The Ukrainian military has launched a long-anticipated counteroffensive against occupying Russian forces, opening a crucial phase in the war aimed at restoring Ukraine’s territorial sovereignty and preserving Western support in its fight against domination by Moscow.
Ukrainian troops, including specialized attack units armed with Western weapons and trained in NATO tactics, intensified their strikes on front-line positions in the country’s southeast on Wednesday night, according to four people in the country’s armed forces, beginning a significant push into Russian-occupied territory.
By “southeast” they mean “Zaporizhzhia,” where most observers have expected the main counteroffensive operational push to come.
Reasons for expressing some skepticism is the MSM source, but everyone has been expecting the counteroffensive to kick off for months. Another reason to assume the counter-offensive is real: Western armor has finally been definitively spotted among Ukrainian forces, including Leopard 2s, Bradleys and French AMX-10s.
“More worryingly was what we saw with the tactics of the armored group. Grouping vehicles closer together like that is just asking for trouble.” But Suchomimus notes we saw some stumbles like trhis at the beginning of the very successful Kherson offensive as well.
Independent journalist Wayne Dolcefino alleges that Lina Hidalgo’s hand-picked election coordinator Clifford Tatum deliberately shorted paper ballots to Republican precincts.
“If you’re a Democrat, you didn’t like the KHOU investigation that cites more than 120 locations that were under supplied with ballot paper, while millions of ballot sheets were available in a warehouse.”
Lots of precinct judges, of both parties, testified that locations ran out.
“It’s not just ballot paper problems. Election judges reported 119 polls, nearly 15%, that didn’t open up on time on election morning. Late in the day, a district judge ordered that polls stay open until 8 PM, but a lot of election judges either didn’t get the message, or didn’t care when they did. 64 polls closed at 7 PM even after the judge’s order.”
“It should force judge Hidalgo to release all remaining public records.”
Of course, she’s waging a lawsuit to prevent just that…
The US, and Ukraine are discussing sending 41 Royal Australian Air Force (RAAF) F/A-18A/B Hornet fighter jets to Ukraine, rather than scrapping them as planned.
Since the US recently granted permission for other Western allies to supply Kyiv with advanced fighter jets, Washington is open to the idea of gifting Ukraine retired RAAF F/A-18 fighter jets, Euromaidan Press reports.
Seventy-five F/A-18A/Bs were acquired by the RAAF from 1985 to replace the ageing Mirage III fighter which had been in service since 1963. The first two aircraft were produced in the US, with the remainder assembled in Australia at Government Aircraft Factories.
Giving them to Ukraine rather than scrapping them makes sense. Australia can’t use them, as they’re transitioning to F-35s, and the U.S. can’t use them since they’ve already transitioned both carrier-based and Marine F/A-18s to the much beefier F/A-18E/F Super-Hornets.
The F/A-18 was originally designed as a carrier plane, but several militaries around the world use them as all-purpose fighter aircraft.
Will Ukraine be able to make use of them? Sure! Just like the F-16s that Ukraine may get sometime, F/A-18A/Bs are reasonably modern fighter aircraft that can more than hold their own against any but the very most modern Russia jet fighters aircraft. (Maybe the Su-57 is better, just like it appears on paper; but a lot of Soviet and Russian gear that looks great on paper turns out to be crap.) One of the first rules of warfare is that you can’t beat something with nothing.
But, as with the F-16, it’s going to take a lot of training before even experienced fighter jet pilots would be cleared to fly F/A-18s in combat. Probably at least six months of type trying in simulators and tandem and solo flying. Maybe more, because Soviet/Russian jets are so different from U.S. jets, maybe less Because War. In any case, it will be too late to take part in the vaunted Spring Counteroffensive, which may or may not be going on right now.
But the way this war has dragged on, there’s a good chance Ukraine will still need them by 2024…
Gov. Greg Abbott of Texas signed a bill into law Friday that bans sex-change surgeries and hormonal interventions aimed at transitioning minors with gender dysphoria, as the Lone Star State joins more than a dozen others to pass similar legislation.
Senate Bill 14, which goes into effect on Sept. 1, prohibits medical interventions such as puberty blockers, cross-sex hormones and surgeries like double mastectomy for female-born minors identifying as male. It also forbids the use of state funds for such procedures in children.
