Written by Althea, Content Writer, Headline Diplomat eMagazine
An unstable growing autocrat is unlikely to last more than a few weeks in the face of an overflowing onslaught from the foreign exchange markets.
With a falling monetary system, falling banking system, and a crumbling economy, whichever the fraudulent rulers are in the right spot of the marketers which would generally step down the marketing system or be killed instantly by the military, and then by the final moment, the laws from the IMF would begin enforcing some discipline.
It has happened a few times yet always maintained a fairly familiar routine. At course, that’s how it used to be.
The storyline has begun to shift significantly in the last few days or months. This week, Turkey’s President Recep Tayyip ErdoÄŸan launched a full-fledged market military conflict, slashing interest rates even while the Turkish lira plummeted. Nonetheless, he retains power even though he is not the most democratic ruler. But then again who is really practicing democracy these days is quite doubtful….
Still, one of the most striking examples of our times of a non-democratic ruler is Recep Tayyip ErdoÄŸan.
Due to falling currencies, Argentina and Chile’s autocracies stay in place, the zloty’s depreciation has accomplished nothing to carry Poland to heel, and Vladimir Putin genuinely cares nothing about what economists say of his military units mobilising on Ukraine’s borders.
In reality, markets no longer frighten anyone – and this will make the future a more terrifying place to be, and also much less sustainable in the long run.
The Turkish Lira is falling in value against the US dollar
It’s been more than three weeks that the Turkish Lira is going under the drain. The currency plunged over 15% in only a few days when ErdoÄŸan knocked economic orthodoxy on its head.
He has confirmed that high-interest rates promote inflation rather than cure it and has effectively eliminated the central bank’s independence while gaining personal control of the money supply. Meanwhile, he lives in riches, while his people cannot even get a loaf of bread.
Turkey’s currency has fallen as a result of rate cuts, amid a 20% inflation rate. It has lost more than 40% of its value versus the dollar this year, the poorest record in the world.
Inflation in Turkey is approaching 20%.
But here’s the kicker and where it gets interesting. Despite a general discomfort; people leaving off the mere minimum; Â prices going up, and imports being scarce, ErdoÄŸan remains in power having waged war on the market economies, while he has indeed triumphed.
To make matters worse, he is not on his own. It seems that totalitarian regimes are on the loose. The Argentine peso, a long-time currency market objective, has fallen by 16 percent this year, yet President Alberto Fernández has remained in office. The Chilean peso has fallen by 12%, but there are only a few indicators that this drop has had any political consequences that would affect the coming elections.
Shareholders may be concerned regarding Poland’s spats with the EU, which have made it the globe’s fifth badly equity funds currency, but there is no indication that anyone in Warsaw is concerned, about how markets will respond to its assertiveness along its border with Ukraine. In fact, it is more and more prevalent that it makes no difference what the markets do, as each ruler seems to be doing their own thing.
That’s a significant shift. Even highly developed countries like the United Kingdom used to be afraid of the markets turning against them a couple of decades ago. Now that Brexit is here to stay, the markets do not seem to have even the slightest effect.
But there was a different point in time that we all recall, and it is worthwhile to consider. “The midgets of Zurich”, slang for market participants, were derided but eventually strictly followed in Harold Wilson’s governments of the 1960s, which were afflicted by currency depreciation. Iconic investors, such as George Soros could offer entire monetary systems crashing to the ground instantly by changing their money from one place to another through the 1990s.
The international capital markets’ decision was always permanent. If you lost their backing, you were doomed. But this does not seem to be the case right now.
There are two explanations for this shift. For starters, there is so much generated money floating throughout the world that countries can now subsist far more readily than they could previously. The Federal Reserve has been printing money at a never-before-seen rate. Time after time, the European Central Bank has been printing billions of euros. For more than a year, interest rates have been maintained at negative.
President ErdoÄŸan, for example, would be in serious trouble if cash dried up, showing inability to pay for fuel or medical imports. When he has been controlling that much cash on hand, he’ll be able to find the dollars or euros he requires. The dollar-based Western financial markets are no longer the sole source of funds. ErdoÄŸan has negotiated massive currency exchange agreements with China.
Turkey is a vital member of China’s Belt and Road economic network, with China being its largest trading partner. Turkey has been labeled as a “vassal state” of China – a fair assessment if you ask me.
Wrapping up
Autocrats in poor countries confront few balances on their power. Whether they are formally tyrants or ruling Autocrats – the fact that they are no longer afraid of the markets should concern all of us. Their labeling democracies severely curtail actual liberties. Their ruling goes beyond any form of legislature, the opponents, judges, or the media.
One of the few ways they could still be kept in cheque was the marketplace. It’s possible that they’ll get kicked out. That menace has vanished, owing too much free money to the West and China’s growing dominance in the East.
We assume ErdoÄŸan’s regime is in jeopardy when we watch the Turkish currency plummet. However, this is no longer an issue. What’s the final outcome? So long as every overly confident despot can reject the markets with freedom, the globe will be substantially less secure and, over time, much more deadly.
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