Some readers probably don’t realize that Turkey is one of
the larger economies in the world. The largest in the Muslim world, except for
Indonesia, and that depends on which stats you read….they are neck in
neck. But Turkey has a problem, and it
may soon be the world’s problem: debt.
Lots of it. A quarter trillion dollars in government debt, but almost
1.5 trillion dollars in corporate debt, most of which is owing externally. I
don’t think it’s going to be paid. Turkey’s debt, not counting consumer debt, is
over twice its GDP. The problem is compounded by Turkey’s aversion to accepting
IMF help. From what I can see, the attitude seems to be “screw the west…they
got us into this mess by lending to us.”
If Turkey defaults, the contagion will spread. Banks who lose will want
to sell other assets….fast. There may not be buyers in some asset classes, and
that will then freeze those markets so that the panic selling will spread even
further.
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