Turkish lira weakness prompts fall in EM currencies

The Turkish lira has lost 40% of its value over the last year.  With national elections approaching, the central bank prompted the overnight offshore swap rate above 1300pc to defend the lira.

Turkish banks and corporates have become overstretched on short-term lending, having exploited dollar liquidity to push the country's external liabilities $234bn. Of this, about $150bn is short-term debt required repayment or refinancing within 12 months.

Turkey's reserve cover, the ratio of short term debt to net reserves, is now around 500%, the weakest amongst emerging market countries, according to Capital Economics.

One possible response from banks is to shrink their balance sheets and sell off foreign currency assets. This could trigger a credit crunch.  CDS on Turkey have spiked 150bp to 454.

Despite the situation being contained in Turkey, traders have responded by trading out of Argentine peso, Brazilian real and South African rand as well.

A Primer on Political Economics with Patten

Chris Patten on the BBC talks about the many flavours of capitalism, starting with Western liberal democracy and its differences with a Leninist model of capitalism or protocapitalism, if you will. Lenin was famous for his role in the Russian Revolution of 1917, replacing the Tsarist autocracy of the Russian Empire and the founding of the Soviet Union.

An interesting political economist is Francis Fukuyama, former analyst at RAND corporation, who wrote the book "The End of History" (read a summarising article here). A background on the development of capitalism since the Middle Ages is detailed here.

Interesting programs on political economics include Stanford's GSB PhD program.
The first law of economics: things that can't go on forever, don't.
60-second spiel on how to improve the world.