Turkish lira falls to new low after Erdoğan's re-election
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The lira's long-term decline is pushing into a new frontier after autocratic Turkish President Recep Tayyip Erdoğan returned to power.
The latest: The lira, which has lost 90% of its value against the greenback over the last decade, fell to less than 5 cents on Thursday, a new low.
Why it matters: The drop in the lira is the flip side of the massive inflation that the Turkish people are dealing with, effectively amounting to the broad impoverishment of the populace.
- Official readings of annual inflation peaked at more than 80% late last year, and inflation is still running at more than 40%.
Context: Markets seem to think the country's economic problems will likely get worse with Erdoğan in power for the next five years — or more, given his increasingly autocratic tendencies — in light of his unconventional views on interest rates, central banking and monetary policy.
- He has repeatedly said he believes high-interest rates actually cause inflation.
What to watch: Whether Turkey's economic disarray leads to a large loss of confidence in international bond markets, effectively shutting the nation out of the ability to raise cash cheaply.
- Access to cheap capital, used to finance a massive Turkish building boom, has been a linchpin of the Erdoğan years.
