A Turkish lira crisis involving dollar-denominated debt, a current account deficit, and foreign-exchange reserves may seem like an arcane Wall Street concern, right up there with bond-market liquidity and congestion at Teterboro Airport. But Turkey’s economic crisis is anything but. It represents the truly scary financial trends that are keeping investment bankers up at night: the weakening of emerging markets that’s threatening to spill across borders, a massive wave of maturing corporate debt that needs to be refinanced, and the ending of an era of ultralow rates We can now add an even scarier trend to the list: President Donald Trump’s willingness to make things worse. While the U.S. government has historically been a supportive force during financial panics, Trump has been treating Turkey’s economic meltdown like a bargaining chip, one more weakness to be exploited. This shouldn’t just scare Turkey. It should scare everyone.
The ongoing dispute over imprisoned American pastor Andrew Brunson has generated considerable interest in the subject of Turkey’s “hostage diplomacy” – that is Ankara’s efforts to use imprisoned foreign nationals to exact