Tag Archives: Turkey

How to Help Soma Mining Incident and Southeast Europe Flood Victims

For sometime now, I’ve been aware that I could use the traffic on this blog to promote other causes besides informing my readers of contemporary issues. For example If I wanted to, I could try to raise money for a new guitar to start my musical career. However, instead of pursuing a personal goal, I’ve decided to raise awareness on how to help the victims of disasters from around the world. I initially did this in November for the typhoon that had struck the Philippines. Following the recent mining disaster in Turkey and the deadly floods in southeastern Europe, I was initially stricken with sadness and grief over the loss of so many lives. However, I soon became emboldened when I realized that in addition to contributing to aid efforts myself, I that could perhaps convince and help some of my readers to contribute as well. Rest assured that for each of the incidents I discuss, I will be very careful to provide accurate details regarding the events that have occurred and to make sure that the organizations that I list are legitimate.

Soma, Turkey

On 13 May, 2014, an explosion at a coal mine in the Turkish city of Soma caused an underground fire within the mine. In the ensuing days, even though 486 miners survived a total of 301 miners unfortunately lost their lives, making it the largest mining disaster in the history of Turkey. The Turkish Ministry of Energy stated that most miners died due to carbon monoxide poisoning.

A Turkish miner weeps for his deceased colleagues.
A Turkish miner weeps for his deceased colleagues.
Women mourn at the graves of the miners.
Women mourn at the graves of the miners.
The body of a victim is carried away from the mine.
The body of a victim is carried away from the mine.

In the Soma mining disaster, it wasn’t homes or buildings that were destroyed; it was families that were most severely stricken. A crumbled house in an earthquake can be rebuilt or restored. A lost father however, will never be brought back. Authorities have reported that 432 children have lost their fathers in the disaster. With this thought in mind, and in addition to the fact that the miners were low income blue collar workers, I have deemed it most useful to contribute to the Turkish Education Foundation’s TEV Soma Hope Fund. This fund is a scholarship that will give financial aid to the children of miners who were killed or injured in the mining disaster. The true tragedy of this incident is that so many miners perished for such a risky job for which they earn too little. Hopefully by contributing to this scholarship, we can make the life of the families of the victims just a little better by making it easier for them to provide education to their children, who have now been left without fathers and brothers.

To contribute to the Turkish Education Foundation’s TEV Soma Hope Fund,
1) Click on the following link: https://onlinebagis.tev.org.tr/FundDonation
2) Choose “Kayıtlı bir fon seçmek istiyorum”
3) Under the list of funds choose TEV Soma Umut Fonu and enter the amount you want to donate in the field below.
4) Enter your personal and credit card information.

Southeastern Europe

On May 15th, multiple floods centered in Serbia and Bosnia and Herzegovina struck large parts of southeastern Europe. By May 20th, 49 people were reported to be dead and by May 23rd, over 70 people are still missing. The monetary damages are also vast and have surpassed 1 billion euros. In total, over 1.5 million have been adversely effected by the floods. Coupled with the frequent landslides, these are the worst floods the region has witnessed in over 150 years. The situation is especially dire in Bosnia. Whereas Serbia and Croatia are members of the European Union and have access to the EU’s 500 million Euro Solidarity Fund, the Bosnian government did not even have a centralized disaster management system until the disaster struck.

A local sports facility has been turned into a shelter.
A local sports facility has been turned into a shelter.
A Serbian man stands atop his home.
A Serbian man stands atop his home.
Bosnian citizens must now travel the streets of their hometown with rowboats.
Bosnian citizens must now travel the streets of their hometown on boat.

Right now, there is said to be a great shortage of wood, drinking water, clothes, hygenic products and medicine. Many hospitals, schools and houses will have to be rebuilt. Between 1992 and 1995 the region had been the site of a ethnically driven war. The emotional and physical scars of the war can still be felt in these countries. Some fear that lingering ethnic tensions might cause people to tamper with where aid is delivered to. I on the other hand, am optimistic that the disaster can bring fractured communities and ethnicities together. In the meanwhile, we can do our part to help the people of southeaster Europe by donating to the following organizations.

