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Old 08-15-2018, 04:26 PM
 
Location: Florida
23,658 posts, read 10,849,531 times
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Russia most likely will not bankroll Turkey, but ironically, Turkey--one of our allies in NATO, will be growing closer to Russia than with us.

If Russia does get closer to Turkey, this will probably have implications for Syria and Iran, as well. Trump may actually have real consequences for his actions this time.

https://www.reuters.com/article/us-t...-idUSKBN1KZ132

https://www.wsj.com/articles/turkey-...sia-1534289856

https://fpif.org/an-emerging-russia-...e-middle-east/
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Old 08-15-2018, 05:06 PM
 
11,399 posts, read 4,835,434 times
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Quote:
Originally Posted by ohio_peasant View Post
Dumb question: why are these various emerging market countries taking out debt in US dollars? If I were a central-banker of XYZ country, I would stipulate that if Chase or UBS or Deutsche Bank want to lend to me, they must do so in my native currency. But then again, I am not a central banker.
A sovereign only needs borrow in a foreign currency when the value of its own currency is in question. 'Borrowing' more is really printing more. Exacerbating the devaluation of its already unstable currency.

Chase or UBS or DB are of course not sovereign in the currencies in question. So those banks would need to take their own moneys and exchange for the currencies in question before lending.

And those banks would rather hold on to their own more valuable and secure moneys. So if they do lend, it will be at very high interest rates.

Note that the US never needs to borrow foreign currencies to any extent, part of the power of the USD and then the power of the USA. We only 'borrow' in our own sovereign currency. USD fiat that can always be created at the federal level.
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Old 08-15-2018, 06:18 PM
 
15,803 posts, read 9,998,366 times
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bunch of posts deleted for being far too partisan/political bashing instead of being on topic for the thread and forum.
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Old 08-15-2018, 06:44 PM
 
27,834 posts, read 14,376,131 times
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Qatar just dropped 15 billion in aid to them. Looks like countries are picking sides in things in unusual ways.

https://money.cnn.com/2018/08/15/new...key/index.html
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Old 08-15-2018, 07:25 PM
 
Location: moved
10,043 posts, read 6,110,479 times
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My question above was awkwardly phrased. Take 2...

Turkey wants to borrow 1B Lira. It goes to Deutsche Bank. DB says, OK, we will use our Euros to buy 1B Lira, which we will then lend to you. When the borrowing occurred, that was 500M Euros. Turkey gets its cash, and proceeds to buy tanks and fighter jets. Meanwhile, the Lira crashes, and is now only worth 200M Euros.

So... does Turkey still owe DB 1B Lira, which is to say, 200M Euro; or does it owe the original 500M Euro, which is now 2.5B Lira?

In the first case, DB bears the currency risk. In the second case, it is Turkey. When I buy shares of DB via my European index fund, I bear the currency risk. But I'm just some yokel guy saving for retirement. There is no reason for DB to assume the risk for me. But is Turkey effectively just another yokel? Or not?

In other words, would DB say, "Yes, Mr. Erdogan, you are such a good customer, that we will bear the currency risk on your behalf. So if your Lira goes to zero, our loan effectively becomes a grant." Or would DB say: "We would be happy to lend you Euros and Euros only. You then pay us back in Euros. If your Lira goes to zero, schade, leider ist es Ihre Problem, nicht unsere Problem."
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Old 08-15-2018, 07:39 PM
 
Location: NJ
28,168 posts, read 33,177,160 times
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Originally Posted by greywar View Post
Qatar just dropped 15 billion in aid to them. Looks like countries are picking sides in things in unusual ways.

https://money.cnn.com/2018/08/15/new...key/index.html
its so hard to keep up with all the different conflicts among all the different nations in that region. im trying to figure out why the US is punishing them and what is the end game plan for Turkey. are they a sacrificial lamb or are they just being taught a lesson? maybe they are being pushed and will be broken if they dont give in to the US demands. everything there is sectarian and everything in the US government is done because someone paid for it. trump is probably being pushed to go after them and he doesnt even know the real reason why. now i am starting to think that things will not work out well for turkey in the long run.

i wouldnt expect it to have a major impact outside of turkey though.
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Old 08-15-2018, 09:10 PM
 
11,399 posts, read 4,835,434 times
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Quote:
Originally Posted by ohio_peasant View Post
My question above was awkwardly phrased. Take 2...