The law stipulates that the procedures are prohibited “for the purpose of transitioning a child’s biological sex as determined by the sex organs, chromosomes, and endogenous profiles of the child or affirming the child’s perception of the child’s sex if that perception is inconsistent with the child’s biological sex.”
It sad that there even needs to be a law that bans child genital mutilation (AKA “gender affirming care,” but really “sex-defying cosmetic surgery”), but this is the world we’re living in.
Russia is doing what it always does: Lying about its battlefield achievements. Recently they claimed to have taken out a Patriot missile defense system sent to Ukraine. YouTuber Suchomimus has looked into their claims by comparing them with several relevant satellite images of the site and determined: Not so much.
Update on “the May airstrike in which Russia claimed to have hit two Patriot SAM launchers: we’ve had some newly released satellite imagery which does show signs of damage at the air base in question. However, is not as it seems.”
Satellite images show that one of the two impact craters were present before the Patriot system was installed.
A time sequence shows that the other crater was not in any of the locations where newly dug emplacements showed where new Patriot equipment was stationed.
The U.S. admitted that a Patriot was damaged by the attack, very possibly from shrapnel, but that it was minor and quickly repaired. Satellite image analysis supports this claim.
“While these satellite images are interesting, and they do confirm an impact at the airport, they don’t show evidence of a destroyed Patriot.”
If you want to look at a big story the mainstream media continues to suppress, the entire contents of Hunter Biden’s infamous “Laptop from Hell” are now online.
And not only his laptop, but stuff from his iPhone as well.
There are the salacious photos you would expect (pics of his dick and what appear to be naked, under-aged girls, pics of a woman giving him a blowjob in-between puffs on her cigarette, etc., all censored).
Some of it is suggestive of Biden Family corruption, like the famous “Big Guy” memo.
Some of it is innocuous: Map snaps, pics of food, pics of sunsets, vacation photos, pictures of kids (presumably some his own, and presumably ones he’s not having sex with), etc.
Some of it is just weird. There seem to be dozens of pictures of a flashlight beam shining through what I assume are crack pipe fumes in a darkened room.
Arty
There’s no doubt this is a rich treasure trove for bloggers and investigative reporters with some free time to dig through. (Alas, that’s not me right now, because books.)
And those are just the ones with over 100 employees. There are much more with fewer (including Gordon Ramsay North America, which has a chain of restaurants, which has moved its headquarters to Irving, despite having no restaurants in Texas). (Hat tip: Ed Driscoll at Instapundit.)
For the past few years, Atlanta has been roiled by corruption scandals centering on the city’s decades-old program to favor minority-owned businesses in government contracting. The troubles started when Elvin “E. R.” Mitchell, Jr., a black contractor, began paying what became more than $1 million in bribes to city official and friend of the mayor Reverend Mitzi Bickers. Mitchell and his associates wanted to ensure that they could keep winning city-favored contracts and subcontracts for minorities, despite submitting bids higher than their competitors’. Mitchell also helped Bickers bribe officials in Jackson, Mississippi, so that she could secure minority-favored contracts on some of that city’s projects. Meantime, Larry Scott, head of Atlanta’s Office of Contract Compliance, which ensures that minority firms win contracts, started a side gig to help such businesses get favorable deals with the city—receiving over $220,000 in unreported income and partnering with the mayor’s brother and sister-in-law in the scheme. Mitchell, Bickers, Scott, and several other city officials have been sentenced on federal charges ranging from bribery to wire fraud.
Affirmative-action plans in schools or workplaces get the headlines, but the practice of favoring minorities in government contracts is almost as old, and even more far-reaching. Such favoritism—in the form of Disadvantaged Business Enterprises (DBE), or Minority and Women Owned Business Enterprises (MWBE) programs—exists across all levels of government and in states and cities of every political hue.
The subject of government contracting, or procurement, may not seem exciting, but its importance can’t be overstated. Nearly 10 percent of the U.S. economy goes through government contracts. The federal government spends over $600 billion yearly on contracts, making it the largest buyer of goods and services on the planet. State- and local-government spending on contracts totals about $1.3 trillion annually. Government contracts and purchases range from aircraft carriers and highway construction projects to office supplies and human-resources software. Favoritism to minority-owned companies pervades this vast universe.
