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Citing stability risks, Fitch Cuts Turkey's Credit Rating to BB, further into junk territory.

  • Risks to macroeconomic stability have intensified owing to the widening in the current account deficit, more challenging global external financing environment, jump in inflation and the impact of the plunge in the exchange rate on the private sector: Fitch
  • Economic policy credibility has deteriorated in recent months and initial policy actions following elections in June have heightened uncertainty, the rating agency said in a statement
  • Fitch expects CAD to widen to 6.1% of GDP in 2018, driven by higher fuel prices, and in 1H, higher household consumption
  • Fitch forecasts annual average inflation to be more than double the current BB range median, at 13% in 2018 and 10.8% in 2019
  • Outlook on the rating is negative

Heading for Hyperinflation

Turkey isn't close to hyperinflation yet. But the path it's on is a guaranteed way to get there.

Turkey on Venezuela's Path

  1. Erdogan jailed political opponents
  2. Parliament effectively made Erdogan prime minister for life
  3. Erdogan took over the press
  4. Erdogan took over the courts
  5. Erdogan took over finance
  6. Erdogan about to take over the central bank

Hyperinflation Nearly Inevitable

Venezuela did not hop straight into hyperinflation and Turkey likely won't either.

However, if Turkey remains on the same path, which seems highly likely, hyperinflation is the inevitable outcome.

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Advice for Turkish Citizens

  • Prepare for hyperinflation
  • Get your money out of Turkish banks ASAP
  • Convert all existing savings into a basket of US dollars, gold and silver.
  • Borrow as much Turkish Lira as you can
  • Invest it in a basket of US dollars, Gold, and Silver

Hyperinflation is complete loss of faith in currency. It's inevitably starts off as a series of political as opposed to monetary events.

Erdogan has Turkey on that path.

For discussion of the Turkey hyperinflation case and comparisons to other historic hyperinflations, please see Hyperinflation and Mass-Migration Crisis Inevitable.

Mike "Mish" Shedlock