Last week, we shared with you a critical problem put forward by the last global financial crisis - long-term unemployment. The deep economic dispiritedness caused by the global financial crisis has been used to cover up the damage visited upon developed economies with speculative financial market attacks using the leading developing economies. The "negative interest rate" area, which is in effect in many leading economies, has been turned into speculative attacks by the leading financial institutions in the world into a "manipulation of perception" against leading developing economies. Methods to threaten the political stability of some leading developing economies, combined with the financial attacks, bring in phases where these countries are forced to pay high interest rates.
After the 2008 global financial crisis broke out, with reforms carried out at the right time some countries improved their economies; for example, China, has never fallen into a negative growth phase; some leading emerging countries, including Turkey, despite displaying negative growth for some quarters, have turned positive growth thanks to some macro prudential measures and even showed growth performances that can be listed as records in 2012-2013. However, following the Federal Reserve's (Fed) statement of monetary tightening in May 2013, India, Indonesia, Brazil, Turkey, and South Africa, rapidly found themselves in a perception operation called "the Fragile Five," which turned into "the Fragile Eight" with the addition of Argentina, Russia, and Chile.
With the product from the leading economy and finance newspapers and reports from international financial institutions, these countries found themselves in the midst of a serious manipulation of "political and economic uncertainty," and a special mission was carried out to render a critical loss of value for the currencies of the aforementioned countries. The countries in question have been simultaneously taken into the interest rate raising "claw" of international economic circles to halt the decrease of losses in currency. On the other hand, Turkey, which had lowered its interest rates under 5 percent thanks to financial discipline and a strong banking system, faced a jump to the 8-12 percent interest rate band. This phenomenon was present in all of "the Fragile Eight." These countries were threatened by the international economic media with facing very difficult challenges if central banks did not increase their interest rates. India and Turkey did not find these threats credible.
The moral erosion of reports
The country quality reports prepared by analysts at international financial institutions and international credit rating agencies reached a questionable point. These reports claimed that a major bankruptcy would be faced by countries in the "fragile" category if their currencies experienced a serious loss of value in relation to their real sectors, even though the currency of these countries against the dollar have been higher than the levels mentioned in the reports; it has been observed that these countries can manage their real sector debts. Thus, the subjectivity of these reports brought up new discussions concerning "manipulations of perception" that actually state that it was attempted to raise the cost of debt for the leading developing economies. The effort to direct the perception of economic risk for countries only over exchange rates is another "manipulation of perception." In fact, credit default swap (CDS) ratios of government bills and stock market indices are very important indicators. As a matter of fact, in the example of Turkey, neither CDS ratios nor interest rates of two- and 10-year dated bills or stock market indices confirm the "economic risk" perception presumed to be constructed over exchange rates. The most effective way to prevent leading developing countries, such as Turkey, from facing such "manipulations of perception" would be to sustain structural reforms and economic growth. Turkey is decisively continuing on its path, sustaining its economic and political reforms and supporting investments based on innovation will eliminate such attacks on Turkey's economy.
Manipulation is a reality
Most of the time, market actors notice the state of panic or over-risky appetite of investors and create a setting to gain from it. Before prices go up and the bubble bursts, they convert what they have into money or take advantage of too much pessimism to collect from those selling very cheaply in a panic. Additionally, they do some "touch-ups" on the psychologies of the investors. If you accept the existence of the previously mentioned situations, then you must accept the existence or the possibility of the existence of those who want to create fluctuations in markets. I will leave it to your judgment to thoroughly analyze the "manipulation of perception" faced by the 45th president elect of the U.S., Donald Trump, and what can be done to the global financial system.
About the author
Kerem Alkin is an economist, professor at Istanbul Medipol University. He currently serves as the Turkish Permanent Representative to the Organisation for Economic Co-operation and Development (OECD).