Minority contracting was never a coherent way to make amends for the nation’s long, lamentable history of racism. Instead of righting historical wrongs, the policy has enriched a small subset of already-wealthy businesses, bred corruption and fraud, deepened racial divisions, and cost taxpayers countless billions of dollars—while doing nothing to help the truly disadvantaged. Indeed, minority residents of urban areas pay the highest price for lackluster and expensive services caused by such programs. One underappreciated reason for the unparalleled costs of American urban and infrastructure projects is that the government too often picks contractors based on their sex or race, not the quality or cost of their bids.
Snip.
Today, governments use several methods to favor minority contractors. At the federal level, Congress has stated that “not less than 5 percent” of all contracts should go to “disadvantaged” businesses. Regulations clarify a “presumption” that “Black Americans; Hispanic Americans; Native Americans,” and “Asian Americans” are disadvantaged. Government treats the goal as a floor, not a ceiling: in recent years, the true share of contracts going to disadvantaged firms has been around 10 percent, and politicians have urged the bureaucracy to push the total higher. The SBA then sets goals for individual agencies—recently demanding, for example, that the Department of Transportation offer 21 percent of all contracts to disadvantaged enterprises. It also requires that federal “prime contractors” (the lead contractor on a project) create subcontracting plans to maximize minority participation.
State and local governments set even higher goals for minority procurement but usually focus on encouraging large businesses to subcontract out to minorities. Chicago insists that 26 percent of all construction dollars go to minority companies and 6 percent to women-owned businesses. But a city-funded report noted that “almost all City funded construction projects require M/WBE” goals for subcontractors and that “project goals should exceed the ‘baseline’ goal.” Maryland has a target of 29 percent of contract dollars to minority firms. New York City and State have set a goal of 30 percent of all contracts going to MWBE, and the city itself goes into more detail, setting precise contracting goals for each race and business category (for instance, black-owned businesses should get 11.81 percent of all city professional-service contracts).
Agencies have various ways of meeting these benchmarks. Federal agencies can directly award contracts to minority firms, without a normal bidding process and through a no-bid deal, if they cost less than $5 million. This arrangement, of course, has caused abuse. After 9/11, the federal government, hoping to accelerate security purchases, expanded awards to “Alaska Native Corporations,” which had a special exemption that allowed them to get no-bid minority contracts of unlimited amounts. Federal contracts to these corporations increased 20-fold in the decade ending in 2009, when spending totaled almost $6 billion. The army’s infectious-disease center at Fort Detrick, in a no-bid deal, shifted the management of all its contracts to an Alaskan Native Corporation, whose most significant former venture was a failed cruise-ship line. Another such corporation won a port-scanning deal and then subcontracted it out to traditional defense companies; only 33 of the corporation’s 2,300 employees were Alaskan Natives. Though Native Americans are the smallest “disadvantaged” group assisted by the federal government, they get 2.7 percent of all federal contracts—more than twice the proportion of any other group.
Snip.
The City of Austin Disparity Study for 2022, conducted by Colette Holt & Associates, a large disparity-study firm started by a lawyer who had previously worked for Chicago’s city government, is typical. It approaches 300 pages and contains a recitation of every supposed ill that has befallen a minority business in the Texas capital. The report uses only anonymous quotes that make accusations against unnamed individuals about racism or sexism. “There is no requirement that anecdotal testimony be ‘verified’ or corroborated,” the report notes.
Try as they might, these studies have had little success proving racism or sexism in contracting. They typically use a “disparity ratio” to show the difference between the number of available minority firms and the number of government contracts going to these firms, though these ratios rarely account for the ability of different firms to perform government jobs. Yet studies conducted by Austin and Washington State found that MWBE firms were more likely to get contracts than were those owned by white men. A Missouri disparity study found that minority firms were more likely to get contracts than nonminority firms. A Chicago disparity study found that black and Hispanic firms were about twice as likely to get construction contracts, and Asian firms four times as likely, relative to their availability.
These reports’ surveys of minority firms find that most aren’t worried about discrimination. Of those MWBEs responding to a survey in Austin, 75 percent said that they had not experienced barriers to contracting based on race or gender. Over 85 percent agreed that they did not get different prices or terms because of their race or gender. Disparity studies ignore such data and argue that the minority of minorities who report unspecified discrimination need assistance.
