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CONTAGION: Why Turkey could Gobble Up the World by Lynette Zang

Blog Aug 15, 2018

Many of you are here because you want to understand what’s unfolding and how that might impact you and your family. You want to know how to be on the side that benefits, vs the side that struggles. I’m here to connect the dots and show you how the erosion in the global fiat currency system is forcing a financial system reset and what you can do to protect your wealth and even benefit from the current shift.

Today we need to have a conversation around Turkey, whose lira has plunged 95% vs the USD over the past year. Currency crisis is not new to Turkey, with an average inflation rate of about 38% annually from the 1970’s through the 1990’s and further planned revaluation in 2003 (lopping off six zeros) and the creation of a “new” lira in 2005. 1 new lire = 1,000,000 old lira, according to Wikipedia.

Consequently, Turkish citizens accumulated physical gold to protect their wealth. Interestingly, in April 2017, the Turkish government attempted to entice 3,500t of physical gold held by Turkish citizens, out from under-the-mattress via a sovereign gold bond and gold lease certificates. These two new fiat products were touted as secure and of benefit to the citizens. My bet is that those who converted their physical gold to fiat contracts are not happy right now.

But Turkey is not an island and as the fourteenth largest economy, they’ve had easy access to global debt markets. If that debt were issued in terms of lira, no problem, it could be paid off with cheaper lira. Unfortunately, roughly $450bn of that debt was issued in terms of other fiat currencies, with USD denominated bonds making up a full third of that debt!

Therefore, as the lira dies, that debt becomes impossible to repay.

That is where contagion comes into play. Eurozone banks in Spain, France and Italy are due $138.7bn in debt. $16bn comes due by the end of this year. If that debt is not paid or rolled over, it could cause a global banking/currency crisis because of the incestuous nature of “Universal Global Banks,” like Deutsche Bank, who is connected to every bank and financial institution in the world. They are also insolvent. In addition, global central banks have not “normalized” from the crisis that began in 2007! Can you see how this mix can take down the entire global financial system?

But how would you know? The market volatility index remains near all-time lows, even as markets struggle to maintain current levels. This is critical. If people understood the danger, there would be a run and a market shut down. Everyone would likely loose access to any wealth held in the system. Just as the Turks that turned in their physical gold have discovered.

“Because gold is honest money, it is disliked by dishonest men.” Ron Paul

Many times, today I heard CNBC commentators discussing central banks selling gold to suppress the current spot price of gold. They also said that gold was dropping because of the “strength” in the USD, referring only to the USD vs other fiat currencies. This could impact the fiat spot gold product because IT’S A FIAT PRODUCT controlled by Wall Street.

But in Turkey? In terms of the lira, gold is at all time highs. In reality, physical gold is simply providing its most important function, protecting wealth. I’ll bet those Turks who did not fall for the government scheme are glad they did not believe the lies.

Slides and Links:

https://www.dailysabah.com/economy/2017/04/03/turkey-to-introduce-sovereign-gold-bonds-gold-lease-certificates

https://www.reuters.com/article/uk-turkey-currency/erdogan-tells-turks-to-buy-crumbling-lira-as-trump-turns-the-screws-idUSKBN1KV0WX

https://stats.bis.org/statx/srs/tseries/LBS_D_PUB/Q.S.C.A.USD.F.5J.A.TR.A.5J.R?t=a5&c=TR&m=F&p=20181&i=37.3

https://www.bloomberg.com/news/articles/2018-05-18/why-investors-have-become-skittish-about-turkey

https://www.ft.com/content/51311230-9be7-11e8-9702-5946bae86e6d

https://www.theguardian.com/business/live/2018/aug/13/turkey-financial-crisis-contagion-fears-hit-markets-as-central-bank-takes-action-business-live?page=with:block-5b711ea9e4b0cc3a883712b6

https://www.db.com/ir/en/download/DB_Interim_Report_Q1_2018.pdf

https://www.bloomberg.com/news/articles/2018-08-13/argentina-central-bank-unexpectedly-raises-key-rate-to-45

https://www.theguardian.com/business/live/2018/aug/13/turkey-financial-crisis-contagion-fears-hit-markets-as-central-bank-takes-action-business-live?page=with:block-5b711ea9e4b0cc3a883712b6

https://www.theguardian.com/world/2018/aug/13/we-can-just-pray-to-god-turks-struggle-as-lira-crisis-bites

https://www.bloomberg.com/news/articles/2018-08-13/look-away-from-the-u-s-and-gold-prices-are-soaring-higher

Thumbnail Photo We believe that everyone deserves a properly developed strategy for financial safety.

Lynette Zang

Chief Market Analyst, ITM Trading

Sources & References In This Article

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