We have to downsize the public sector…

As market fluctuations continue, we observe that world stock exchanges, notably the Wall Street, slowly start to gather strength again after sharp declines. But, the ground is still pretty fickle.

The nature of this week’s transactions has been almost targeted to reduce the “asset bubble” risk, which means stock and commodity exchanges became a lot calmer when trading computers and investors have set to work selling.

The same goes for the crypto currencies. It can be seen that they are recuperating from a harsh sales. As I have always said, however, treating crypto currencies like regular money is the best. Otherwise, you will not be able to avoid losses, should you use them as a commodity; because we are face to face with machines without feelings that do their jobs getting previous periods data. If a bitcoin is a type of currency, in other words a medium of exchange, we should beware of the possibility that computers may be trading by interpreting bitcoin’s rise as a commodity in their own way.

Tax kills tax…”

Meanwhile, we observe that Oil Prices have fallen back to 65 dollar per barrel following the latest US output hike, which obviously is quite advantageous for Turkey. Ever-increasing taxes are the reason why fuel prices always go up in Turkey, despite the oil price decline. Turkish Minister of Finance said the other day that, as Government, they do hike taxes every year based on inflation rates. Although I always remark that Turkish imports do not increase because of low trend oil prices, taxes actually do bring negative impact on both inflation and revenues.

Speaking of inflation, as we all know, to reduce interest rates, we must reduce inflation first, which is a task that cannot be, even should not be carried out merely by the CBRT. As a matter of fact, financial practices of the Ministries of Economy and Finance, not to mention Ministry of Agriculture, are causing inflation and cost of living to climb up. Also, Turkish public sector must develop a strong spending discipline as immediate as possible.

When I say “spending discipline”, I don’t mean that the Government must collect more taxes. Spending discipline basically means to downsize the government budget. Should Turkey fail to achieve that task, interest and inflation rates will always be doomed to remain high, which is a crucial fact, way more important than exchange rates movements.