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Turkey Faces Massive Currency Fire-Sale As Lira Plunges

Turkey İş Bank Museum in Eminönü, Istanbul
Image by Jwslubbock

As the Turkish Lira continues to plummet, citizens have taken to selling their homes, cars and converting cash into gold. The Lira has lost over 50% of its purchasing power over the last five years.

Dealing with “some of the strictest capital controls on the planet,” Turks are discouraged from purchasing dollars by the government. This has forced many to rapidly switch to other stores of monetary value such as gold, a traditional and popular vehicle for savings as Turkish history has shown.

When President Recep Tayyip Erdogan nationalized the Turkish central bank in mid-June of this year, he gained de facto control over the country’s monetary policy. This move followed suit with the president’s gradual take over of many government institutions.

Managing to avoid a complete collapse, Erdogan used capital controls to bring the Lira to a flatline which lasted for around a month before resuming its overall decline.

Turks are choosing gold over the dollar to protect their assets due to fear of the massive spending, loose monetary policy, and debt being racked up by America during the COVID-19 crisis.

Even with market interventions and reassuring stories about monetary stability coming from the government, the locals’ faith in the lira is on a downward trajectory, reported Coin Telegraph. Inflation is currently at 11.8% and has overtaken the amount of interest offered for savings at banks. One resident was quoted as saying he had bought gold as a safe-haven asset:

“I think it is the best investment right now so I converted my dollars to buy gold, I might withdraw my lira and buy gold with it too, but I am scared to go to the bank right now because of coronavirus.” 

Cryptocurrency is also gaining ground in Turkey along with fears of government regulation of the blossoming market.

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