entire policy.
The alternative its that countries can ally with Russia and China and face off with the US military.
That's empire and the extracting tribute in contemporary form.
Who is this an opportunity for?

Maybe China, which is proposing a different world order?

Does the US really think that the emerging world is going to roll over and acquiesce in re-colonization?

This is what the US is aiming for with Russia, too, in order to encircle China using economic warfare while also ramping up US military dominance, now also in space.

Donald Trump aiming to become the new Caesar Augustus?

WWIII anyone?

Michael Roberts Blog
Turkey: total meltdown
Michael Roberts

See also

Although the US was essentially defeated in its attempt to remove Assad, the US leadership has not given up on the plan to extend US hegemony to the entire Middle East (MENA).

The attempted coup against the democratically elected government in Turkey failed. This is the next iteration on "humanitarian" pretexts.

Defend Democracy Press
The Empire Hits Turkey. Opening the way to Teheran, Cutting Russia from Syria

9 comments:

Bob said...

Allah (our well-armed security forces) will provide.

Matt Franko said...

Tom all they have to do is balance the trade.... shouldn’t be hard...

Tom Hickey said...

Easier said that done:

1. Trade involves domestic policy affecting socio-economic and political issues. It's not just an economic issue for any country. Failure to understand that this endemic and it is exacerbated by the idea of conventional economics that micro founds macro, so that there is a single representative agent, be it a consumer or producer. The reality is highly nuance and local.

2. Capital flows to the highest return based on risk/reward and cost/benefit. US firms investment in production abroad, because it is more profitable. Moreover, the big growth is occurring in the emerging world while the developed world has peaked.

3. Strong dollar makes US goods more costly than competitive goods in markets. But US threatening to counter that advantage with tariffs.

The only way out is for the vassals and colonies is to pay tribute to the imperial core, just like always when there is an empire.

Matt Franko said...

Maybe the firms will do it thrmseles just to shut these econo morons up ...

Like they went “carbon neutral!” to shut up all the tree huggers .... they can now go “trade neutral!” to shut up the economists...

Greg said...

If they went carbon neutral to shut up the tree huggers then the tree huggers won. That’s all they wanted

Going trade neutral is much more difficult and likely won’t happen. The way these morons measure trade guarantees that whoever is making the most of a deal will be described as cheating. The only trade neutral situation is essentially a socialistic outcome with everyone equal at the end. Can’t happen

Matt Franko said...

And all the firms want to do is make munnie... they don’t care how they do it...

Matt Franko said...

Greg you guys whole “ neoliberal conspiracy!” theory is a fantasy dreamed up by Art Degree economists... it’s not real... it’s Alex Jones stuff...

The people running the firms just want to make munnie that is what they are trained to do via a Science methodology... they have science degrees ...

Matt Franko said...

Greg there is not a Business School out there that teaches a course called “Neoliberalism 101”...

Greg said...

Wrong Matt, they want to make (need to make cuz of shareholders) incrementally more money each quarter than their rivals

It’s a game of taking more and more of the share or they are losing