Debt Majesty

God forgive us; as if COVID-19 came to support and even complete President Trump's economic (especially dollar) policies. The POTUS has added value to its national and international currency by bringing in his country's foreign companies, "developing" markets (including Turkey) have felt a greater need for the dollar, and devaluations have taken place.

One of the most brutal examples of this happened between Ankara and Washington in August 2018: since April, the United States has demanded the release of pastor Brunson, and in July, President Trump reminded his Turkish counterpart, “you had promised to release the pastor, and if he was not released, I would destroy your economy.”

The Turkish lira depreciated by 35% in August. The release of the pastor did not end the issue, and President Erdoğan had to make a statement that he had released him. When President Erdoğan placed his "one-man" regime on top of that devaluation, the Turkish economy has so far failed to recover. The next 35% devaluation was brought by COVID.

When Azerbaijan allocated 600 million (Turkey $ 16.5 billion) for the measures to fight against the virus, we wrote, "If they have allocated such a small amount, taking into account the threat of devaluation, it is a right step." Because, given the unprecedented distribution of national income in the world, it is not difficult to see that a new devaluation can create inevitable chaotic consequences for Azerbaijan. Before the arrival of COVID-19, Turkey had spent not only its foreign exchange reserves but also the "shroud money" in the Central Bank.

COVID-19 increased the country's need for currency several times. In response to the currency demand, the Fed did not open the swap line it promised on April 6, and if it did, to which problem the $ 2.6 billion, which could be used, would be the remedy? The State Department and the Pentagon have exacerbated the S-400 issue, which has already been the most important reason for the loan. Although the IMF has announced that talks are underway for a new stand-by, Erdoğan, as "the head of a government who has long ended his relations with the IMF," is ashamed to knock on the same door again, believing it will hurt his political career. In the days of the struggle with COVID-19, Erdoğan's government faced a very difficult dilemma: if they allowed major municipalities run by the main opposition party to launch a campaign to help the population, they thought that those municipalities would raise the ratings of the main opposition party.

Without permission, they saw that the rating of each of those municipalities increased by at least 5 points. Seeing this, the government's search for dollars also accelerated. But in what way?

It turned out that the Central Bank is secretly trying to collect dollars from the domestic market by printing banknotes. In this situation, no matter how low the Central Bank shows, it intensifies inflationary pressure in the market in accordance with the most classical rules of economics.

In fact, the simplest way to deal with this situation is to raise interest rates on citizens who want to add value to the national currency with foreign currency by raising interest rates and have them “feel strange from” the foreign currency.

However, President Erdoğan does not allow the Central Bank to implement the classical rule. Because in Mr. Erdoğan's economic theory, "the reason for high inflation is high-interest rates". The reason for the Central Bank's reduction of interest rates by 16 points in the last 15 months is the President's suggestion and even demand.

Therefore, the only question that strains everyone's mind is: where and by what means will Turkey find about $ 50 billion it urgently needs?

COVID-19 is really changing the world: countries like Turkey are now looking for the dollar that rained down on the world market 10 years ago. If it was just a virus or just Donald Trump who adds value to the dollar, the pain was half over. The main reason for this is that the system has been indexed to a single person, and as a result, the Central Bank has completely lost its independence.

Of course, I do not mean Elman Rustamov, the village headman of our Central Bank, who buried the record of Alan Greenspan, who is the former president of the Fed for 19 years, with his 30-year career...

Mayis Alizade