Weekly Hurriyet Column: Saint Valentine’s Day Massacre

Below is  my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. As for the title, I am it is history rather than movies this week...

I will have an addendum later today or tomorrow, especially on detailing how you could take advantage of my lira scenario, but I should out front that I found out today that my view is not as contrarian as I had thought: Among the several pieces I read today on tomorrow's CBT MPC meeting, J.P. Morgan's is the most similar to my views. I like their argument on extra liquidity, but although I did not verify this, it seems their measure only considers daily stock of OMOs. They should have also penciled in the unsterilized FX buying. 

As for the implications of a rate cut tomorrow: Master YesilAODA (I am a padawan compared to him, especially in market matters, and his last name means GreenRoom, so the Yoda comparison isn't that bad after all) also thinks that there will be a massacre of the lira if the CBT cuts rates tomorrow, as he highlights at the end of his Finansonline article today (in Turkish).

That's all I have to say until the addendum, so on to the column:

Technically, it would not be Saint Valentine’s Day massacre, unless you have decided to inhabit the uninhabited Baker and Howland islands.

Other than these two atolls fourteen hours behind Turkey, the Central Bank of Turkey’s, or CBT’s, rate decision will come the day after Saint Valentine’s Day. Moreover, the lira’s massacre would have materialized only if the CBT were to cut the policy rate again and signal of more cuts to come.

The Bank is unlikely to follow that route, as the conditions that justified its foray into the unconventional policy mix of cutting the policy rate and increasing required reserve ratios have changed significantly. For one thing, the “wall of money” into emerging markets that started with the Fed’s Quantitative Easing II, and prompted the CBT to act, is slowing down sharply.

This means that capital inflows are likely to become selective, and I would expect to see some differentiation between countries with current account deficits and surpluses. The lira, the currency of the archetypical deficit country, is likely to feel some pressure.

Besides, the Bank has been quite successful in weakening the currency, although I am not sure it is the result of its policies, or what I deem as constructive ambiguity, i.e. confusing markets on the direction of monetary policy. The lira has depreciated around 10 percent against the dollar-euro basket since November. To try to weaken it more by cutting the policy rate could lead to a sharp correction.

Inflation does not paint a rosy picture, either, even though it is at a historical low. Even without reversing base effects, the inflation outlook is quite challenging, thanks to the possibility of pass-through from import and producer prices as well as the upward trend in global food and energy prices. In addition, demand pressures are building up, as the latest industrial production figures confirm.

Perennial optimists still believe that the government will support the CBT with tight fiscal policy. The January budget, to be released on the same day as the rate decision, could give them false hopes, if last week’s cash budget is any guide. But counting on fiscal policy before the June elections, especially given that the ruling AKP is aiming for constitutional majority, would be unrealistic.

Adding all this together, you realize that it would make sense for the Bank to put a stop to the rate cuts. However, despite some claims otherwise, the full effect of the policies on credit has yet to be felt. For one thing, the Bank’s latest reserve hikes won’t be in effect until Friday. Besides, when taken in conjunction with the rate cuts, the net effect of monetary policy so far is only a slight tightening.

Without additional support from the banking regulator or the government, reserve hikes of at least a couple of more percent would be needed for loans to decrease meaningfully, especially if the Bank would continue with providing liquidity through auctions and unsterilized foreign currency interventions. The CBT would then probably start hiking rates during the second half of the year.

Therefore, without ruling out some more weakness in the short-term, the lira’s prospects look good over the longer run. Interestingly enough, markets have not fully priced in this policy shift at the moment. Longer-maturity dollar-lira bets look especially attractive, and several, like dual currency deposits, are accessible to the average investor. In fact, I will have got some as you read these lines.

But that doesn’t mean you should, too: Doing exactly the opposite of what economists are saying, especially of those with little market-savvy like your friendly neighborhood economist, is often a great strategy.

Emre Deliveli is a freelance consultant and columnist for Hurriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com.

More on CBT's success

I guess I am not the only one who questions the claim that the CBT's new policies are already taking their toll on deposits and. Reader R.Mutt (love the wordplay, R.Mutt==armut is pear in Turkish) who has her own Economics blog, although not yet in press, wrote the following as a comment to my post on whether data defy CBT doubters:

Mr. CrazyParent,


I think you have been way too courteous with Emma Hanim. In my opinion, she deserves nothing but a good “Ottoman” slap on her butt with that ridiculous analysis. How can anyone, for God’s sake, claim that the average maturity of Turkish deposits has increased in this very short time span? For one, the Turkish monetary statistics are notoriously unreliable, especially during year-ends when banks do all sorts of tricks to inflate their asset sizes. One of the ways they achieve this is through establishing back-to-back inter-bank deposits. (During the last week of 2010, those deposits have increased by an “unbelievable” 35%, and then somehow (!) deflated to their original levels.) The other point is that it is almost an insult to Turkish depositors to think that they will be lured by a few basis points increase to put their money into longer maturity deposits, especially when the exchange rate is so volatile. As you mention, the credit side of Emma’s analysis is even more ambigous. She mentions that “three weeks ago, total lira loans fell 1.3 per cent in one week”, but somehow forgets to mention that just one week before that, they increased by an even more remarkable 2.2 per cent!

What is almost certain (out of this ambiguity) is that in order to be successful in curbing bank loans, CBT will need to raise required reserves at least 3-4 per cent more.

Crazyparent:):):) I love good old TGI Friday humor:) (that's when the reader sent this comment). But if I have any say in this, I would prefer Maddervish:):):). Anyway, the reader is perfectly right; I guess being called "ukala", "HBB" (her boku bilen) and "with an inflated ego" by my perennial spammer have made me a bit too careful with my criticisms:)

She is also right with her comments. Incidentally, I am continually visited by local bankers because of my moonlighting interests. When they hear I am a washed-up economist, they ask me my opinion of the Turkish economy and CBT policies. After teasing them that their local economist, whether it be Selim, Cevdet or whoever else he may be, would be pissed off if he heard they are asking the opinion of another economist (for some reason, banks have not been able to figure out how to make their economists accessible to the branches; I mean, I do not expect them to visit the branches every day, but how difficult could it be to have their reports forwarded to all the branches and prepare short recorded commentaries for the branches to listen into?- I know of just a couple of banks who do these, but enough of that, I am digressing), I also ask them a couple of things in return: Pricing for my favorite investment/bet of the year (you have to wait a few hours, until tomorrow's Hurriyet column for that) as well as how the Central Bank's policies are working out. The impression I have got is that R. Mutt is right: Deposits have lengthened only marginally until now.

