The markets all tanked today. And I am told that the reason was the steadily worsening relationship between the US and Turkey. But I have to wonder: So what? Suppose that the US never again did any trading with Turkey--any whatsoever--just how, exactly, would this impact world markets? I truly doubt that much of the world's daily trade is between these two countries.
Either that may not actually be the true reason, or the markets can go down a percentage point based on negative news coverage. It's a psychological effect, not entirely rational.
If the US never did any trading with Turkey then that would create a major rift between the United States and one of its NATO allies. Turkey shares a border with a number of countries but crucially Syria, Iran and Iraq. If Turkey were to turn away from the United States as an ally an were instead to start looking towards Russia or Iran (who would likely support Turkey's ongoing fight against - or oppression of (depending on your point of view) Kurdish nationalism) then that would tend to further destabilise the Middle East which would impact on world markets AND would increase uncertainty.
That is a good analysis. Still, I am of the opinion that Turkey is, at best, a "frienemy" (to use a word coined by Millennials): It is, indeed, a part of NATO--although I am not exactly certain just why--but it is increasingly becoming an authoritarian state; so I truly have no use for it. (If it were to become a part of Russia's orbit, I would simply shrug my shoulders, in total indifference.) As for (next-door) Syria, I very much support the view that the Kurds--our traditional ally--should have a homeland, carved out of Iraq and Turkey. And I would seriously hope that our government would strongly take their side, too.
Thanks.... Turkey's been "interesting" for a long time - certainly well before the break-up of the Ottoman empire and faces a number of internal challenges: The conflict between being a "good" Muslim country (the Sultan was considered the leader of the Islamic faith for centuries) vs. being a modern secular democracy. Kemal Atatürk, the first president of post-Ottoman Turkey was a secularist, Erdogan seems to be the opposite The troubling influence the armed forces have. They seem to have a military coup followed by the installation of a junta on a regular basis The ongoing conflict with internal minorities, especially the Armenians (against whom a genocide was perpetrated) and Kurds (who are either terrorists or freedom fighters depending on your point of view The comparatively secular 1950's and 1960's Turkey was a firm ally of the West and allowed missiles to be installed on its soil - an act that led to the Cuban missile crisis as the USSR sought to retaliate. It would not be out of character for there to be yet another military coup and for Erdogan to find himself out on his ear. Well that's very generous of you, giving away chunks of other people's countries. I personally have very mixed and conflicted views about the Kurds. On the one hand, there's no doubt that they are a persecuted minority. On the other hand Kurdish freedom fighters (or terrorists) have been responsible for the kinds of violence that we in Britain unfortunately had to endure during the "Troubles" in Northern Ireland.
You would have a very reasonable point here--except for the fact that the Kurds have never been accepted as genuine Turks or Iraqis. So they deserve their own homeland.
Msybe the analysts that you are listening to are wrong(?). Turkey is on the edge of an economic/financial crises. The big money is worried that things there will get worse, and spread to the international financial systems.
I suspect that Turkey will, indeed, collapse economically. But I am quite indifferent to that matter. Why, after all, should that suggest a possible "spread" to "the international financial systems"?
Turkey, like every other country in the world borrows money. If they can't pay it back, other institutions will lose money. Also: If inflation causes imported goods to become unaffordable, other countries will lose business.
The first part of your response makes sense--although I do not think that it is a good idea for any country to borrow money. (And yes, that includes the US.) As for the second part of your response: Why should the first lead, automatically, to the second?
Well... In isolation; if a single country is undergoing economic hardship, other countries are not going to be willing to lend to it. That does two things. First, it reduces demand for that currency. That reduces it's value internationally. That automatically creates inflation of the price imported goods. Second, the reduced inflow of foreign money reduces the country's foreign currency reserves. Foreign currency reserves are a necessary component of setting a value for the country's own currency - and - facilitates trade with other nations.
You mean stabilization of exchange rates. Every country that does this still needs to periodically adjust the exchange rates though, so they don't diverge too far from what the natural market rates are. Otherwise it would end up costing them a lot of money or depleting their foreign currency reserves. China is only able to manipulate their currency exchange rates long term because the government has such a large ownership in the economy. They have the revenue (as a percentage of the country's entire trade economy) to do this.
This looks suspiciously like a response based upon the idea of globalism; as regarding which, I have the lowest possible regard...
It's market based. It's just how money works. I am certainly not a globalist. I had to edit that post for clarity (I mean I was talking out of my butt before I fixed it), but when I did, I left out an important point. In these posts where I talk about a 'country', I mean the sum total of its economy. Governments are only a portion of a country's economy. Money has no intrinsic philosophy. It only wants to reproduce or, at worst, be protected. One world government or many individual governments, money only cares which one allows for more money to be made. Sometimes, people want to force their personal philosophies upon money. In those cases, money will just adapt to the circumstances.
Maybe it's wrong, but I look at the value of a country's currency, as being the total of the world's opinions of that country's economy. I think foreign currency reserves are like how a stock investor looks at cash on hand. If the market values a company's business at $1billion, and it has $100million in cash, the market value would be 1.1billion.
Something else we should understand, if the current market exchange rate is 1 dollar to 5 rupees, for example, and another country has 5 trillion worth of rupees, that doesn't mean the country actually truly has the equivalent of 1 trillion dollars. As the country starts unloading all those rupees for dollars, the exchange rate is going to shift. By the end of it all, the going rate might only be 1 dollar to 20 rupees, since the rupees will have flooded the market place and may start being more than foreign buyers want. There's no way the country is going to be able to suddenly trade off 5 trillion rupees for 1 trillion dollars. Static exchange rates should be seen as a microeconomic phenomena, not macro.
Sorry to be the bearer of contrary news, but the market didn't tank Wednesday or any other day in the last, over 5, months. It was a normal correction that kept the trend within the existing boundaries of the trend. Move along; nothing to see here.
Although a correction does not last quite so long--and is not quite so steep--as a true bear market, it does last a bit longer than one day.
Here is an interesting article from the New York Post concerning Turkey: https://nypost.com/2018/08/20/turkeys-been-a-poor-excuse-for-a-us-ally-for-a-long-time-now/
Wait wait wait.... You said the markets "tanked" on Wednesday. All I said was that they didn't. Would you like to see a graph of the stock market for 6 months?
They "tanked for that one day. I am certainly not suggesting that they never have recovered. But, again: They tanked for that one day.
Well, ok. I don't want to bicker over this, but that "tanking" last Wednesday was a loss of about 0.4% A loss of 1% is significant but I begin to consider it a "tank" when the loss is something more like 3% or greater. You may have a different measure of it that you prefer.
If the Dow is around 25,000, a three-percent loss would be a jaw-dropping 750 points! When do you last remember a one-day loss of 750 points? (Even if inter-day trading comes close to that, bargain hunters reliably swoop in, and purchase when the stocks are priced low.)
