ISTANBUL BLOG: Fool me twice, shame on me, fool me three times, shame on both of us
It is the Erdogan regime’s habit to treat everyone as a perfect fool.
Its top officials, mind you, are actually kind people. They don’t openly state “You are a perfect fool”, they instead follow the Orwellian path of doublethink.
War is peace, peace is war. Negative is positive, positive is negative. Normalisation in our economic policymaking means fewer measures, more measures bring normalisation. Lira-isation is dollarisation, dollarisation is lira-isation.
At the end of last week, Turkey’s new economic team announced more “normalisation”. The central bank and finance officials made it clear that they would dearly like to pull the plug on the costly foreign exchange-protected “KKM” savings accounts that the Erdogan administration introduced nearly two years ago. Moves towards that goal were announced.
The central bank lifted the veil on measures targeting conversion of KKM deposits into straight lira deposits. Officials, however, didn’t dwell too long on the prickly problem of how banks are expected to persuade Turks all too familiar with the woes of the lira to switch from lira accounts protected against depreciation (the KKM scheme covered deposits of 3.36 trillion lira, $127bn, as of August 10) to accounts not protected from depreciation. Instead, as ever with the Erdogan era, they are attempting to coerce the situation.
The announced measures scrap the securities maintenance and reserve requirement obligations brought in to push banks to convert FX-linked deposits to KKM deposits. At the same time, they impose new obligations on the banks that push them to secure the conversion of KKM deposits into non-KKM lira deposits.
The central bank’s reserve requirement directive adds up to a hugely perplexing problem.
KKM was introduced because the regime supresses lira deposit rates. In July, the central bank introduced measures to further counter lira deposit rates, which were on the rise. The move was marketed as a positive step to push deposit rates below lending rates.
In Turkey, there are caps on commercial loan rates linked to the policy rate. If a bank wants to impose high commercial loan rates, it is required to hold more government papers at the central bank as collateral.
Back to this question of convincing Turks to find faith in placing lira in standard deposit accounts. Why should a Turk keep their money in lira if they will receive 30% interest versus annual inflation that looks set to climb to 70% under official projections, especially when the banks are not permitted to offer higher lira deposit rates?
The search for fools (keriz in Turkish) who will purchase some Turkish papers continues. However, it seems that the Erdogan regime has taken all the fools in the world for a ride in recent years.
“The fool you have called cannot be reached at the moment. Please try again later.”
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