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Old 23rd August 2015, 10:07   #103 (permalink)

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Re: Watch The Lira Now

Lots of gloomy thoughts on the Turkish economy on financial blogs. This is from an economist called Russell Napier who thinks Turkey could default on its foreign currency loans and trigger a global market collapse:

What could be the trigger for a credit crunch in emerging markets?
I have learnt from history that it is very hard working out what the trigger is. In 2008, it was the collapse of Lehman Brothers that triggered a credit crunch. Now it could be a major event in Turkey or a default of the Brazilian oil company Petrobras or some event in Malaysia. But if I have to pick one I would say it is Turkey introducing capital controls. Such controls will mean that Turkey will not pay back principals amounting to 400 Bn. $ and the interests on it.

Couldn’t the damage of a major default in Turkey be contained?
We saw in the past that when credit stops to flow to one big emerging market, it tends to stop flowing to all of them. In Eastern Europe, there are lots of countries with large current account deficits and currency links to the Euro. They need to be importing capital, but I fear it will stop flowing there.
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