1 Big Thing: The Turkish lira is in a crisis
I think the Turkish lira is now extremely undervalued. It has dropped as much as 20% this week amid concerns that the country won't be able to pay its foreign-currency debt obligations. Today alone, the lira was down as much as 12%. Total losses for the year are over 30% against the US dollar. Now, the lira is trading well below fair value
Why this matters: this is how crises happen. Fair value is meaningless because we are faced with a case of reflexivity. We are in a feedback loop where investor worry about Turkey impacts the currency level, which further frightens investors. That loop can only be broken via decisive behavior from the Turkish government to support the currency with interest rate hikes and put appropriate economic remedies in ...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.