In Serbia

Donate to the state institution solely for this purpose
Donate to the “General support” fund of the TRAG Foundation, the most respected community foundation in Serbia.

In Bosnia and Herzegovina

Donate to Red Cross of Republika Srpska
Donate Red Cross of the Federation of B&H
Donate to the MOZAIK Foundation, the most respected community foundation in Bosnia and Herzegovina.

In Croatia

Donate to Red Cross
Donate to Croatian Caritas

As I stated before when raising awareness for the typhoon in the Philippines, you might not know any of the victims in Turkey or in southeastern Europe. You might not even have any friends that come from those nations. But no matter where we’re from, we all share the same emotions. We are all capable of love, grief, joy and sadness; no matter what our background, nationality or religion is. Thus, even if it will make just the slightest difference, we should make an effort to help one another no matter where we come from. A small donation may not have a significant impact on our lives, but it in a time of despair it could prove invaluable in helping a Turkish orphan to someday go to college or in aiding Serbian family to rebuild their home.

“Our human compassion binds us the one to the other – not in pity or patronizingly, but as human beings who have learnt how to turn our common suffering into hope for the future.”
– Nelson Mandela

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Emerging Markets in Emergency Mode

Despite how much we prayed for a peaceful and prosperous year, 2014 has started off with a crisis; this time in the Emerging Markets. In a previous Economy in Digits post, I had discussed how India and Turkey had responded to large losses in the value of their currencies by raising interest rates. In the following days, the sell-off in stocks and currencies extended to other Emerging Markets. If you’d like to get a better understanding of Emerging Markets, feel free to check out one of my earlier posts regarding upcoming Emerging Market elections, which I will touch on shortly. As you can see from the following graph provided by Bloomberg, the MSCI has been performing very poorly. Lets take a look at what is causing all this mess in the countries that not so long ago were deemed to lead the world out of the global economic crisis.

emerging markets index

The first reason for the rapid sell off of Emerging Market stocks is a topic that my regular readers might be getting sick of hearing, but its tapering. The main reason why most Emerging Markets fared so well after the economic crisis of 2008 was that central banks in developed nations pushed interest rates to almost 0%. Seeing as how they would make almost no money on investing in developed countries, investors sent their money to do its magic in Emerging Markets where interest rates are higher. Combined with an increase in price of global commodities, which is an important source of income for many Emerging Markets, the inflow of foreign funds caused Emerging Market economies to skyrocket. However, in the last week of January, the FED decided to continue tapering by reducing its bond purchase program by another $10 billion. This is causing interest rates to rise in developed markets, especially in the United States. Thus, investors are now doing the opposite of what they did in 2008 and are now pulling their money away from Emerging Markets and are putting their cash back in developed markets such as the US and the UK.

Another reason why Emerging Markets are in trouble is because of China. China had been the poster child of Emerging Market success in the past several years. However, as the country reaches a limit on urbanization and its population transitions from rural to middle class, the government has had to enact reforms that inevitably slow down the Chinese economy. Combined with the fact that the Chinese government has also tried to reduce credit in the Chinese economy due to fears of a credit bubble, some investors now fear of a “hard landing” for the Chinese economy. These fears were strengthened in the final week of January as Chinese officials announced that the country’s Purchasing Mangers Index (PMI), a monthly manufacturing report that surveys private manufacturers, contracted for the first time since 2008.The reason why China is so crucial to other Emerging Market nations is that China is one of the world’s largest importer of commodities. On the other hand, most Emerging Markets are net exporters of commodities. Thus a slowdown in China would mean less demand for commodities from other Emerging Markets, causing a chained slow down across all Emerging Market nations. Here is a video that further breaks down whats going on in China.