When studies admit that there is no discrimination in contracting, politicians refuse to abide by them. Miami-Dade County made the mistake of employing a legitimate accounting firm, KPMG, for a disparity study, which determined that companies owned by blacks and Hispanics were not underused. The Miami mayor rejected the study. Los Angeles’s city council rejected a study that found that black firms did not suffer discrimination in contracting. The occasional lawsuit will surface, challenging these disparity studies when they provide no evidence of discrimination. But in such cases, governments will simply look for another minority contractor to conduct another study calling for more minority contracting.
Minority-contracting programs are a magnet for fraud. No-bid contracts represent an obvious avenue, but the most common kind of MWBE fraud is simple: contractors with subpar bids either lie about being run by minorities or lie about involving other minority businesses in the contract. The Wedtech scandal in the 1980s involved such fraud; though John Mariotta, a Puerto Rican immigrant, had started the company, it was partially run by Fred Neuberger, a Romanian Jew who escaped the Holocaust in Europe but did not count as “disadvantaged” for the purposes of the 8(a) program. Similar issues arose with the recent Atlanta scandals: while contractor Charles Richards was white and won many “prime” contracts, he promised to subcontract work to Mitchell’s minority firm, and then paid Mitchell without asking his firm to do any work. A 2016 Department of Transportation presentation stated that more than one-third of its contracting-fraud cases involved minority contracting and that, over the preceding five years, cases involving minority-contracting fraud had led to $245 million in financial penalties and 425 months of incarceration for offenders.
These cases tend to follow a certain playbook. A minority-owned front company wins the government contract, takes a small cut, and issues a pass-through contract to a white-owned firm. The largest such case in American history involved Schuylkill Products, a Pennsylvania firm that manufactured concrete bridge beams but had used a Filipino-owned front company for 15 years to win more than $130 million in contracts. The federal investigation led to several prison sentences in 2014. Front-company and pass-through fraud has dogged construction work at Chicago’s O’Hare airport and New York casinos. According to the New York State inspector general, the minority firms in the casino-fraud case did little more than submit invoices. A former Dallas councilman, meantime, went to prison for his role in setting up minority front companies for government contracts. Sometimes, the fraud is even more direct: in Seattle, the owner of a company that was paid to clean up homeless camps falsely identified as black on city forms. She also happened to be a city employee.
Target has repeatedly boasted about efforts to support the Gay, Lesbian, and Straight Education Network, also known as GLSEN, an entity which helps teachers place LGBTQ books in school libraries and hide their students’ so-called gender transitions from parents.
Conservatives have launched a boycott against Target after the retail behemoth marketed a female swimsuit as “tuck-friendly” and with “extra crotch coverage,” as well as hired an artist who creates Satanic items to make various designs for the company. Links between the company and GLSEN, which supports “affirming learning environments for LGBTQ youth” and activates “supportive educators,” resurfaced amid the backlash against Target.
The retail behemoth boasted last year about donating more than $2.1 million to GLSEN over the past decade, lauding the group’s mission to create “affirming, accessible, and antiracist spaces for LGBTQIA+ students.” Target also actively promotes GLSEN on its online store.
Strangely enough, having a DA who will prosecute criminal and not lawful citizens defending themselves makes a difference. “San Francisco District Attorney Brooke Jenkins follows the law and the evidence and does not make decisions based on what may be politically expedient.”
Speaking of Soros-plagued cities: “Citywide Youth Curfew Begins In Baltimore As Mayor Strives To Restore Law And Order.”I doubt Mayor Brandon Scott’s policy will make that much of a difference, though maybe with Soros-tool Marilyn Mosby out of office and awaiting trial on federal perjury charges, maybe there’s a chance of Baltimore improving. But remember:
Of course. “Just Stop Oil’s Hollywood Patron Has Holiday Home in Ireland That he Jets Off to ‘When the Going Gets Tough.'” “Oscar winner Adam McKay, whose films include The Big Short and Don’t Look Up, is one of a group of multi-millionaires behind the Climate Emergency Fund. The Beverly Hills-based fund raises cash from its mega rich supporters and distributes it to ‘disruptive’ activists, including handing almost £1million to help Just Stop Oil wreak havoc in the U.K.” Being a Democrat means never having to apologize for your hypocrisy.