Turkey wants to borrow 1B Lira. It goes to Deutsche Bank. DB says, OK, we will use our Euros to buy 1B Lira, which we will then lend to you. When the borrowing occurred, that was 500M Euros. Turkey gets its cash, and proceeds to buy tanks and fighter jets. Meanwhile, the Lira crashes, and is now only worth 200M Euros.

So... does Turkey still owe DB 1B Lira, which is to say, 200M Euro; or does it owe the original 500M Euro, which is now 2.5B Lira?

In the first case, DB bears the currency risk. In the second case, it is Turkey. When I buy shares of DB via my European index fund, I bear the currency risk. But I'm just some yokel guy saving for retirement. There is no reason for DB to assume the risk for me. But is Turkey effectively just another yokel? Or not?

In other words, would DB say, "Yes, Mr. Erdogan, you are such a good customer, that we will bear the currency risk on your behalf. So if your Lira goes to zero, our loan effectively becomes a grant." Or would DB say: "We would be happy to lend you Euros and Euros only. You then pay us back in Euros. If your Lira goes to zero, schade, leider ist es Ihre Problem, nicht unsere Problem."
Turkey is sovereign in the Lira. It needs no foreign bank.
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Old 08-16-2018, 12:55 PM
 
Location: Silicon Valley
5,321 posts, read 2,371,130 times
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Quote:
Originally Posted by ohio_peasant View Post
My question above was awkwardly phrased. Take 2...

Turkey wants to borrow 1B Lira. It goes to Deutsche Bank. DB says, OK, we will use our Euros to buy 1B Lira, which we will then lend to you. When the borrowing occurred, that was 500M Euros. Turkey gets its cash, and proceeds to buy tanks and fighter jets. Meanwhile, the Lira crashes, and is now only worth 200M Euros.

So... does Turkey still owe DB 1B Lira, which is to say, 200M Euro; or does it owe the original 500M Euro, which is now 2.5B Lira?

In the first case, DB bears the currency risk. In the second case, it is Turkey. When I buy shares of DB via my European index fund, I bear the currency risk. But I'm just some yokel guy saving for retirement. There is no reason for DB to assume the risk for me. But is Turkey effectively just another yokel? Or not?

In other words, would DB say, "Yes, Mr. Erdogan, you are such a good customer, that we will bear the currency risk on your behalf. So if your Lira goes to zero, our loan effectively becomes a grant." Or would DB say: "We would be happy to lend you Euros and Euros only. You then pay us back in Euros. If your Lira goes to zero, schade, leider ist es Ihre Problem, nicht unsere Problem."

Well, it's not like when you or I go to a bank and get a home loan that's secured. Banks will assist in bond issuance, where the currency will be stated. A bank may help in the issuance of a bond in any currency, but it gets paid for that. It sells the bonds to those affiliated with it that want the bonds. Most bond buyers do not want said currency risk, albeit all currencies trade at a risk to the relative buying power of other currencies, hence the DAX may have gone up 20% this past year, but it may be flat in USD terms.



That said, there are relatively few people holding Turkish Lira. If I spent the Euro to obtain the lira, I may become a forced buyer if I in turn need to sell the Lira to go back into Euro. So bond holders that are buying debt in a currency they don't need face an additional component of risk. There's still risk of default, but the risk of buying power loss isn't limited to inflation, but also foreign currency exchange risk. There's also fees involved in getting from Euro to Lira and back to Lira to Euro. In some situations, a very weak currency may cease to be convertible and you'll be stuck in Lira...which is why some countries enact capital controls.



Banks that have customers in a region will need these currencies though. If I'm Wal-Mart Turkey (or whatever the equivalent is) I will want some working capital at the ready in Turkish Lira in order to buy from local suppliers and pay the local workforce. I would be interested in getting a return on my money there.



However, with the worlds largest deficit, most countries seek dollars for their value preservation and an opportunity that they will be able to earn said dollars in foreign exchange. (Not necessarily selling to the US, but selling as an export to another country that also has dollars) The entire process makes it easier to keep $100M in USD for a bank rather than $1M is the 200 different currencies around the world and constantly be long/short natural demand levels.



https://www.bloomberg.com/news/artic...n-turkey-bonds
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