As for R. Mutt's argument that required reserves would need to go up by 3-4 percent for the CBT to succeed in curbing bank loans: She may be right; I just don't know, but I am sure that more hikes are called for! I am working on credit demand and supply functions, and so far I found that a one unit increase in the interest rate decreases credit stock by 0.1 units. This is way too primitive to be reported. I have yet to incorporate the effect of liquidity on credit and the relationship between reserve requirements and interest rates. After all, reserve hikes work their magic through decreasing liquidity as well as (at least as the CBT hopes) increasing the lending rates and deterring credit. But I would say at least a couple of more percentage points hikes are needed, and if the CBT continues to provide liquidity through auctions and unsterilized FX buying (I said interventions in tomorrow's column, but it is not really intervention, I just did not want to use the word "auction" twice), even 3-4 percent may not be enough.

Anyway, my thanks go to R. Mutt for an excellent explanation on the ways of Turkish banks...

On Turkey's output gap

A reader has written the following as a comment to my post on industrial production and Turkey's output gap:

I disagree with any of the "rapidly closing output gap" or "overheating economy" arguments. Industrial production constitutes only 30% of the total economy and the correlation does not necessarily imply causality as you know it better than I am. The diffusion effect of industrial sector dynamics to services sector may take more time than you expect. Moreover, backward linkages may not be strong as much as you think. In order to comment on a gap, one has to specify a correct reference point, which is the "potential output" in this case. Given the developments in Turkish economy over the last decade, I think CBT's "negative output gap" argument might have a more profound significance. Let me put it this way: Turkish economy would have grown by 60% since 2003, if the real GDP had increased by 6% each year. However, by the end of 2010, Turkish economy is estimated to have grown by 45% since 2003. I believe this could be one reason that why Turkish economy might still has a negative output gap.

First of all, I should thank the reader for illustrating so well the case against the rapidly closing output gap. All her arguments have a merit, but let me add one footnote: Indicators other than industrial production are signaling overheating as well: For example, have a look at the demand indicators my good friends at Turkey Data Monitor have compiled:

The picture does not change if you look at it in a quarterly format:

At the end of it, as this argument boils down to what Turkey's potential output/growth is, and as a corellary what the Turkish NAIRU is. I have discussed both issues quite a few times in the blog, for example, see here and here.

But the reader's comments illustrate that there is quite a compelling case, as argued by the CBT, that the output gap has a long way to go. I don't buy it, but the case is still there!...

How successful is the CBT?

I have been burning a lot of brain cells of late on whether the CBT's brave new policy mix has been successful. While passing judgment based on data is not straightforward, the other domestic and global events make it difficult to attribute this success to the Bank's policies alone. It is therefore better to address the question in two steps:

Do Turkey data defy the doubters?

Emma Saunders of the FT's moneysupply blog thinks so. By looking at the most recent deposit and credit data, she concludes that deposits are lengthening in maturity and credit is slowing down.

With deposits, she is right that there is slow tendency towards longer-maturities, but that is nowhere near the levels the Bank would like. With credit, I am less confident: While Emma highlights a week where credit fell sharply, credit data is notoriously volatile.If you look at moving averages of the weekly credit growth, you don't see definite proof of a slowdown, just some moves in the right direction:

Besides, it is way too early to pass any judgment on whether the CBT is achieving the desired effect in deposits and credit: The latest reserve hikes won't be in effect for a week or so, and even then you need time for the effect to work its way into prices at first (i.e. deposit and lending rates) and then quantities (deposit maturities, and loans). So I would say that we just have to wait and see:

You could of course argue that, at least from capital flows and recent bout of weakness of Turkish assets, the Bank's policies are working. Again, a picture is worth more than a thousand words, so I have three thousand words of material:

First, foreigners' stock holdings, from Central Registry Agency:

Then, non-resident bond holdings:

And finally Turkish asset prices:

So there are some results, at least in terms of slowing down hot money and weakening the lira, despite lack of complete evidence that credit is slowing down. Therefore, while we could not say that Turkey data defy the doubters, they do not defy the believers, either.

But the question is to whom the results should be attributed to, to which I turn to now:

Whose success?

If we deem the Bank successful on the capital flows and asset fronts, it is not given that the success is solely due to the Bank's policies. It is important to note that this is a time when for several reasons, ranging from the reemergence of emerging country risk thanks to the events in Tunisia & Egypt to perception of saturation in EMs and the rising US 10-year Treasuries. It is very difficult, if not impossible, to separate these different effects.

But even if you could attribute some of the movement in Turkish hot money and asset prices to the Central Bank's policy, say by controlling for EM flow data from EPFR (see picture below, from an excellent presentation by Nomura) or EM market performance, it is still not clear how exactly the Central Bank policies are working their magic.

For one thing, after all the columns I have been reading, both in the domestic and foreign press on CBT policy, as well as my own chats with foreign journalists and meditation/brainstorming, I have convinced myself that a significant part of the CBT's success is emanating from what I described as constructive ambiguity in my last Hurriyet Daily News & Economic Review column: Markets got confused on what the CBT was achieving. This uncertainty on the direction of monetary policy, in turn, seems to have scared quite a bit of hot money away.

To illustrate this point, two well-known economics columnists were more or less making he opposite points on Turkish monetary policy in their columns in Turkish daily Radikal on the opposite pages early this week. If economists following the Turkish economy can't agree, it'd be natural to expect some confusion in markets as well...

Turkey through The World's eyes

Following this morning's post on a view of the world through a Turkey economist's eyes, here comes the exact opposite relationship: Turkey through the world's eyes. But before you go on, have a look at this FT op-ed that argues for an increase in the Bank of England policy rate. Just replace all the "England"s with Turkey and "hold rate" with "cut rate", and this could easily be passed as a piece written on Turkey... Man, I AM really starting to see Turkish monetary policy everywhere...

But coming to the matter at hand, the Central Bank's policy has been getting a lot of attention of late. For example, Reuters recently interviewed Durmus Yilmaz (also covered by the Guardian), and Harvard econ. professor Ken Rogoff, former chief economist of the IMF, recently praised the Central Bank. And Emma Saunders, blogger at FT's moneysupply blog argues that the Central Bank's policies are working, a topic to which I will return to either later today or tomorrow.