The Georgia Bureau of Investigation (GBI) and the Atlanta Police Department (APD) arrested Marlon Scott Kautz, age 39, of Atlanta, Savannah D. Patterson, age 30, of Savannah, Ga., and Adele Maclean, age 42, of Atlanta, on Wednesday on charges of money laundering and charity fraud in association with fundraising efforts for the domestic terrorists who are currently in jail.
“The GBI, along with the Atlanta Police Department, have arrested three people on charges stemming from the ongoing investigation of individuals responsible for numerous criminal acts at the future site of the Atlanta Public Safety Training Center and other metro Atlanta locations,” reads the GBI’s press release.
The trio ran a non-profit called Network for Strong Communities, which worked with another group called the Atlanta Solidarity Fund, which, at least on paper, was a bail fund for the thugs who attacked the training center property and other areas in Atlanta.
Given that, it might be time to take a look at Worth It or Woke for honest movie reviews.
Dwight has a good look at the Battleship Texas, and (for Memorial Day) seaman Christen Christensen, who was killed in combat during the bombardment of a German shore battery off Cherbourg.
Don’t let JinJin eat poop off San Francisco’s street, or they may end up tripping balls.
After intense negotiations between U.S. Speaker of the House Kevin McCarthy (R-CA-20) and President Joe Biden, an agreement was struck which passed the House with both bipartisan support and bipartisan opposition.
The so-called “Fiscal Responsibility Act” (FRA) passed the House Wednesday in a 314 to 117 vote, with 71 Republicans joining 46 Democrats in the minority voting against the measure.
The deal will suspend the nation’s debt ceiling until after the 2024 presidential elections, leaving it up to the next White House and Congress to navigate a deal that addresses the ever-expanding national debt.
With the debt nearing $32 trillion, the congressional budget analysis estimates it will grow by around $4 trillion during the period the FRA is in place, or until early 2025.
Congressman August Pfluger (R-TX-11) was one of the members who voted in favor of the bill but acknowledged in a phone interview that the bill was far from perfect and isn’t to be considered a home run by fiscal conservatives.
Pfluger explained there were some major wins in the negotiations that caused him to vote yes.
“The number one thing we took away from holding the Energy Committee meetings in Midland was calls from the oil and gas industry to reform the National Environmental Policy Act (NEPA), and I’m proud to say we got the most significant reforms to NEPA in 50 years as part of this deal, and Biden isn’t happy about it,” he said.
Pfluger explained how under NEPA laws, oil and gas permitting and regulations can slow industry projects down, taking almost 10 years in some cases to get federal permitting. He also said the deal would greenlight important pipeline projects.
In addition, Plfuger said he supported the welfare reforms, requiring 80 hours per month of work or job training from The Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families program (TANF) recipients, and clawing back of IRS funding, and while the proposal didn’t cut as much spending as he would like to see, it was still a small step in the right direction.
Here is where the usual blogging protocol would be to put in my analysis of the good and bad points of the deal. Nah, it stinks, because it doesn’t treat the looming national debt crisis seriously. We need a republican House, a Republican Senate, and a president who is willing to ride herd and veto non-balanced budgets to start fixing the problem, and we haven’t had that combination in my lifetime. Gerald R. Ford was the last Republican President who really fought to balance the budget, and republican congressional leadership hasn’t done so since the days of New Gingrich, Phil Gramm and Dick Armey.
Democrats will always vote for higher deficits because their entire business model is predicated on raking off the graft and doing the bidding of elites who prosper from asset inflation. Republicans as a whole always cave to them because no one holds them in line and because every debt limit hike is always an emergency rushed into law at the 11th hour when nobody is paying attention and they can whine “But we had to!”
Real austerity is limiting government outlays to receipts, and we haven’t had that since Gingrich and company held the line and the Dotcom boom brought in then record revenue in the late 1990s. Undoing Gramm-Rudmam-Lotta was disasterous.
I’d like to think that DeSantis could hold the line on deficit spending if he gets in. Sadly, we know from experience that Trump (whatever his other strengths) won’t…
Both men had their time in the sun, and neither’s time extends to 2024. Pence’s was 2016, when he provided a dull, predictable counterweight to Trump’s wild ride. Christie’s was 2009-2010, when his unexpected election as governor of deep blue New Jersey gave him a high profile platform to criticize the Obama Administration’s many unpopular policy failures.
Neither has a prayer of beating Ron DeSantis or Donald Trump for the Republican nomination in 2024.
