Assessment: Venezuela, Lebanon and now Turkey are modern day examples government and central bank overreach. Revelation 6:5-6 brings hyperinflation on a global scale …
Another day, another collapse in the Turkish lira, only this time there was a twist: as the hyperinflating currency implodes, Erdogan has finally had enough of the relentless pummeling, and is starting to shut down Turkey’s markets.
Third Seal: Scarcity on Earth
“When He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand. 6 And I heard a voice in the midst of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine.”
But first, let’s back up: heading into Friday, the lira accelerated its historic descent, weakening past the 16 per-dollar mark for the first time ever, as the central bank’s pledge to end a four-month cycle of interest rate cuts on Thursday failed to convince investors that inflation can be brought to heel. That was just the start however, and the currency plunge only accelerated crashing as low as 17.14 just hours later, bringing declines this week to 17%. YTD the currency has lost more than half of its value!
As a reminder, the central bank yesterday cut its benchmark one-week repo rate by a further 100 basis points to 14%, its fourth reduction since September spurred by demands from President Recep Tayyip Erdogan to lower borrowing costs in the face of surging consumer prices as part of his batshit insane monetary policy Erdoganomics whose only possible outcome is the collapse of Turkey’s economy and hyperinflation. The resulting sell-off accelerated a 54% plunge in the currency so far this year as real rates fall further below zero with inflation now standing at an annual 21.3%.
Erdogan then responded to the economic pain caused by rising prices by ordering a 50% increase in the minimum wage next year, guaranteeing even more inflation as it will increase production costs that will see inflation accelerate by a further 2% to 8% next year, Erkin Isik, chief economist at QNB Finansbank, wrote in a note to clients.
In any case, once the lira plunged to 17, the central bank spent another billion or so intervening, its 5th intervention just in December. Needless to say, this intervention like all those preceding it, had a half-life of just a few minutes, and shortly after the USDTRY was trading back at just shy of all time highs.
And this is what the realization that hyperinflation has arrived and may not be good for stocks looks like.
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