Turkish Crisis-Mongering and Conspiracy Theories

Author: Emre Deliveli  ·  January 9th, 2012  ·  1172http%3A%2F%2Fwww.economonitor.com%2Femredeliveli%2F2012%2F01%2F09%2Fturkish-crisis-mongering-and-conspiracy-theories%2FTurkish+Crisis-Mongering+and+Conspiracy+Theories2012-01-09+20%3A36%3A45Emre+Delivelihttp%3A%2F%2Fwww.economonitor.com%2Femredeliveli%2F%3Fp%3D1172 › Share This Print

I will be posting my Hurriyet Daily News column soon enough, but before that, I needed to take care of urgent business.

There is a lot of crisis talk in Turkey of late. While today’s Twitter gossip of Fitch downgrading Turkey (I know exactly where that came from, and I assure you the person who inadvertently started that was simply voicing his own opinion) and a Financial Times claim that Turkey analysts are “muttering about going to the IMF” certainly played a role, it is the Turkish daily Sabah that is making the most noise. After claiming on Friday that Turkish “elites” (whatever that is supposed to mean), along with domestic and international speculators, were plotting an economic crisis, the paper’s economy section chief takes on banks the next day, asserting that the major Turkish banks had formed a gang to destroy Turkey (of course, he never claims this outright, hiding behind the usual “I’ve been hearing rumors that” cloak). It is beyond me why Turkish banks would want a crisis in the country they operate, but there seems to be a “sinister plot”: In a highly-analytical! piece, Sabah’s econ. chief goes on to “prove”, in his editorial yesterday, that banks are cutting lending to the so-called Anatolian tigers, i.e. the successful firms in the hinterland that are supposedly the backbone of the AKP’s success, to bring the party and PM Erdogan down. Here is how it goes:

He looks at the Central Bank’s weekly bulletin and finds that private banks have been cutting down lending. But he doesn’t bother to see if they are cutting their lending more compared to state banks- I wonder if decreasing lending was the Central Bank’s major goal, as Governor Basci admitted on Friday, last year. But in fact, his claim is even stronger than that: To show that private banks are decreasing credit to Anatolian tigers, he would also need to look at lending to cities. Fortunately, the banking regulator has such detailed data. He’d basically need to regress credit growth on state-private bank dummies as well as an Anatolian tiger dummy- 1 if the city is Istanbul-Ankara-Izmir 0 otherwise- similar to the analysis I had done for my “connected lending” column.  To make a long story short, if someone concluded that private banks are cutting lending to Anatolian tigers by just looking at banks’ growth rates, you should dismiss it right away. If that was a undergrad. term paper for a metrics class, the student would end up with an F. But then again, this is Turkey, and this analysis finds its page to the editorial, as a full-page story, of one of the major dailies of Turkey….

Switching gears, economist Burak Saltoglu made some important tweets today on the need for columnists to be impartial. Since I am often seen as a staunch government critic, even by close friends and readers, I wanted to squeeze in a small footnote. There have been several times I was quite optimistic on the Turkish economy, with the latest being when the government started disclosing one ambitious reform after another at the end of the summer- my optimism unfortunately did not materialize, as I noted in a later column. Similarly, I have been critical of Turkish monetary policy for a long while, but I’ll be the first one to congratulate the Central Bank if they improve on the communication front, or even if they are proven right, which would mean I am proven wrong.

Anyway, Ugur Gurses of Radikal, a critic of Turkish monetary policy like me, demonstrates clearly how an impartial and analytical columnist should write in his column today. Unfortunately, it is in Turkish, but he is basically saying that despite the problems in monetary policy and some vulnerabilities, the economy is nowhere near the 2001 crisis, as some claim. I don’t agree with him on the adequacy of reserves, but I will address that in a post in the next couple of days. In the meantime, I strongly recommend his column…

EDIT: I was happily surprised to see this morning that Hurriyet Daily News, where I write weekly columns, has translated Ugur Gurses’ column into English. It serves as a crash course, not only for the workings of Turkish markets, but also for understanding “Turkish mentality”, so it is highly recommended…