Finally, we have the isolated incidents across individual Emerging Markets. In an earlier post, I discussed the political crisis created from a corruption probe in Turkey and rampant inflation in India. However, other Emerging Markets have also had their own troubles. Thailand has been in social and political turmoil since November of last year. Protesters have taken to the streets across Thailand to force Prime Minister Yingluck Shinawatra to resign and postpone the elections that was supposed to occur in the beginning of this month. Protesters see Mrs. Yingluck’s regime as corrupt and wishes her to reform the Thai political structure before elections are held again. In fact protesters managed to postpone the elections which were planned on February 2nd. To learn more about the events in Thailand, feel free to read more about it on the BBC.

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To make matters a tad bit worse, as if it wasn’t bad enough already, the Argentinian economy is rapidly deteriorating. On February 13, Argentinian inflation was announced to be at 44%. That is at levels where one would call it hyperinflation. Argentina had once been a prosperous nation. But a crisis in 2001 has left it with naively populist governments that have slowly shut itself out of global capital markets. The gradual downfall of the Argentinian economy is an issue I will cover in another post but for now check out this post by the Economist to get a better understanding.

So what happens now? Are Emerging Markets doomed for eternal decline? First of all, even though most people like to lump all Emerging Markets together, not all countries are the same and not all have suffered greatly over the past couple of months. In fact, in January, shares in the MSCI Indonesia rose by 4.6% while the market in the Philippines gained 2.4%. These countries have done well to turn the money that was invested in their economies into long term growth opportunities that improve their trade balances over the long run and increase the education and productivity of their population. However, many of the Emerging Markets  that experienced rapid economic growth in 2010 and 2010 were fueled by short term foreign investments and increasing consumer demand which required constant to satisfy. As foreign investors pull out and domestic demand cools, these economies will start looking back to 2010 and 2011 as the glory years of the past. Countries such as Turkey, India and Brazil, which were on the verge of double digit growth back in those years will now find it difficult to reach 4% let alone 5% growth. Even though Emerging Markets may not collapse and fall out of favor with all investors, I think the markets in these nations will revert to a new normal which is slower growth.

“So much of what happened to India late last year and early into 2011 is the same story we’ve seen with other big emerging markets, and that is that investors started to realize that the growth trajectory in India would have to get moderated by tightening policy.”
-Jerrry A. Webman

Video of the Week – Taper Continues

This video does a great job to explain what I wanted to talk about from the previous week. However, I know you’d be devastated if you didn’t get a taste of my elegant writing. Have no fear.

As he passed the torch to Janet Yellen, Ben Bernanke announced in his last FOMC meeting that the FED would continue tapering QE by decreasing the bond buying program by another $10 billion. This brings the total of the program down to $65 billion of treasury bonds and mortgage-backed securities. FED officials decided that the American economy is strong enough for a second round of tapering, despite recent mediocre data including a weak jobs report.

Once again, this second step of tapering will end up lowering US stock markets, raising interest rates in the United States and appreciating the US Dollar in value against other currencies. This is having a profound on effect on Emerging Markets such as Turkey and South Africa where a devaluing currency and a rise in American interest rates is causing investors to flee those markets. In response, Emerging Markets have resorted to raising interest rates but so far they have not been able to regain the losses to the value of their currencies. In response to the effects that tapering is having on foreign countries, FED officials have stated that their priority is to maintain the strength of the American economy and tthat if they succeed, then Emerging Markets would fare better off as well.

“Most projects start out slowly – and then sort of taper off.”
-Norman Ralph Augustine

Economy in Digits – 02/01/2014

In the past couple of weeks I didn’t see any significant economic indicators in the news. However, we got a lot of data over last week.

