The Crisis Is Turkey

President Recep Tayyip Erdogan of Turkey is finding his dreams of an all-powerful resurrection of the Ottoman Empire falling apart. Qatar has come to the aid of Turkey offering $15 billion in a loan, but keep in mind that the entire issue with Syria began with Qatar proposing a pipeline through Syria to compete with natural gas with Russia. Therefore, it is in Qatar’s best interest to keep Turkey trying to invade Syria. The price will be the pipeline, which we seriously doubt will ever take place.

Erdogan has sent the Turkish economy into a downward spiral for some time. Its soaring inflation has exceeded 100% and rising debt-to-GDP of about 70% under President Recep Erdogan’s regime has been a growing problem.

As central banks pumped money into the system over the past decade, nations like Turkey and other emerging market economies used the opportunity to raise more and more “cheap” debt to boost their productivity. Turkey has attracted capital from Europe seeking higher yields because of the negative interest rates policy of the ECB. Now we have a crisis in Turkey that is also the result of Draghi’s Quantitative Easing that drove capital to Turkey and FAILED to revived the European economy.

Erdogan’s dream of restoring the Ottoman Empire is no joke. It has been European money seeking higher yield that kept him in power. It is curious how those who seek dictatorial power are the ones who dream of restoring the power of empires long since dead.

Erdogan has wanted to recreate the Ottoman Empire just as the dream of the reestablishment of the old Roman Empire as was the desire behind Napoleon and Hitler. The days of Empire Building are long gone and Erdogan has been living in the past. His goal was to expand his country’s military operations in Syria and this, he hoped, would be the first step as with Hitler’s invasion of Poland. However, the lira collapse and the expensive dollar are conspiring against him. On the one hand, Erdogan is attracted to dealing with Russia who is on the opposite side of the game board with Qatar. Erdogan has the free markets moving against him and he is more likely to turn to Russia than the West to retain personal power. Nevertheless, he turned to Qatar because he was desperate for money to retain personal power. If he loses the support of his military, then they will side with the people and Erdogan’s head may end up on a spike. Yet, the financial markets are working against Erdogan and as the crisis continues, Turkey can hardly afford military adventures.