Pence combines the dynamic personal charisma of Jeb Bush with the national electoral chances of Jeb Bush.
This meme still cracks me up.
Christie combines the personal likeability of J. Edgar Hoover with the weight of a second J. Edgar Hoover.
As long as we’re memeing…
And Christie has no excuse running again, having already run a dismal 2016 campaign that earned him exactly zero delegates (one less than Carly Florina).
All these political coelacanths are going to do is prevent the anti-Trump vote from consolidating around DeSantis.
Both should give up on their quixotic campaigns and retire to the cushy corporate board and college President circuit.
I have an in-process post titled “League of the Boned” in embryonic form, which was going to be about how each country in the League has been screwed by deficit spending, high interest rates and endemic corruption. But there so much boning to write about, and so many members of the League, that I thought it best to split it up into individual posts.
First up is Turkey, not because it’s the most boned, but the one whose immediate boning is made more acute by recent events, namely Recep Tayyip Erdogan’s reelection.
Recep Tayyip Erdogan’s supporters are celebrating after Turkey’s long-time president won Sunday’s vote, securing another five years in power.
“The entire nation of 85 million won,” he told cheering crowds outside his enormous palace on the edge of Ankara.
But his call for unity sounded hollow as he ridiculed his opponent Kemal Kilicdaroglu – and took aim at a jailed Kurdish leader and the LGBT community.
The opposition leader denounced “the most unfair election in recent years”.
Mr Kilicdaroglu said the president’s political party had mobilised all the means of the state against him and he did not explicitly admit defeat.
International observers said on Monday that, as with the first round on 14 May, media bias and limits to freedom of expression had “created an unlevel playing field, and contributed to an unjustified advantage” for Mr Erdogan.
President Erdogan ended with just over 52% of the vote, based on near-complete unofficial results. Almost half the electorate in this deeply polarised country did not back his authoritarian vision of Turkey.
Ultimately, Mr Kilicdaroglu was no match for the well-drilled Erdogan campaign, even if he took the president to a run-off second round for the first time since the post was made directly elected in 2014.
But he barely dented his rival’s first-round lead, falling more than two million votes behind.
Snip.
The president admitted that tackling inflation was Turkey’s most urgent issue.
The question is whether he is prepared to take the necessary measures to do so. At an annual rate of almost 44%, inflation seeps into everyone’s lives.
The cost of food, rent and other everyday goods has soared, exacerbated by Mr Erdogan’s refusal to observe orthodox economic policy and raise interest rates.
The Turkish lira has hit record lows against the dollar and the central bank has struggled to meet surging demand for foreign currency.
“If they continue with low interest rates, as Erdogan has signalled, the only other option is stricter capital controls,” warns Selva Demiralp, professor of economics at Koc university in Istanbul.
Tiny problem: Strict capital controls tend not to work. By the standards of the Middle East, Turkey is fairly open and fairly modern, and getting around currency controls is one of the use cases that cryptocurrencies are ideal for.
Indeed, the currency problem is so severe that Turkey’s foreign currency reserves just turned negative.
The Turkish central bank’s net forex reserves dropped into negative territory for the first time since 2002, standing at $-151.3 million on May 19, as the bank – following Erdogan’s strict orders – scrambled to counter demand for hard currencies (USD, gold, crypto) ahead of Sunday’s runoff vote.
Forex demand in Turkey surged to record levels ahead of May 14 on companies’ and individuals’ expectations that the lira, which lost 44% in 2021 and 30% in 2022, will plunge after the vote (spoiler alert: those fears have been justified).
As we discussed last week, the central bank’s forex reserves have sagged in recent years due to costly market interventions and other efforts to cool forex demand. The bank’s net reserves dropped by $2.48 billion in the week to May 19, to their lowest level since February 2002. They have dropped $27.7 billion since the end of 2022, and were at negative $3 billion as of May 19. The net forex reserves would be even more negative if outstanding swaps, courtesy of foreign central banks and which stood at $33.50 billion on Wednesday, are deducted (as they should be since the CBRT will have to repay these at some point).
