A few weeks back on our Global Market Thought Leaders blog, Mohit Mittal at PIMCO linked two spheres of geekiness: macroeconomic policy and Star Wars. What is the unifying factor? None other than, of course, the Force, that fabled energy field that pervades the universe in the George Lucas film series.
In Mittals universe, three central bankers the Feds Janet Yellen, the ECBs Mario Draghi and the Bank of Japans Haruhiko Kuroda possess the Force, and they have been using it to drive down interest rates. But just outside Draghis realm, an economys Force is facing interference from a high-ranking power, who in a parallel life would likely appreciate the finer points of a sci-fi convention, if this recent photo op is any indication.
Turkish President Recep Tayyip Erdogan seeks to model present-day Turkey after the Empire the Ottoman Empire, that is. Rather than Star Wars characters, the presidential palace guards, dressed like Seljuk and Ottoman-era warriors, were to help set a mood of grandeur for Erdogans $615 million Seljuk Empirethemed presidential palace (R2-D2 action figure sold separately) in Ankara.
Erdogans fandom for all things Ottoman puts the fervor seen on sci-fi sub-Reddits to shame. He was a driving force of razing central Istanbuls Gezi Park to construct a shopping mall modeled after Ottoman-era barracks. This move incited environmental protests that expanded into massive demonstrations in June 2013 against Erdogans increasingly authoritarian rule.
Among Erdogans latest reaches for power: Turkeys monetary policy. In early 2014 the country was already running in the back of the pack of the Fragile Five, a group of vulnerable emerging-markets economies that also included Brazil, India, Indonesia and South Africa. One of the factors weighing on Turkey in January 2014 was political risk skittishness over a December 2013 scandal at state-owned lender Halkbank in connection to money found stuffed in shoeboxes one that implicated some in Erdogans inner circle, including his own son. The Turkish lira hit the skids, touching a record-low 2.33 to the dollar before the Central Bank of the Republic of Turkey jacked up the one-week repo benchmark rate by 5.5 points, to 10 percent. The lira recovered somewhat during the following weeks.
Some 15 months later, the Turkish central bank is scrambling to regain the Force. The lira hit another record low against the dollar this past Friday, dipping to 2.74 to the greenback, whereas the countrys inflation rate stood at 7.6 percent in March. Although an improvement from 8.6 percent a year ago not to mention the double- and triple-digit rates that prevailed in the 1990s and early 2000s its still well above the 5 percent target. Not that central bank governor Erdem Basçi has much Force to wield these days.
Econ 101 teaches that a traditional way to bring down inflation is to raise interest rates. During the central banks past two monetary policy meetings, the most recent of which was on April 22, Basçi has left interest rates unchanged (though he did cut dollar borrowing costs and raised what the bank pays on lira reserves).
The reason for the dovishness? Erdogan wants to keep interest rates as low as possible. Hes called Basçi a traitor and part of the interest rate lobby a nebulous group that Erdogan claimed was also behind the Gezi Park protests. The president contends that low interest rates will stimulate borrowing and spur the economy.
All the while, international investors are fleeing Turkey for greater safety. A poll conducted by Société Générale showed Turkey has one of the least credible emerging-markets central banks, along with Brazil and Nigeria. And in March Citigroup sold its last 9.9 percent holding in one of Turkeys largest lenders, Akbank, taking an $800 million loss on the disposal.
Perhaps Basçi, who took over as central bank governor in 2011, never had the Force in the first place. But there may be a homegrown cinematic model.
Take the early-1980s global obsession with Star Wars, and filter it through the censorship lens that only a Turkish ultranationalist military coup could provide, and, voilà, you get the film Dünyayi Kurtaran Adam, translated as The Man Who Saved the World but better known among cult movie geeks as Turkish Star Wars. Released November 1982, two years after then-General Kenan Evren seized power, the movie regularly appears on rosters of the worst films ever made.
The movie stars Turkish kung fu master Cüneyt Arkin as Murat, who vaguely emulates Luke Skywalker. He and his trusty sidekick Ali crash-land on some forbidden planet they believe to be inhabited solely by women (a world that in reality is the Central Anatolia tourist region of Cappadocia). Ali wolf-whistles. Instead of beckoning the ladies, however, he brings on an attack of skeletons on horseback, which Murat and Ali pound away in hand-to-hand combat.
If the plot doesnt make sense in English, it didnt in its original Turkish either. Never fear: Clips from Hollywoods Star Wars are spliced in as a viewing guide to remind you that this is supposed to be related to the 1977 U.S. classic in some way, as are John Williamss theme from Raiders of the Lost Ark and Giorgio Moroders Battlestar Galactica theme. Romance? Oh, its got conservative-government-approved romance. The one woman in the film settles down and eventually has a kid with Murat, the whole relationship portrayed with long, languid glances. And what I can glean from the two times Ive forced myself to watch the movie is that Islam is the Force, with Christianity being some sort of Other Power. Is it the Dark Side? Not necessarily.
Some sort of Dark Side is disrupting its Force. Given that Turkey is facing elections in June in which Erdogan seeks to consolidate his power by changing the parliamentary system of government into a presidential one by securing a three-fifths majority that can approve constitutional change, dont expect Basçi to be able to wield his lightsaber anytime soon.
Follow Anne Szustek on Twitter at @the59thStBridge.