Rules of game are changing in politics, economy

Published 23.11.2017 21:04

The Turkey-Russia-Iran summit held in Sochi, Russia, this week was of great historic importance for the Middle East, as it ended the present game of powers that have determined the destiny of this region for nearly two centuries. On the same day as the summit, Serbian murderer Ratko Mladic, known as the "Butcher of Bosnia," was found guilty of war crime during the Yugoslavian civil war and was sentenced to life imprisonment.

Those who have created terrorist organizations in Iraq and Syria, causing the death and displacement of thousands of innocent people will one day be condemned just like Mladic. Those who created Daesh and armed the PKK and its Syrian affiliates the Democratic Union Party (PYD) and the People's Protection Units (YPG) will bear the consequences of their acts.

We now know why the civil war and the genocide took place in Yugoslavia. Given these facts, global powers and states behind murderers like Mladic must also be condemned, just like the Nazis, for their crimes against humanity.

They broke Yugoslavia, as they did not want it to emerge as a common power against Germany in the heart of Europe, and similarly, they do not want Turkey to be a player in the regional power game in Eurasia.

Those who staged the July 15 coup attempt in Turkey, using a global terrorist organization, the Gülenist Terror Group (FETÖ), are also responsible for the civil war and disintegration processes in Iraq and Syria.

Everyone knows that Daesh is not the reason behind arming the PKK/PYD like a regular army. It has also come to light that Daesh is a fictional terrorist organization. In fact, there is a clear link between the regional dynamics and what has happened in Turkey in the last four years. The Gezi Park protests, the Dec. 17 and Dec. 25 cases, the PKK's ditch actions, the fighter jet crisis with Russia and the July 15 coup attempt, all of this was run together with the disintegration of Iraq and the civil war in Syria.

In addition, all kinds of speculative initiatives against the Turkish economy were brought forward through dirty news mechanisms as rating agencies carried out an organized degradation operation through negative reports against Turkey, irrespective of the country's macroeconomic data.

They thought that the economy would rapidly shrink after the July 15 coup attempt and enter a period of "stagflation" (unemployment and inflation) as a result of falling exports and industrial production as of the first quarter of 2016.

However, Turkey spoiled this game with its Credit Guarantee Fund (CGF). At the same time, it mobilized to support exports and industrial production and boost employment. As a result, industrial production got back on track, and capacity utilization rates started to increase rapidly, in turn boosting consumer confidence, while the public sector supported investments with financial policies. Thanks to a combined effort, Turkey achieved record growth rates in 2017 and quickly escaped the danger of recession. Exports also started to make a net contribution to growth. Meanwhile, participation in the labor force began to increase rapidly. To that end, the Central Bank of the Republic of Turkey (CBRT) also signaled that it would switch to a new proactive monetary policy path that would support employment.

The foreign exchange volatility that continued in 2016, after the coup attempt, only recently reappeared in 2017. We know that foreign exchange volatility and bubbles in exchange rates these days stem from dirty news and an act of "cutting arm" that is meant to break out of the current position to get rid of the bigger loss in financial markets. Here is the new reality that is not known by the perpetrators of such operations that take advantage of shallowness in financial markets and spread some dirty, baseless news.

Unlike in the past, the Turkish economy will not slump down into a crisis because of such foreign exchange attacks. Companies, the financial sector, households and the public sector have hardly any foreign exchange deficits, and for Turkey, currency pressure is no longer a dynamic that can create a permanent crisis through provisional currency attacks.

Those who are trying to create a currency crisis by cutting their arms will undoubtedly be unable to take their cut arms back from this country.

Apart from all this, the CBRT is implementing a floating exchange rate regime. In all open economies that pursue a floating exchange rate regime, such currency attacks are the usual financial circulation.

If we were to implement a fixed exchange rate regime rather than a floating one, the local currency would undergo devaluation, as a result of the appropriateness of domestic prices and external prices so that goods subject to foreign trade switch to advantageous prices from disadvantageous prices.

This picture was inevitable in all crises processes, including the 2001 crisis, toward which Turkey was dragged by the International Monetary Fund's (IMF) prescriptions. Turkey has left the spiral of inflation, devaluation, and crisis linked to the fixed exchange rate regime, which is another form of currency board implementation in an old colonial mechanism.

Turkey, set to achieve record growth in the third quarter of 2017, had expected a decline in growth in the fourth quarter because of the declining effect of CGF and base effect. However, leading indicators show that this decline will not be considerable.

On the other hand, exports are rapidly rising. And there is no foreign currency debt problem for the public, private sectors and households in Turkey in the short term. Meanwhile, the Treasury is in a good position.

In other words, the Treasury has already guaranteed the midterm debt cycle by borrowing. Budget realizations are relatively good compared to the relative expansionary fiscal policy. This is because revenues in the budget are growing in line with developing industry and export-based growth.

The CBRT has also taken all necessary steps in this process. However, the central bank does not have a direct foreign currency target in accordance with the exchange rate regime it implements. It has an inflation target, and as required by this target, it does not hesitate to use funding rates as a weapon and if necessary, it would hike interest rates without waiting for the Monetary Policy Committee meeting.

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