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As Markets Look For Direction

FED’smuch-awaited statements caused the money in developed markets and particularly in emerging markets to set a new course again.

The power of markets,which have stood up for yearsthanks to the support from US Federal Reserve (FED) following the crisis that began to hit the US by late 2008, was tested and it was observed thatthose markets would collapse in the case of even a slight reduction in this support, let alonecutting it altogether. The much-awaited statements made by FEDon September 18 and ensuing reactions of markets caused the money in developed markets and particularly in emerging markets to set a new course again.

In the wake of the financial crisis in the US, the course of money took shape and Turkey emerged as a candidate for a new financial center in this environment. Istanbul would be easily accepted as a reliable financial center for capital that is flowing –and will be flowing– from the Middle East, Russia, and Turkic republics. Important steps have been taken in this direction. But an international lobbying activity was carried out to eliminate this prospect, which was perceived as a serious threat to the rivals, and to destroy the Istanbul Financial Center project in embryo. Turkish judicial system was brought into question and worn down through various cases, with Ergenekon case being in the first place.

As I always say, money is timid. Money flows to those countries with a sound judicial system. The already tainted image of capital market was further damaged.Social media that portray stock exchange as completely a swindle market and web sites that adopt it as a principle to make news in that vein were supported. Meanwhile, investors with the character of a gambler were directed to the forex market.Well-meaning steps that had been taken to expand the market were abused by rogue and uninspired bosses.

“An attempt to pit banks against the government”

The SPK (Capital Markets Board) took strong measures to prevent the public offering campaign from turning into a big fiasco. If only 400 thousand aggrieved investors were not ignored anymore, their rights were returned and an environment of trust was established again. What a great start would be the return to the stock exchange of 400 thousand resentful investors who remain distant to the market, just think…

When we look the banking sector, the greatest protection against market collapse is the existence of banks that have high capital adequacy ratios and strong overall ratios.That’s for sure. So, what is it that happens nowadays? There is an attempt topit banks against the government and weaken the banking sector. Weapons of the Central Bank are taken awayunder the name of interest rate lobby. It is as if the government and capitalwere enemies of each other.How can the government ignore the fact that while it is angry at interest rate lobby, it chargesthe highest interest by quadrupling traffic tickets whose notification were made to neighborhood heads and eventually went unnoticed? When there is huge difference betweenpenalty rates and normal interest rates, how can you react to banks? Both the government and the private sector should get their act together on this matter.

“Interest rate lobby at issue again”

The term ‘interest rate lobby’ comes to the fore again. I would like to do knowledge sharing in this regard. The concept of interest derives from the Italian term “agio.” According to the AgioTheory of Interest of Austrian economist Eugen Böhm von Bawerk, interest is the premium or agio which present goods command over future goods. People prefer present goods to future goods and so there is an ‘agio’ or premium on present goods. Interest is forbidden in all monotheistic religions; because it encourageshastiness and ambition instead of patience and submission. Interest rate lobby needs to get positive real interest rate. In other words, it shouldn’t be affected by inflation. Banks and financial institutions holding instruments based on interest rates make profit when interest rates decrease but not increase. In order to make money on interest rate, there is no other way but to buy interest rate-based instruments at the highest level and wait for the rates to decline. It is impossible to make profit in an environment in which interest rates continuously increase. Henceit wouldn’t be wrong to think that recent developments have been brought about not by interest rate lobby but by other lobbies.