United States

Driven by the fastest consumer spending in the last three years and a rise in exports, US GDP increased by 3.2% year-over-year in the 4th quarter.The calculations also showed a 1.9% increase in GDP across all of 2013, compared to 2.8% the previous year. The 2013 figures showed that a significant decrease in government spending due to the shutdown in October had dragged GDP figures down when compared to last year. That was of course accompanied by the extreme cold temperatures in the winter which also hampered the economy. However, the numbers are still positive and despite the continuation of tapering by the FED, the US still remains the safest economic harbor right now. As we’ll discuss soon, Emerging Markets are not doing too well right now.

united-states-gdp-growthTurkey and India

Both the Turkish Central Bank and the Indian Central Bank resorted to drastic interest rate hikes. In Turkey, a corruption probe against government officials had led to the resignation of various cabinet ministers. The following levels saw the Turkish Lira lose significant value and brought the Turkish Lira/US Dollar spot rate to unprecedented levels. To stop the devaluation, the Turkish Central Bank sold parts of its foreign reserves but it was to no avail. Finally, the Central Bank had enough and they raised interest rates sharply. The benchmark interest rate was raised from 4.5% to 10% and the over night lending rate was hiked from 7.5% to 12%. Following the rate hike, the Turkish Lira gained 4% against the US dollar. However, the crisis is yet to be averted. Even though the Lira gained in value after the Central Bank’s decision, the sell off creeped in again. This decision is surely to slow Turkish economic growth and that could prove crucial to determining the outcome of the upcoming local elections in March.

tlusd

On to India, another country that required a rate hike this past week. As I stated in an earlier post, India is struggling with high inflation and lackluster growth and just like Turkey, they will be having elections this year. However, the Indian Central Bank let everyone know that they are serious about battling inflation when they increased the repo rate by a quarter point to 8% and announced that they plan to reduce the inflation rate to 6% by 2016. As you can see from the graph below, the latest inflation figure in India is over 11%.

indiainflationGreat Britain

Another GDP figure came from Great Britain as GDP growth was announced to be 0.7% in the 4th quarter of 2013 and by 1.9% in 2013 overall.That figure might seem as slow as Shaq running down a basketball court however that is the fastest growing quarter that Great Britain has had since the 2008 economic crisis. The main force behind the growth was the services and the manufacturing sectors and evidences that slowly, eventually and oh so gradually, the British economy is picking itself up.

Historical Data Chart

EU

The Eurozone had been battling a rather unfamiliar problem, deflation, which is the opposite of inflation. To battle the deflation, the European Central Bank had decided to lower interest rates last month. However, we got new inflation figures from the Eurozone which don’t look so bright. Consumer price inflation across the Eurozone fell from 0.8% in December to 0.7% in January.. Even though the worst of the European debt crisis is behind us, deflation means that firms and individuals are more likely to hold off on spending money until the future, which could take a toll on growth. Even though I see it to be unlikely, European Central Bank officials stated that if matters get worse, they could resort to negative deposit rates for banks’ deposits at the European Central Bank.

Historical Data Chart

That was what made economic headlines this week. Stay tuned for more economic news in Economy in Digits in the following weeks.

“Economics is extremely useful as a form of employment for economists.”
-John Kenneth Galbraith

The Economy in Digits – 01/04/2014

Here are the economic highlights from the week ending January 4th.

Spain

Spanish unemployment fell by 107,570 in the month of December, decreasing the total number of unemployed in the Iberian nation to 4.7 million. With this boost from the December numbers, unemployment in 2013 as a whole decreased by 147,385. That makes 2013 the first year since 2007 in which Spanish unemployment decreased over the calendar year. Spain’s economy, which paid a heavy toll during the European debt crisis, has also been battling with record high unemployment. As of October 2013, Spain’s general unemployment rate sits at 26.7% and its youth unemployment is over 50%.

spain-unemployment-rateEven though the recent spike in employment could be related to temporary hiring during Christmas, it still provides a glimmer of hope that the worst of Spain’s economic crisis is behind them. Maybe they can now run away from their bulls with slightly less angst.

