Turkey’s central bank has made some fresh moves involving its security maintenance framework, the Official Gazette showed on October 27.

The financial media were—as is now usual when it comes to the country’s new economic team—quick to headline that Turkey has taken some more steps towards “normalisation”. Perhaps the authors of these headlines would like to put themselves forward for a quick quiz, with the entry question being, “What is security maintenance?”.

This is most definitely not a simple case of normalisation.

The supposed normalisation is like a fetish object such as a red apple. It promises pleasure and passion. However, it has yet to produce any testosterone in the bodies of EM traders.

You can see this reality in the USD/TRY rate. It is still heading north. On September 21, the pair once again broke through the horizontal barrier set at the 27.00-level. The latest record high, registered on October 25, is 28.3807.

Turkey’s government has lately been again applying a ‘five/10 kurus (Turkish cents, pronounced as kurush) devaluation per day policy’ in the struggle to stop the slide. As of October 27, the latest daily trench was dug around the 28.20-level, up 3% m/m and 52% y/y.

Looking at the global markets, sentiment remains turbulence-free, despite the latest rise in US Treasury yields (sailing through the 6%s across the curve) that was followed by the rise in the USD Index (DXY) (through the 107-level from the 99s seen in July).

So what’s the latest with Recep Tayyip Erdogan, our old friend the Turkish leader who is supposedly simply leaving his new economic honchos to get on with rescuing the economy, with no interference. Well, while they have been trying to lure Western investors, Erdogan, on the contrary, has started giving those giaours a new serving of blood and thunder.

On October 25, he launched his latest flaming curveball at the infidels, declaring that Hamas is “not a terrorist organisation”.

Three days later, he was slamming his foot down on the gas pedal at his so-called Great Palestine Rally, held at the decommissioned Ataturk Airport in Istanbul.

The team is gathered. Now Israel should think.

“I am talking about the West, which the late Mehmet Akif [Ersoy, a poet, author of Turkey’s national anthem] described as ‘the monster with only one tooth left’ [a quote from Turkey’s national anthem], including America, Europe and all the pawns whose strings are pulled by them,” frothed Erdogan.

The massacre in Gaza should be seen as the work of the West as a whole, according to Turkey’s president, who outlined how the Western world, from its politicians to its media, mobilised to legitimise the massacre of Gaza children, women and innocents.

“Who is behind PKK, YPG and FETO [Erdogan’s arch enemies, “terrorist organisations” that he fights]?” Erdogan asked his audience. And, he received a clear reply: “America.”

“So is Israel,” responded Erdogan.

“We are well aware of the machinations against our country in the lobbies of European and American administrations. We are well aware that institutions and individuals who claim to be liberal, libertarian, free-market, human rights advocates are actually tripping our country up, and we know the intentions behind their actions. Now we are witnessing the same realities in Gaza,” said Erdogan, a man never short of a dire warning.

At the end of the day, do these Erdogan marketing exercises actually mean anything when it comes to business? They are about as meaningful as the PR campaigns run by finance minister Mehmet Simsek as he seeks to convince the global investor elite that Turkey’s economy is not a complete fruitcake.

In April 2024, following the local elections to be held in March, Turkey’s policy rate will reach its peak. The finance industry will then be welcomed in for the rate-cutting party. Even if Erdogan spits in their faces, they will buy his lira papers.

However, Erdogan’s new stage show could create problems for the financial media. It is still parroting the same melody, while Erdogan is changing the song. If they keep promoting Turkey, they may soon be excommunicated.

Those headlines should turn to “Geopolitical risks weigh on Turkey’s outlook”.

Regarding the latest episode of the “tensions with Israel” soap opera, bne IntelliNews noted in November 2022 (when Israeli PM Benjamin “Bibi” Netanyahu held his first new term of office phone call with Erdogan):

“Netanyahu has to regularly kill some Palestinians to remain in power. Erdogan’s gambit is to issue harsh words and yell his ire. It works a treat in relaxing the masses who get angry over the global silence that meets Israel’s murderous actions against the Palestinians.

“'Once he [Erdogan] used to call me Hitler every three hours, now it’s every six hours but thank God trade [between Israel and Turkey] is up,'” Netanyahu said in 2020, describing the IR game between him and Erdogan.

“It was in 2018 when Erdogan expelled the Israeli ambassador after Netanyahu switched the Israeli capital to Jerusalem. In August [2022], Turkey and Israel agreed to once more exchange ambassadors.

[On October 28, Israel’s current foreign minister Eli Cohen (@elicoh1, not the famous spy) said that he had told all Israeli diplomatic personnel in Turkey to return home for a re-evaluation of Israeli-Turkish relations. Rather a lot of the lives of the personnel in question have been spent on planes flying back and forth between Turkey and Israel. What do their kids do about school?]

“In 2002, when Erdogan’s Justice and Development Party (AKP) won the elections in Turkey, Israel was among the biggest supporters of the AKP. It was from 2009 that things turned sour.

“At the end of the so-called Arab Spring, which included a series of uprisings and armed rebellions, amid major public tensions between Erdogan and Israel, all threats against Israel in the region were destroyed. Erdogan particularly served for the destruction of Syria.”

As mere mortals, we watch such theatre play out in the media. In the beginning (unfortunately) was (not) the Word. On the contrary, words (and even the letters in the current mass information age) fly away. Indeed, deeds are fruits, words are leaves.

So, assuming we have the freedom to at least ask it, we can put the simple question: What has Erdogan in fact done to end Israel’s Gaza military campaign?

To end the tabloid part, does anyone have a satisfactory answer as to why Hamas has provided Netanyahu with the opportunity to get comfortable in his post for the first time since he returned as Israel’s leader?

The Islamists do this kind of unexplainable thing. That's right. Erdogan yells at Israel, but serves for the destruction of Syria.

If you mull over some conspiracies about such happenings, Bernard Lewis calls you a Middle Eastern primate in a kind way.

By the way, Turkey’s central bank has terminated the securities maintenance practice applied to banks at a rate of 30% based on the lira-denominated cash loans they extend.

It has also terminated the securities maintenance practice applied at a rate of 30% on securities issued by the real sector and purchased by banks.

It has also changed the commissions on reserve requirements for FX deposits in order to increase the share of Turkish lira through the renewal of FX-protected accounts and their conversion to lira.

If this is not making any sense, do not worry. You are not alone.

Turkey’s policy rate still remains idle on the sidelines, meaning monetary policy is still conducted via macroprudential measures and non-capital controls.

In July, the central bank governor Hafize Gaye Erkan said that there were “more than a hundred” such measures.

bne IntelliNews has been gnawing at his issue for quite some time, advising that “even the treasury departments at Turkey's banks can hardly keep up with each announced move.”

The governor herself is also having problems in counting the number of measures.

“Whilst promising, we view the current pace of monetary-policy normalization strategy as likely to fall short of reviving significant capital inflows until the central bank brings policy rates to a threshold that re-anchors price stability,” Ehsan Khoman, head of EM research at MUFG, told Bloomberg, commenting on the latest “normalisation” announcement.

The yield on 10-year lira-denominated government paper has ‘jumped’ by 1.2pp to 27.1%.

On October 3, the Turkish Statistical Institute (TUIK, or TurkStat) said that Turkey’s official consumer price index (CPI) inflation stood at 62% y/y in September versus 59% y/y in August and 38% y/y in June.

On October 26, the central bank’s monetary policy committee (MPC) announced another policy rate hike of 500bp, taking the benchmark to 35% in line with market expectations.