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Turkey in free fall
Howard Richman, 1/5/2014

Spengler (David P. Goldman) is one of the few commentators on the world scene who understands trade surpluses and deficits. I look forward to his postings. On December 27, he reported on his blog that Turkey is in free fall:

Turkey is coming apart. The Islamist coalition that crushed the secular military and political establishment–between Tayip Erdogan’s ruling AK Party and the Islamist movement around Fethullah Gulen–has cracked. The Gulenists, who predominate in the security forces, have arrested the sons of top government ministers for helping Iran to launder money and circumvent sanctions, and ten members of Erdogan’s cabinet have resigned. Turkey’s currency is in free fall, and that’s just the beginning of the country’s troubles: about two-fifths of corporate debt is in foreign currencies, so the cost of servicing it jumps whenever the Turkish lira declines. Turkish stocks have crashed (and were down another 5% in dollar terms in early trading Friday). 

Don't believe the rosy reports for world prosperity in 2014. On November 24 I explained why world economic growth is actually slowing. I pointed to an OECD report which said:

Reinforced by concerns about growth slowdowns and the sustainability of high external [trade] deficits and political tensions in some economies, large portfolio investment outflows contributed to tighter liquidity conditions, sharp declines in bond and stock prices, and sizable currency depreciations. This was especially marked in Brazil, India, Indonesia, South Africa and Turkey, all countries with large external financing needs... 

I explained that these countries (Brazil, India, Indonesia, South Africa and Turkey) were innocent bystanders who were hurt by Bernanke's foolish way of deflecting the U.S. mercantilist-caused trade deficits abroad. Instead of dealing with the mercantilists, Bernanke caused problems for "innocent bystanders."

This story will continue to play out in 2014 and will worsen the U.S. trade deficit and reduce U.S. economic growth.

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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