Due to the Corona virus epidemic, the world economy is facing a very serious supply and demand cessation. Governments and central banks are struggling to prevent the recession from turning into a crisis.
Veteran banker Kerim Rota, who has stepped into politics with the Future Party, predicts that the economic effects of the epidemic will compete within each country and that the transitivity of capital will decrease between countries.
Route advantageous saying that countries with adequate foreign exchange reserves, “the usual suspects” as the Turkey, India, South Africa, and countries like Argentina would be affected negatively, he said.
We talked with Rota, who stated that the situation will result in more unemployment and poverty for these countries, and the effects of the process called the “Corona crisis” on the economy.
– How do political leaders and central banks deal with the economic effects of this crisis?
The outbreak caused domestic demand, foreign demand and supply chains to stop simultaneously all over the world. Every country will struggle against the economic effects of this epidemic. Meanwhile, the transitivity of capital among countries will decrease.
This means that each country struggles with its own resources. Countries with high foreign exchange reserves or budget surpluses are more advantageous.
while foreign savings and domestic consumption-dependent economies such as Turkey will be affected more negatively. Unfortunately, if the effects of the Corona epidemic last long, this will result in more unemployment and real household income loss.
Kerim Rota
WILL PROTECT FINANCIAL FENCE
– Did the great crisis of 1929, the 2008 great recession followed by the third crisis?
I think it is the first time in modern times that both foreign demand, domestic demand and supply and supply chains stop all over the world at the same time.
It is impossible for any country to endure such a “sudden stop” financially for a long time. Over $ 2 trillion in fiscal expansion packages in the U.S. passed parliament.
With this money, dollar liquidity will increase gradually in the USA, but due to the collapsing economic activity, it will not go beyond the borders of the USA and will flow to the US bonds. In a sense, the US will protect its territory by financial fence.
– So, which countries does the liquidity shortage affect the most?
If we divide the countries into three categories, the first is those who have a port to take shelter in this tsunami in the short term, that is, those with sufficient foreign exchange reserves or reserve coverage. Like China, Russia, Saudi Arabia…
The countries that could get the swap limit from the FED by giving their own money even though the second category reserve is not very high. Brazil, Korea, Mexico are now in this category.
In the third category, there are those who are low in terms of reserve debt and who do not have swap opportunities. These countries are in the final year of the financial world “usual suspects” Turkey, India, South Africa, countries such as Argentina.
A reputable program is required to overcome this crisis
– How can Turkey afford this crisis, how can you create resources?
All countries including Turkey will increase the money supply primarily local. It will take full care of the citizens’ health, then prevent them from losing their jobs while they are at home, support those who lose their jobs, keep their supply chains healthy, and protect their small trades, SMEs, companies and banks.
These all mean money. The important thing is to make this money supply within a reputable program in order not to be an inflationist.
MB reserves were spent not to exceed 6 TL
– Does the Central Bank’s low foreign currency reserves cause problems in this process?
In the last year, 40 billion dollars were spent from the MB’s reserves so that the exchange rate does not exceed 5.60 lira or 6 lira. $ 40 billion was standin ‘at the checkout today Turkey would win a significant period of time.
On the other hand, 40 billion TL reserve fund accumulated for 15 years was also spent in the election year. With this money, half of the employees with SGK for 3 months could be given a short-time working allowance close to the minimum wage.
It is inevitable that an increase in money supply without a transparent management that spends its inefficiencies will trigger other problems.
