Beware the domestic borrowing rates…

As the new week begins, it looks like the Fed’s FOMC meeting will be the top priority item on the agenda.

This will be Yellen’s final meeting before successor takes over as chair on February 3rd. That’s why people are wondering whether or not Yellen will raise interest rates before leaving office.

Maybe CBRT did play its cards right by deciding to hold the rates steady, which enabled them to take a sigh of relief for 2 months; because, if Fed goes for keeping interest rates stable in this meeting, this will allow CBRT to pass the ball around until the next meeting. In the meantime, Treasury will have to very careful about the borrowing leg in order to prevent interest rates from going up.

If the net borrowing exceeds its targets like it did last year, this “paddling our own canoe” business might get a bit expensive. If all resources in hand are used for financing the public sector, then what is left for the private sector? That’s why there’s no stopping interest rates.

“Costs of Tensions and Conflicts…”

Another critical issue which must not go unnoticed is the financing of ongoing military operation. Turkey has engaged in several operations before in order to eliminate terrorist groups operating on its borders. The fact that such operations are crucial to fight terrorism makes this financing issue almost insignificant. When I took one more look at my 1997 paper titled “Inflationist Impact of National Defense Expenditures”, however, I once again came to the conclusion that military operations do not bring too much of a negative impact on vital economic parameters.

On the other hand, if we lived in a more peaceful part of the world, these resources, used for military expenditures, would achieve large scale impact across national income and development. This I cannot deny. I would like to underline that the paper I mentioned above also covers the fact that tensions and conflicts across the world cause a damage of 14.3 trillion dollar a year.

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