As a byproduct of the interest in the Turkish economy and monetary policy, I, as a Turkey economist writing in English, have been in demand of late as well:)- The previous week's column was inspired by freelance journalist Simon Roughneen, who had contacted me for a piece he was writing for the Guardian. And I had a long phone chat with a Dow Jones reporter also doing a piece on Turkey- I am keeping her name for the moment, since I did not get her permission to disclose it, but I'll link to her article once it is published.

The impression I got from all these pieces on Turkey and my own chats with foreign journalists have made me confident in my constructive ambiguity idea I mentioned in my last column: That at least part of the success of the Central Bank's success is because of the confusion it has created in markets. But I am getting too far ahead: That is the topic of the upcoming post I mentioned above.

The World through a Turkey economist's eyes

I just wanted to share what some pieces I stumbled upon during my morning news-reading made me think:

British banks agree to lend more to small businesses in exchange for certainty over future regulation. Maybe, the Turkish regulator has to do exactly the opposite, less lending in exchange for policy certainty:) And just as I was becoming critical for the lack of fiscal support for the CBT's measures (and the Bank's somewhat surprising complacency regarding that), Brazil tightens fiscal policy to curb inflation and prevent overheating. The article notes that the budget is still growing in nominal and real terms, and quotes Barcap chief economist for Brazil underlining that there are no expenditure cuts. It seems that economists will have to wait and see if fiscal policy will indeed be supportive of monetary policy, but what we see in Brazil is much better than what we are seeing/likely to see in Turkey...

Interestingly, as you can see above, I have started to see everything as applicable to Turkish monetary policy. Maybe, I should really see somebody:)...

What Exchange Rate?

I recently got the following question from a reader:

I have a question. I am a little confused when I read about the "strong Turkish Lira". In 2003, the dollar was about 1.45 TL and in 2008, right before the crash, it was about 1.20 TL. Now it is around 1.58. What am I missing??

The question is: Which exchange rate? As a an investor, the reader is interested in the nominal exchange rate (and the return on asset she has invested), which you can see below:

But in terms of the country's competitiveness, the relative rates of inflation matter as well. That's the concept of the real exchange rate, which adjusts for the inflation differentials between countries. As you can see, it then matters which countries you are comparing Turkey to, and the Central Bank computes RER indices comparing the country to the whole world, developed countries, or developing countries:

Note that purchasing power parity and The Economist's Big Mac index are variations of this concept.  Note also that until of late, Turkish inflation was well above many of its peers, and it is still above the developed world. And most of the RER appreciation, as a result, was coming from the inflation differential rather than the nominal exchange rate. That's why many economists, including yours truly, have argued that the best way of increasing Turkey's competitiveness sort of structural reforms is to keep inflation under tab.

But the big question of the nominal and the real exchange rates is the following: What is the equilibrium value of the exchange rates? In other words, what is the fair value of the lira? There are many different methodologies, and I regularly use (although never at the same time) never less than half a dozen. 

So the reader is after all right on questioning the "strong lira". But that was before the recent bout of weakness. Although I have not done my calculations for a while (lack of incentives, when no one pays me to do it), the analyst reports I have been reading, as well as my own intuition, tell me that the lira is not "that overvalued" anymore...

Ne kapanmaz output gap'mis...

Sorry for the Turkish, but it does not really translate well into English- it literally means "what an unclosable output gap", and I am saying it in reaction to today's release of December Industrial Production and the CBT's argument that the output gap still has a long way to go:

If you are interested in reading more, have a look at this Citi note. Incidentally, they make the same points about fiscal policy I made in yesterday's column, in case you are thinking I am the lone ranger...

Preview for the addendum to the Hurriyet column

Since I have a very early flight tomorrow morning, I will not be able to do the addendum to my latest Hurriyet Daily News & Economic Review column that I had promised until tomorrow night or so. But in the meantime, let me just sketch out my ideas. 

At the heart of Central Bank's policy strategy lies the banking sector. This is so because even if hot money comes to a virtual halt, the current account deficit will continue to soar if banks continue to lend- that's when we crash-land, meaning that either output or the exchange rate will end up adjusting very strongly, probably the latter, at least at first. Moreover, if banks do not adjust their balance sheet in accordance with the CBT's simultaneous control of the price and quantity of liquidity, the market interest rate will be different from the policy rate. That is something which the CBT can tolerate, to some degree at least, or maybe even favor, as I explain below. But then what is the point of cutting the policy rate?Actually, there is a subtle point, which I turn to next.

What changes would I expect to see in the banks' balance sheet because of the CBT's policies? Let me start with the FX side, as it is easier: For one thing, as a direct result of the CBT's policies, banks' FX claims from abroad should have fallen. On the domestic front, there has been some retail sell-of in the past two months, so in accordance with this change in the banks' balance sheet FX position, their off-balance sheet positions should have decreased as well- this phenomenon is not recent; banks' on and off balance sheet FX positions are exactly mirror images of one another.

At some point, this need for FX liquidity would make banks turn to receiving cross currency swaps- or at least unwind payer positions- does not make sense to allocate dear FX liquidity to swaps, right? But note that until a few months ago, that was how banks made their balance sheets grow, by accumulating payer swaps on the liability side. Anyway, as a result, FX swap rates would stay low, making sure that the lira does not become an attractive carry currency again. This process would naturally be hastened if the CBT were also to hike required reserves for FX. BTW, this is what the CBT means by a low external equilibrium interest rate.

And since deposits are unlikely to move much, banks could make up for the changes in the liability side by issuing bonds. Bonds are cheaper to borrow for banks than cross currency swaps, so bond issuance will enforce the mechanism noted above. I noticed this when I got Garanti's press bulletin about their latest bond issuance on Saturday, so they receive my blessings for sparking the light bulb inside my head. In sum, you should think about the recent bank bond issuance as part of this game-set...

And last but not the least, there is the CBT providing liquidity on the liability side. This is a typical mustache-beard dilemma, as the Turks would say (it is the mustache if I spit upwards, the beard if I spit downwards): If the CBT continues providing liquidity to the system at the policy rate, banks will not hesitate to make lending out this liquidity. If it doesn't, market rates will be above the policy rate, but maybe this will be good by bringing yet more constructive ambiguity and signaling that, on net, the CBT is tightening.

