If the dollar index suddenly began to rise, it probably means that the dollar is about to enter the countdown to the harvest. Affected by this situation, you see that some large and small countries will become leeks to return blood to the United States, and these countries are likely to have inflation, rising prices, currency depreciation, and so on in the economy.
Turkey, for example, has a series of serious economic problems this year, Turkey's national currency, the lira, has fallen 30% against the US dollar in 2021, making it the worst performing currency in the world this year.
The continued depreciation of the Turkish currency has caused the price of food, daily necessities and other commodities in Turkey to rise by about 30% year-on-year, and the inflation momentum in Turkey in October alone was close to 20%, which is more than three times higher than the 6% of the United States. In fact, the depreciation of the Turkish lira is only the beginning of the dollar harvest cycle, and everything has long been doomed.
The countdown to this round of dollar harvests in 2021 has just begun, and Turkey is almost unable to hold on.
In this bad situation, but where the United States slightly pushed a little bit of movement, you can completely harvest Turkey's fragile wine and vegetables, Turkey's current currency is still facing a collapse, can happen such a tragic situation, there are natural disasters, there are reasons for man-made disasters, natural disasters refer to the United States to the world's new round of harvest, and man-made disasters refer to Turkey itself is a bit dead, in these years Turkey it has been using monetary easing policies to stimulate the economy to promote the economy, They promote the employment and economic development within Turkey through a large number of investments, but what they did not expect was that their beautiful economic situation was not yet built, and they ushered in the fluctuations of the United States nearly 30 trillion US dollars, coupled with the high inflation in the United States, as well as the impact of the debt crisis in the United States, etc., so that the economies of many countries around the world have been more or less affected by inflation, and Turkey's currency lira has been seriously disturbed and implicated, basically loose monetary policy. This, coupled with the large inflation problem spearheaded by the United States, has led to Turkey's severely low resistance in response to flooding around the world.
At present, the United States is rushing to harvest the world's wealth, if the Turkish currency is further out of control and depreciating this time, it is likely to make Turkey face the tragic end of Venezuela. Turkey's president, Recep Tayyip Erdogan, is even more open-minded, and in order to stimulate economic growth and investment, it will not hit the southern wall on the road to lowering interest rates and will not turn back. At a time when many central banks around the world are raising interest rates, Turkey has to cut interest rates for several years in a row. According to the IMF's forecast, Turkey's GDP may grow by 9% in 2021, becoming one of the fastest growing countries in the world, but it seems to be useless, and your increase is too strong, which leads to Turkey's hobbi lira also being in trouble.
Since the beginning of this year, the exchange rate of the lira against the US dollar has fallen by more than 30%, in November this year, Turkey's central bank still disregarded the surge in inflation, insisted on reducing Turkey's benchmark repo rate by 100 basis points, which made the dollar against the lira suddenly break through the 1 billion mark, it can be said that it has reached a record high, I estimate that Turkey will not care about stimulating economic development in the future, they should think more about how to stabilize the currency and inflation in the future, which is the most important thing they will deal with in the future.
Some of the economic practices at the second end of the past have made the entire Turkish financial system a great risk in the long run, and it has also made the domestic people very dissatisfied with him, after all, inflation, rising prices, and the people's pockets may not be enough.
So if the Turkish currency continues to depreciate, it may face the following 4 major risks. The first is that it will cause foreign investors to lose confidence in Turkey and thus withdraw. You see, because of the devaluation of the currency, many Turks now don't want to hold the lira anymore, but instead turn to a more stable dollar and euro. Now the Turkish people hold foreign currency deposits account for 55% of all deposits in the entire Turkish bank, more than half, about $260 billion. Then, with the further depreciation of the lira in the future, foreign investors will lose confidence and withdraw from Turkey.
The second is to lead to the continued aggravation of inflation affecting people's livelihood, you want the currency to depreciate, Turkey is now soaring in domestic prices, like we just said that Turkey's inflation rate in October is close to 20%, which is much worse than the United States, and food prices rose by 27%, for those ordinary families how serious the blow, wages did not rise much, the result is that prices are rubbing up.
Many poor people complain that they are about to eat, and that high inflation is a serious blow to consumer confidence in shopping, which will exacerbate the weakness of the currency and will dampen economic growth, and the complaining Turks will certainly have some dissatisfaction with Erdogan.
In addition, Turkey is a country that relies heavily on imported goods, especially raw materials and energy, so the collapse of the lira will undoubtedly increase the import cost of the entire country. At this time, however, the Turkish central bank's domestic foreign exchange reserves are not much, and their room for regulation and operation is very limited, and this situation may become more severe in the future. As some economic experts predict, Turkey may rise to 25% to 30% inflation in the next month or two, which is really not optimistic.
The third is that Turkish banks may become more difficult to borrow money from the international in the future, and Turkish banks are very dependent on borrowing money from abroad to provide funds at home, and once the mood of these lenders in the international community has changed, it is likely to bring more pressure to Turkey's domestic financial system, that is, lack of money to spend.
The fourth is that Turkey is likely to be able to repay the debt it owes to other countries in the future.
Remember that in 2018, the lira fell by 15.8% in one day, which caused investors to worry about the Turkish economy, many countries doubted that Turkey was heavily indebted, whether it could repay his dollar and euro-denominated loans, we see that Turkey's foreign currency debt has accounted for 60% of its total debt in October this year, which is much higher than the 39% in 2017.
So as the lira continues to depreciate in the future, turkey's ministry of finance may have a higher cost of repaying these debts in the future, so do you think Turkey will successfully escape from this crisis of currency depreciation? Welcome to leave a message to discuss.