And while the endgame here is clear to all, few are willing to say it out loud for fear of retaliation by the Erdogan regime (no really, he has been known to throw people in jail for recommending a Turkish lira short); yet one bank which decided to double down on Goldman’s dire view of how it all plays out is Morgan Stanley, which in a note last week (available to pro subscribers in the usual place), wrote that the turkish lira plummeting to 28 by the end of the year, is likely in the cards (in our view, that’s a rather optimistic take since the lira is about to become the new Bolivar where soon new zeroes are added daily if not hourly).
This is, I think, a bit of an exaggeration, since Turkey is a much bigger and more important country (and economy) than Venezuela, and while they’ve done several terribly stupid things with their economy, they haven’t gone full socialist starvation scenario on it.
The biggest concern when Erdogan came to party was his Islamist roots, and how he dismantled Turkey’s own peculiar systems of checks and balances, namely that anytime the government would move too far in an Islamist direction, the military would step in, depose the current government, rule for a while, and then step down once things had calmed down again. That doesn’t look very much like classic western democracy, but it served well enough for Turkey, partially insulating it from the wild swings between different despots common in the rest of the Islamic world.
The bad news is that Erdogan demolished those checks and balances in his drive to centralize power in his own hands, purging the military of anyone he thought might possibly oppose him. The good news is that, after all that, he turned out to mostly be a typical Middle Eastern strongman rather than a fervent jihadi. The bad news is that he’s also a complete economic ignoramus, and his stupidity is making Turkey’s economic problems much worse.
Here Patrick Boyle explains just how stupid:
On Erdogan’s idea that low-interest rates can cure inflation: “The official annual inflation rate in Turkey was 43.7% as of April. This is actually down from the 80% inflation rate that Turkey saw the prior year. There is no guarantee that this slowdown will persist. There is in fact widespread suspicion that the official numbers understate an inflation rate that according to independent experts is actually closer to 100%.”
The February earthquakes didn’t help.
“Another term for President Erdoğan would likely imply a continuation of the current policies with a heightened risk of persistent very high inflation and severe currency pressures.”
“The high inflation, along with government largess and efforts to prop up the currency are threatening economic growth and could push the country into a deep recession.”
The Lira is trading near record lows against the dollar.
“Net foreign assets, a proxy for the size of Turkey’s foreign currency holdings, have declined to minus $13 billion dollars from $1.4 billion dollars a year ago, according to central bank data.”
“Those figures include billions of dollars in funds borrowed from the domestic banking system through swaps. Pressure on international reserves has been ‘significant in recent weeks’ as the government made efforts to prop up the economy ahead of Sunday’s elections.”
“Turkey’s foreign currency and gold reserves tumbled $17 billion dollars in the six weeks leading up to the first round of the election according to the FT, a decline of 15 percent.”
“Turkey had a painful experience of high and chronic inflation from 1975 through to 2004 caused by political instability, poor institutions, high public sector budget deficits and depreciation of the Turkish Lira which culminated in a severe financial crisis in 2000-2001.”
“The establishment of an independent central bank in 2001, which focused mainly on fighting inflation along with tight fiscal policies implemented at the same time brought inflation under control.”
“During his election campaign, Erdogan showed no intention of changing his policies, doubling down on his claims that low interest rates would help the economy grow by providing cheap credit to increase Turkish manufacturing and exports. ‘You will see as the interest rates go down, so will inflation’ he told supporters in Istanbul in April.”
With the cost-of-living crisis on many voters’ minds, Erdogan launched a range of expensive policies in the lead up to the election aimed at reducing the immediate impact of inflation on voters. He raised the minimum wage repeatedly, announced a free month of natural gas for consumers, reduced electricity prices increased civil servant salaries and changed government policies to allow millions of Turks to receive early government pensions. Just days before the first round of the election He gave a 45% pay rise to 700,000 Turkish public sector workers, saying he would “not let anyone be crushed by inflation”.
So he combated inflation by guaranteeing there would be more inflation, just like Joe Biden.
Boyle thinks Turkeys problems can be solved by adopting sane economic policies. “For a country in crisis, Turkey’s problems are not that difficult to solve – it is not a total basket case economy like some other emerging markets. The country mostly just needs a sensible interest rate policy and an independent central bank. Turkey has a lot of positives, it has a diversified economy, growth is good, it has good demographics and an educated workforce.”
This is true, but it was also true before Erdogan got into power and screwed things up. Peter Zeihan thinks that Turkey has the right mix of geography and demographics to be a future regional power. But there’s an awful difficult present to get through before that happens…