The problem is that as it is, with the average maturity of deposits only a couple of months,  there is not much difference between deposits and CBT money in terms of maturity mismatch when banks lend the funds. In fact, that's why the CBT would like to extend the maturity of deposits, but with 40 percent of total deposits concentrated in 30,000 accounts over 1 million liras, it is a depositor's world out there, they have the last say in this matter, even after they are appropriately incentivized:) This structure explains why banks have to fight hard for deposits. And if the banks are not able to lower their deposit rates because of competition, they will either have live with lower profits or pass on the reserve hikes to lending rates. BTW, this is what the CBT means by a high internal equilibrium interest rate.

Now, you can see why I am critical of the Bank's communication of late: All this is as complicated as it is, but referring to this convoluted process as simply "dual interest rate to achieve internal and external equilibrium" is likely to make things even more complicated.

So far so good. From what I have written so far, what the Bank is trying to achieve on the FX side seems to be rather straightforward. The lira side is a bit trickier, as it seems that credit may continue to be flowing even with higher lending rates, as it makes sense for banks to lend more. Moreover, with the economy in still recovery mode and confidence signals strong, there is not much support coming from the demand side, either.

Unfortunately, there is not much support from the asset side of banks' balance sheets, either: As they scramble for liquidity, the first to get loaded off balance sheets should be government bonds. After all, government bonds are not as good a deal as credit, especially in the current monetary policy outlook. So we should see some of the recent government bond sell-off get channeled into credit, but that's not what the CBT wants! Uppssss......

Finally, remember that the government is criticized a lot for not enacting capital controls. Just think what in this story would change if there were capital controls? Not much!

This is all me storytelling. In a day or two, I will be do another addendum, where I will provide some figures and charts to support my story. After all, a picture is always better than a thousand words, and I am almost at a thousand words!:)...

Weekly Hurriyet Column: Memoirs of a Governor

Below is  my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. As for the title, another cheesy movie reference...

By the way, the article will make much more sense if you use a Spanish-Turkish/English dictionary to look up all the Spanish names. I deny any suggestion that the characters resemble real-life personalities. It is all pure fiction:):):)

And if you thought it was not detailed and technical enough, I will have an addendum here at the blog in the next 24 hours, where I will discuss the Central Bank's policy using mainly the banking sector's balance sheets and banks' reaction to the policies- because the key agents of the Bank's policies, which will ultimately determine their success or failure, are the commercial banks....

Since I am done with the chit chat, on to the column:

Below is the introduction to the novel I am working on, titled Memoirs of a Central Bank Governor:

“I am glad it is finally over,” thought ex-Governor Tenaz as he walked past the large doors of the Central Bank on Plaza de la Nación.

His term had not started on exactly amicable terms when he was assigned to the post five years ago amidst a mild, at least by the standards of the country, economic and political crisis. His qualifications for this important post were brusquely deemed inadequate by the markets, which assumed he would simply be the government’s pawn.

But time had certainly been on Tenaz’s side: Bringing inflation under control and steering monetary policy deftly during the global crisis that had swept through the world little more than a year after his assignment, he had the hard-earned respect of markets and fellow central bankers alike. He was ready to retire when he was trapped into literally pulling a rabbit out of his hat a few months ago.

“I should have told Virtud that the concept of dual interest rates to achieve internal and external equilibrium was bound to confuse markets”, he thought, as he lighted a cigarette. Virtud, his deputy governor and successor, had a habit of creating new economics concepts out of old ones, in this case the familiar Swan diagram.

Virtud was the one who had come up with the unconventional policy mix of cutting the policy rate and increasing required reserves in response to the ballooning current account deficit. Fueled by rapid credit growth and an overvalued peso stemming from capital inflows, it had begun to threaten financial stability.

The rate cut was supposed to deter short-term foreign money, whereas the reserve hikes would discourage lending. Never mind that this policy would amount to the impossible task of determining both the quantity and price of liquidity at the same time, and as long as deposits were short-term, banks would not mind borrowing from the Central Bank to extend credit.

It was true that as Virtud argued, they did not have much choice: The government and the banking regulator had not enacted any of the traditional remedies such as institutional and structural reforms geared towards increasing the savings rate, higher capital adequacy ratios, or capital controls, as other countries faced with the same dilemma were doing.

But what still made him blush with anger was that he had stood aside and watched as the government marketed a fairly loose fiscal policy as tight. Embedded columnists had hailed last year’s budget figures as a success thanks to results better than the government’s original projections. “Misleading benchmarks lead to false conclusions,” thought Tenaz. Juan el Bebé, as the economy minister was known due to his juvenile appearance, was one shrewd fellow.

Some economists had protested that the improvement in the budget mainly stemmed from interest expenditures. Others had noted that last year’s fiscal stimulus, once adjusted for the 8 percent growth rate, was almost as large as the previous year’s, when the economy had contracted by 5 percent. “We are lucky they were muffled, but I wish I had not stayed so complacent,” he sighed.

The good thing was that the Bank looked successful, although through some sort of constructive ambiguity: Confused by the direction of monetary policy, hot money had evaporated. It was even too successful: At his last rate-setting meeting, they had worried about the possibility of a sudden stop in capital flows, which would crash-land the economy. And inflation was creeping up due to the weak peso.

But they were all Virtud’s problems now. Governor Tenaz, or rather ex-Governor Tenaz, was going fishing with his grandson that afternoon.

Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com.

Turkey - unexpected sharp drop in inflation

I have had another hectic week and yet another of my prolonged illness episodes. As I am cleaning out my inbox, I came across a note with the title above- from a European bank....

That inflation would fall to below 5 percent by February was known for several months, and many economists, including yours truly, have mentioned it. If anything, Wednesday's January inflation turned out to be higher than expectations.

One of the themes I have been considering of late, and will mention in tomorrow's Hurriyet Daily News & Economic Review column, is that the Central Bank is confusing markets on purpose, i.e. it is using some sort of Kissinger's constructive ambiguity. I guess it should not be too difficult to confuse the economist who thought the drop in inflation was unexpected:)....

More on Turkey in the MIST

Simon the journalist (I just remembered the famous line from As Good As It Gets), who motivated me to write on the topic with his well thought-out questions, just published his own piece on the MIST and Turkey in The Guardian's Poverty Matters blog.

He has managed to touch upon all the big points working for and against Turkey, including some I could not due to space constraints, so I definitely recommend it, not the least because he quotes me as well:)

By the way, reader Flann Myles, in a comment to my Hurriyet column, notes that "MIST, in German, is a (mostly) acceptable substitute for the stronger and impolite..... Scheisse." And here's my answer to him: "In Turkish, MIKTir is the sort of polite way of saying f--k off: The original word is written with an "s", and the idea is that it is somewhat softened when you replace the "s" with an "m":):):)"

Not particularly stellar, but at least a double single

As loyal readers would know, I have made a habit of tracking how well-read my columns are. Today's repeats the pattern of the past few weeks by barely putting me in the top 10 late afternoon:

I casually checked my performance while having sushi with a friend (Yep, that's how sick I am! And after all, I have an inflated ego that, despite being continually deflated during the past weeks, just refuses to go away), and I was as high as number 8. Not bad, but a far cry from the continuous top threes of the last month. But at least, the comments seem to be flowing again:

As you can see, I made it to the most commented list after a long hiatus...

Roubini Post: Houses of BRIC and MIST

This post already appeared in Hurriyet Daily News this week; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around...

There is also an large addendum over at the blog, which includes some additional points I couldn't fit into 600 words. And it turns out the timing of the article couldn't have been better: Jim O'Neill/Goldman Sachs Asset Management published today a strategy paper titled, "It is Time to... Re-define Emerging Markets", where they explain their thinking about the MIST. Since it just dropped to my mailbox, I have not had a chance to read it yet, but I'll do so soon and plan to do a blog post about it, which I will probably submit to RGE Economonitor as well.

Chart of the day

Compliments of Farooq Muzammal, Head of Foreign Exchange & Precious Metals @ MAREX Financial Limited, comes this chart...

Now, I am having trouble determining the direction of causality; I mean are these guys living with their parents because the economy is f---ed up, or is the economy f---ed up because they are living with their parents?:)

Weekly Hurriyet Column: Houses of BRIC and MIST

Below is  my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. As for the title, another cheesy movie reference- House of Sand and Fog- I am quite pleased with my find...

You might have already seen the addendum, which was posted late Sunday night, so I can jump straight to the column:

 
 

As your friendly neighborhood economist, I find it my duty to respond not only to all readers’ questions, but also to requests from fellow journalists as well. So when Simon Roughneen, a freelance journalist doing a piece on the Turkish economy for The Guardian, contacted me with three well thought out questions, I had to respond.

While I address his other questions over at my blog, Simon’s main question on the Goldman Sachs’ new acronym definitely deserves some thought. To quote him, Jim O’Neill, chairman of Goldman Sachs Asset Management and formerly the bank’s Chief Economist, recently characterized Turkey as one of the four ‘MIST’ countries, his latest sound bite to describe the next big players, after the BRICs, among the world’s “emerging economies,” as he sees it.

Simon would like to know what I think of this as well as “the pluses and minuses inherent to the Turkish economy that could underpin or undermine O’Neill’s idea”. Before I go on, I should applaud him for correctly grasping the Goldman proposal: The Financial Times, as well as many other newspapers and all the Turkish media, wrongly thought that Goldman was expanding the BRIC group.

As O’Neill explains in his latest research note, that is not the case: Brazil, Russia, India and China “are in a league of their own within the changing world and, while there are more countries that should be regarded as Growth Markets, there are none that can be regarded to be as strong as them.”

Although I am all for cheesy titles paying homage to movies in my columns, I hate acronyms that result in generalized groupings, as they tend to ignore the differences between these countries. For example, it is often ignored that China is bigger than the other the BRIs combined, and that the BRIC success story is largely a China story.

It is also important to consider the great vampire squid’s motivations: I have always wondered how much of the relative outperformance of the BRICs after the coinage of the term by O’Neill was due to Goldman’s marketing efforts rather than to these countries’ sound fundamentals. But BRICs have been underperforming other emerging markets since the crisis, so Goldman may be thinking it is now time for a new idea.

But leaving these technicalities aside, it is worth considering whether Turkey could be the next big thing. That would require us to look beyond the monthly data flow to longer-term considerations. There are indeed many things working in Turkey’s favor. For one thing, it is a large economy, which is a necessary condition for making it into O’Neill’s list. It has a young, although poorly educated, population, and it is a domestic consumer-led economy.

But Turkey’s largest weakness is in the area of reform. The government could not capitalize on the global crisis the same way it did on the 2001 domestic crisis to enact the reform agenda. On the contrary, the feeble attempts at reform stalled after the 2008 crisis. As a result, while the country has sound macroeconomic fundamentals thanks to the earlier reforms, there are serious fault lines in the microeconomic, institutional and structural landscape.

In this sense, I am surprised at the inexistence of a sound analysis of the new Turkish Commercial Code. My feeble attempts at cracking it have hinted that it is bringing a huge facelift to mergers & acquisitions and the workings of capital markets, two areas in need of reform. Without such changes geared toward facilitating ease of doing business, I find it hard to buy the Turkey story.

But then again, it might be wiser to take the word of Jim O’Neill as an economist: After all, he once attempted to buy Manchester United, whereas I can barely afford my Beşiktaş season pass.

* Emre Deliveli is a freelance consultant and columnist for the Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com.

Addendum to Hurriyet column, Houses of BRIC and MIST

OK, I guess this is not a first: I have written an addendum before my Hurriyet column was published before. In fact, as I am writing these lines, there is just a minute to the publication if the column, and by the time I finish this email, it should be on the Hurriyet Daily News & Economic Review front page so that I will be able to hyperlink it.

Anyway, I would like to add one more point to the reasons behind my distaste for acronyms like BRIC and MIST. Not only do such acronyms imply that these economies are alike (which they are not), they also implicitly state that they are decoupled from the developed world. As John Auters of the Financial Times has argued recently, the crisis was an aberration. Leaving that exceptional episode aside, the assets of these countries continue to mimic those of developed countries. So from an investment point of view, argues Auters (and I tend to agree with him), you are not getting much in terms of diversification by investing in these countries. It is better to pick based on individual countries or sectors. For example, if you think oil prices will skyrocket, Russia is a better bet than Turkey, right?

I would also like to share Simon's other questions and my answers:

There has been a lot of talk among foreign policy wonks about Turkey apparently drifting “east” and away from decades-old alliances with the west – with the Iraq War, EU accession difficulties cited as deterrents from the Turkish side. Does the recent opening of the first Islamic investment fund signify something similar in economic terms?

"I would rather see it as part of efforts to make Turkey a regional finance hub: But as I wrote some time ago with a friend, there are huge institutional deficiencies we explained against that happening."

But I would like to add to my original answer that this is one of the most common questions I get from foreign journalists. I guess this Islamic investment thing has got much more attention abroad than at home.

From a ‘development’ and ‘equality’ viewpoint, what has been the impact of economic growth on living standards, wages, regional and class differences inside Turkey?

"This is a huge point: AKP's success at the polls should be (but it is often not) tied to their success at increasing the living standards of the lower classes. For some weird reason, you don't see it that well in standard inequality and poverty indices, but two economist friends managed to capture that in a research note. I refer to their work in a column. If you are interested, the blog version of that column has a hyperlink to the paper. As I explain there, that's also why addressing Turkey's current account deficit is no easy task."

Many thanks to Simon for the intriguing questions and motivating me to write on the MIST. And before I forget, the other members of the MIST are Indonesia, South Korea and Mexico. In fact, if you choose to refer to South Korea simply as Korea, the acronym becomes MIKT, which I like a lot more, as it reminds me of a certain Turkish word:)...

Roubini Post: Talking Turkey on the Crisis

This post already appeared in Hurriyet Daily News this week; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around...

There is also an large addendum in the blog, which includes some additional points as well as a link to Ferhan's presentation. And if you are interested, Sumru Altug has put her comments on the IMF paper and Ferhan's presentation into a neat little ERF policy note- unfortunately, it is in Turkish...

Addendum to Hurriyet column, Talking Turkey on the crisis

As I mentioned when I posted the column to the blog, I have several additional points to make, so here we go:

First and foremost, Ferhan's presentation, which summarizes the paper I discussed in the column, has been put up to the ERF website. It is a really well-prepared presentation, so if you don't feel like reading 100 pages, definitely go over it.

Second, I exchanged several emails with ERF director Sumru Altug after the conference. It seems that there is no big difference between her "expectations" explanation and my "once bitten twice shy" or "crisis savvy" explanations. In fact, you might see my explanations as a subset of hers, as they could explain the sudden drop in expectations. Other than that, I feel Turkey was a bit more externally vulnerable at the time than she maintains, but that's about it. We both (and the IMF as well, I believe, although I don't think they say it explicitly) believe that the Turkish response was late and muted.

By the way, I don't really try to get to the bottom of this in the sense that I offer two competing explanations: It could be that consumers and businesses are extremely risk-averse when it comes to crises, or that they just know how to deal with crises. This is similar to Sumru Altug's point that agents could be adjusting their expectations rationally (crisis savvy) or irrationally (once bitten twice shy)- actually if you take the standard definition of rationality, once bitten twice shy guys could be rational as well...

Third, it has been brought to my attention that the IMF, in its latest Article IV published back in September, attributes the sharp output drop during the crisis to Turkey’s history of crises, which has made clamping down on spending an automatic response. This is more or less my point. They make this point in particular by looking at the historical volatility of Turkey’s GDP compared to Brazil's. I have no idea how I missed this, as I had read the Article IV, and not as Wood Allen had read War and Peace:)...

But I was nevertheless very pleased to learn that, as the Fund has probably used 90% analysis, 10% judgment to reach that conclusion, in contrast to my 90% judgment 10% analysis (but give me a break, I had half a day to read a 100-page paper and write the column, so I didn't really have all the time in the world). Anyway, if you are interested, here's the link for the report.

Last but not the least, I am totally convinced that despite all its apparent benefits, PowerPoint has profoundly changed the way we listen to speeches: Caner Bakir of Koc University commented on Lorenzo's presentation with a traditional old-school speech, i.e. without a PPT presentation. He made really interesting observations, most of which I only half understood, as I was having problems concentrating to his speech without a PPT presentation to look at! Call it what you like, but now I am sure that PPT has bastardized our conference-listening skills:)...

Reader Question on Credit Cards

Reader "Me" made the following comment to my latest Hurriyet Daily News & Economic Review column:

Greetings Emre Bey! Excellent article once you think about it a bit! I also wanted to know if you had read the credit card article in today's paper??? I just would be so interested in finding out what amount of carryover debt there is. And also how many defaults they are seeing. I still think this would be an excellent topic for you to take on. It might help a few families avoid the credit card crunch. Times are tough everywhere and there is no need for people to get caught up in the credit market if they are educated. Better hurry.

Here's a partial answer to her question, again using the maxim that a picture is worth more than a thousand words:

We have NPL info. as well, but for all loans; as far as I know, they are not differentiated for credit cards... BTW, as the legends say, these are for individuals, as that's what Me was asking. But we have the same data for corporates as well.

While there is a boom in both figures, I find particularly interesting the jump in past-due credit from late to 2008 to late 2009; the crisis effect is apparent there. I guess it hasn't passed tangent after all, contrary to what the PM often claims. But we already knew that, right?

One final disclaimer: Care is needed in interpreting these graphs: Drawing consumer credit for small amounts is very common in Turkey as well, so these figures should always be used together with loan data before jumping to conclusions about consumer patterns...

BTW, here's the article Me was referring to....

Guest Columnist: Suluman the Economist

As you might already know, I have a reader who loves to hate me, who I call my perennial spammer. She contends that I, among other things, have no economic analysis, so to please her, I am offering her a column of Suluman the Economist, who fell into my radar of late after his insightful analysis of Ozan Acar's paper on Turkish credit ratings, which I featured in my Daily News column a couple of weeks ago. This is the column I was mentioning yesterday; I thank reader ubg, who had made me aware of the article in the first place,  for providing the whole thing. But speaking of the perennial spammer, I am also wondering what she has to say after last night's victory against the lazes, as she was arguing a victory against weak Buca did not mean much....

BTW, I did not get permission from Taraf to use this article, so good luck to them if they decide to sue me for that:)- I am not being cynical; according to Turkish law, as I found out during the summer during my "market research" to start up an Econ./Fin. magazine, any published article can be used in full one day after it has been published (I was told this by several journalism professionals, but feel free to correct me nevertheless). So if you want to start jup a good Econ. magazine, all you'd have to do would be to hire a translator and get the Martin Wolf, Paul Krugman,etc... articles:) We obviously did not go down that route, but the magazine project is therefore still in its infancy:).....

Anyway, without, further delay, I present you Suluman the Economist. I highlighted in bold the parts I found relevant, but do read the whole thing. I again will not comment on it, but the leftist f3n3v-fan friend I mentioned yesterday has something to say: "O hiyari dovmek sonra dinlenip gene dovmek lazim."- "We should beat up that "hiyar" (does anyone want to take a shot at translating that?), rest a bit, and then beat him up again.... Now, I am wondering if this is a threat, and if Suluman the Economist filed an official complaint, whether I would have to reveal my friend's name.... OK, I am already drifting away, so here it goes:

---------------

Süleyman Yaşar/Taraf

İşadamları Başbakan Erdoğan'a niye karşı

Başbakan Tayyip Erdoğan “emeği sömürerek zengin oldum diyemezsiniz” dedi, işadamlarını sinirlendi.

Turgut Özal da “sermayemiz yok devlet bize yardım etsin” diyen işadamlarına “yalılarınızı, lüks arabalarınızı satın şirketinize sermaye olarak koyun” dediği için işadamlarını kızdırmıştı.

Çünkü Türkiye'de bazı işadamları zengin, şirketleri zayıftır. Şirketlerinin içini boşaltıp güçsüzleştirirler. Ve devlet yardımı beklerler. İşte bu nedenle Başbakan Erdoğan “neredeyse işçi ücretlerini de devlet ödesin diyecekler” diyerek işadamlarının tutumlarını yansıtıyor.

Başbakan Erdoğan niye haklı? Çünkü 2009 yılında işadamlarına 4,7 milyar lira tutarında vergi indirimi yapıldı. Ödeyecekleri sosyal güvenlik primlerinin yüzde 5'ini devlet üstlendi. Bu üstlenmenin maliyeti 2008'in eylül ayından beri her ay artıyor. İşte bu nedenle 2010 yılında sosyal güvenlik açığı için bütçeden 31,8 milyar lira transfer yapılacak.

Peki, bütün bu paralar devlet tarafından karşılanmasaydı kimin cebinden çıkacaktı? İşadamları, bu paraları, ödemek zorundaydılar. Kendilerine sağlanan kolaylıklara rağmen işadamları, “işçi alın, istihdamı arttırın” denince, bunun serbest piyasa ekonomisine aykırı olduğunu ileri sürüyorlar. Peki, aldığınız devlet yardımları serbest piyasa ekonomisine uygun mu? Değil. O halde serbest piyasa koşullarını ileri sürerek savunma yapamazsınız.

Gelelim bizim bazı işadamlarının serbest piyasacılığına... Statükocu işadamları serbest piyasadan ve rekabetten pek hoşlanmazlar. Hammaddeyi devletten alıp, ürettiklerini devlete satmak isterler. Teşviksiz iş yapmazlar. Yüksek gümrük duvarı isterler. İşte bu nedenle özelleştirmeye de karşı çıkmışlardı. Turgut Özal, “gelin, KİT'leri alın” dediğinde, banka sahibi işadamları “biz almayız” dediler.

Çünkü KİT'lere yüksek faizle kredi verip, KİT'lerden ucuz hammadde alıyorlardı. Böylece “kolay kazanç” sürüp gidiyordu. Özelleştirmeyle bu kolay kazancın kesileceğini gördüler ve karşı çıktılar. Hatta 28 Şubat 1997'de darbe nedenlerinden bir tanesi olarak, o dönemde, işbaşında bulunan hükümetin “KİT finansman havuzu kuracağım.

Artık KİT'ler yüksek faizle bankalardan borçlanmayacak” tezini ileri sürmesine bağlanabilir. Çünkü statükocu sermaye, KİT'ler kredi kullanmayınca, yüksek faiz kazancından mahrum kalacaktı. İşte bu nedenle laiklik gösterileri adı altında, 28 Şubat darbesinin ardından bazı işadamları önemli tutarlarda haksız kazanç elde ettiler.

Peki, işadamları sağcı olarak bilinen Erdoğan ve Özal'la niye çatışıyorlar? Çünkü Erdoğan ve Özal, Müslüman değerlere sahip oldukları için emeğin sömürüsüne karşı çıkıyorlar. Böylece Erdoğan ve Özal emeğin sömürüsü konusunda kapitalistlerle çelişiyor. Aynı zamanda Özal ve Erdoğan kamu ekonomisi politikalarında solcu politika tasarımına sahip iki lider. Çünkü Özal da Erdoğan da kamu harcamalarını “düşük gelir gruplarına ağırlık vererek” yönlendiriyorlar.

Özal'ın “orta direk” yaklaşımıyla pek çok dar gelirliyi konut sahibi yapması gelir dağılımını “dar gelirliler lehine” değiştirmişti. Erdoğan ise “sağlık” hizmetlerinde bir devrim yaparak dar gelirlileri büyük bir yükten kurtardı. Etkin ve ucuz verilen sağlık hizmeti, düşük gelir grupları üzerinde önemli miktarda “ilave gelir etkisi” yarattı. Böylece dar gelirlilerin refahında küçümsenmeyecek bir artış ortaya çıktı. Dolayısıyla Özal ve Erdoğan, kamu ekonomisinde, düşük gelir gruplarına yapılan harcamanın payını arttırarak zenginler lehine çalışan bütçe dengelerini altüst ettiler.

İlk defa Erdoğan döneminde bütçe harcamaları içerisinde “eğitim” harcamalarının payı “savunma” harcamalarının payını geçti. Böylece eğitimde fırsat eşitliğini sağlamaya yönelik önemli bir adım atıldı. İşte, geçmişte Özal döneminde olduğu gibi şimdi Başbakan Erdoğan'ın son günlerde “bazı işadamlarıyla” çatışmasının altında yatan nedenler kısaca böyle açıklanabilir.

Again Suluman the Economist

We are hearing new exploits of Suluman the Economist by the day: Reader ubg notes, in a comment to my follow-up to the travails of Suluman the Economist, that while writing at Taraf, Suluman the Economist claimed that businessmen were in conflict with Ozal and more recently with Erdogan because both leaders were, as pious Muslims, against the exploitation of labor by capital!!! Ubg provides the link, but you cannot read the whole article, as Taraf requires a subscription for that. If you have one, I would appreciate if you could email or post as a comment to the blog the whole article.

I have no comment to add to that; I am simply left speechless! Besides, I need to invite my oxymoronic leftist f3n3v-fan friend to vote for AKP in the elections; he was saying he would vote for CHP at lunch today! I need to save the poor guy from an apparent mistake, which he would not have made in the first place had he been reading Suluman the Economist regularly:)....

Internalizing the flexible exchange rate regime

Ozan Gaziturk, economist at Sekerbank (and the Fernandes of my gang) makes the following keen observations:

The relationship between the exchange rate basket (50% EURTRY, 50% USDTRY) and inflation broke down in April, 2008:

Similarly, the relationship between the exchange rate (USDTRY) and consumer confidence has been broken since the end of that same year:

These are well-known by Turkey economists, but I really liked how Ozan put this all together: He notes that dedollarization is only part of the answer to "why". The main reason is that Turks have internalized the flexible exchange rate regime: Turks do not use the exchange rate for pricing forming their confidence of the economy. But they still trade USD and EUR!

Ozan notes that this internalization was unavoidable, as the exchange rate creeping up did not result in a crisis, but also underlines the oil price shock of April 2008 and the tomato prices later, i.e. supply shocks, as the breaking points in the relationship between inflation and the exchange rate. 

While I would agree with him, I would also highlight the role of the output gap, which decreased the exchange rate pass-through considerably in the crisis and its aftermath.

Yesterday's conference

I couldn't keep my semi-live blogging promise yesterday, but I will probably write about the conference in my Hurriyet column in the next two weeks. In the meantime, let me give you some spoilers:

Loukas Tsoukalis seemed extremely knowledgeable. Francesco Paolo Mongelli gave really good insights, although I had a tough time hearing him, and Aykut Kibritcioglu had an extensive presentation. Finally, ex-Central Bank Governor Sureyya Serdengecti gave very interesting insights on the relationship between economics and politics, in addition to criticizing the fiscal stance after 2006 and refusing to answer a question on current Turkish monetary policy on grounds that this wasn't the time and place to do that- but he did say that he could give an extensive interview to a newspaper (attention journalists!!!) and asked everyone to read what the Bank is writing, listen to what it is saying carefully. This last point seemed very proper, as the lady asking the question said that "she understood that the CBT was raising reserve requirements to curb capital flows":)....

And it was amazing how much the points made by different panelists seemed so similar, even for the ones who had not heard each other. Here are a couple of bullet points:

• European policymakers know what the problem is as well as the solutions. But the crisis is not being solved because doing so involves certain costly decisions. So it is a political decision.
• Turkey during 1994 and 2001 crises offers important lessons to EU policymakers- such as: Central Bankers should not assume government will put fiscal books in order; one successful auction does not mean the crisis is over...

And BTW, Yavuz Canevi, ex-CBT Governor, who was the moderator for the afternoon session, looks a lot like Gene Hackman...

Another dismal performance

Only made it to number 8 (as in 8tas) this time around:

 If I go at this rate, my ego will be invisible soon:)

Semi-Liveblogging (hopefully) tomorrow

I got invited to a conference tomorrow at around 5pm today by the Economic Development Foundation (don't be deceived by the name, they don't have much to do with econ. or development)... I don't think it is very smart to send invitations out to a conference at the end of the workday the day before the conference and expect an RSVP, but I did manage to email back the RSVP while driving on Baghdad (the street, not the town, and please don't try emailing while driving), and the program is very interesting.

For those of you not verse in Turkish, the conference is about the future of the euro and includes quite a few! Turkish Central Bank presidents (I counted three) as well as Turkish and international academics. Anyway, I plan to do a semi-live blog from the conference, meaning that I will wait until the lunch break for doing my post on the first session and the end of the conference for my second post.

By the way, although it says "to be confirmed" (I have no idea what they have to confirm a few hours before the conference), CBT President Durmus Yilmaz is to make the opening remarks, so I will tweet if he has anything interesting to say, such as "I wanna break Erdem's nose for convincing the MPC to cut the rates and secure his governorship even though I had clearly signaled towards a no cut in the past two weeks":):):) I am obviously joking; I have no idea about the internal workings of the MPC...

Improving my Vocab: HBB

My perennial spammer is back with another great comment on my knowledge of football:

Your insights to Turkish football are even better than those on movies; which, as we have already established, are incomparably better than your so-called "ramblings on economics". But allow me to tell you that as an ardent GS supporter, I couldn't really give a toss about your "Black Eagles". This said, to appreciate their overwhelming victory over Bucaspor does of course (?) necesitate the sort of expertise on everything under the sun, which only a few lucky "HBB"s like yourself are fortunate enough to possess.
Congratulations once again!
Your perennial spammer.

Now, we know another reason why my perennial spammer loves to hate me: If her team's new acquisitions are Yekta, Zapata and Stacu (or something like that) and mine Almeida, Fernandes, Simao, she is sure to hate me:) As for her comment on the merits of a victory against Bucaspor, I am asking her to wait until the Laz game Wednesday night, as I had noted in the original post as well- I could have waited to write this comment until after the Laz game, but I am that confident!:)

Anyway, the most interesting part of her comments was that I had no idea what HBB meant. An email to a couple of friends resolved the issue: HBB stands for "her boku bilen", literally translated as "knowing every shit", i.e. meaning smart-ass, wise-ass, cocksure or something like that... A friend wanted to illuminate me further by giving me some examples from the columnist world: Like herbokolog hincal uluc, alles-wieser deniz gokce... Now, now, now... We are not amused, for being likened to Hincal Uluc and Deniz Gokce, except that I would have love to be deft with my fists (or head) as Deniz (although I have not heard of any action from him other than to his ex-wife, except for him raiding the university with a friend once to beat up, literally, a fellow academic who was badmouthing about him and trying to get him kicked out of the university and answering the department head trying to convince him out of it by saying "you can't do that" with "don't tell me you can't do that- say you won't do that) or with my c--k as Hincal (or at least pretending to be, but I am sure he is getting some action, if not only because of signaling theory or herding).

Joking aside, I never claim I am an HBB, just that I know Turkish macro. I have admitted my lack of knowledge several times, most notably on commodities and trading technicalities of late. But nevertheless, although I said the exact opposite above, I am quite amused with all this: My perennial spammer does have a sharp wit, I have to give her that, although I continue to claim that she does not have any clue on what economic analysis is...