Turkey

The annual inflation rate (as measured by the Consumer Price Index) in Turkey for 2013 was 7.4%. Earlier in the year, the Turkish Central Bank had set a target rate of 6.8% for 2013. However, rising global oil prices and a fall in the Turkish Lira due to political instability throughout the year has caused inflation to exceed expectations.

turkey-inflation-cpiHigh inflation proves especially worrisome for Turkey, as it is also trying to bring its current account deficit under control. Turkish current account deficit currently sits at 6.1% of GDP and a loss in the value of the Lira makes that deficit even harder to lower. Ideally, the Turkish Central Bank should raise interest rates to battle this inflation . However, Turkey will hold local elections in March and it appears that the Central Bank will not play a very active role in the economy until the Turks go to the polls.

“Economics is extremely useful as a form of employment for economists.”
-John Kenneth Galbraith

Upcoming Emerging Market Elections

The geopolitical stage is typically divided into two camps: the Developed Markets (such as USA, the EU, Japan, England) and the Emerging Markets (such as China, Russia, Brazil, India, Turkey). Developed Markets are countries that have stable financial markets and political systems. Their economies are powerful but have developed to the point where they can now only grow at a slow and steady pace. On the other hand, Emerging Markets are the new players on the global stage. Their economies have grown rapidly over the past several years and they appear to have promising futures. However, their financial systems still need improvement and their political systems are still unstable. If the two groups could be visualized as Hollywood actors, the Developed Markets would be Liam Neeson.

Liam-Neeson-9421118-1-402

No matter what movie it is, you know for a fact that if Liam Neeson is in it, he is going to dominate that role and he is going to be a total badass as he trains Batman, saves his daughter, releases the Kraken, etc. Much like Liam Neeson, Developed Markets shape the context of the globe and have established themselves as the leaders of the world. On the other hand, Emerging Markets are James Franco.

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You can tell James has a lot of potential. He’s had some great movies such as 127 Hours, the Spiderman series and Pineapple Express. But let’s be honest, he’s been in some lousy movies too. Have you seen Your Highness? No you haven’t; and neither has anyone else. So you know Franco is a great actor but you can’t tell if his next movie is going to break box office records or totally fall flat and bomb. Similar to Franco, Emerging Markets have potential and may even become one of the world’s leading nations in the future. However, they are unstable and have their internal problems, much like Franco’s problem to keep his eyes fully open.

After the financial crisis of 2008, Developed Markets suffered greatly. Their economies were in shambles. These nations responded by lowering interest rates to stimulate demand. Thus, investors moved their money to Emerging Markets to seek higher returns on higher interest rates. After 2009, Emerging Market economies skyrocketed. From 2010 to the end of 2011, most Emerging Market economies grew somewhere between 6-11%. For example, in 2011, the Chinese economy grew by 9.2% and the Turkish economy grew by 8.5%. Following these developments, everyone believed that the time of Emerging Markets had come and that they would lead the world out from pits of the financial crisis.

However, in 2013, as central banks around the world such as the FED started talking of taking their foot of the pedal and slowing their support of their economies, interest rates rose in the developed world. 2013 was also the year when political upheaval broke out in certain Emerging Market countries, the US economy continued to recover at a steady pace and the EU saw the worst of its crisis pass. All of these factors caused investors to put their money back into the Developed Markets. As the cheap money was pulled away from Emerging Markets, their economies slowed down and their currencies lost value against Developed Market currencies.

In case you don’t believe me, here is a finance professor from George Washington University discussing how Emerging Markets fared in 2013.

Now in 2014, many Emerging Markets will go to the polls and determine their leaders in elections. These elections will shape the political sphere in those nations for the next several years and will definitely effect not only their national economies but ultimately the global economy. So, along with a graphic from the Wall Street Journal, here is a breakdown of upcoming Emerging Market elections in 2014.

MI-CA487_YEFRAG_G_20131231130906

Brazil

Brazil’s economy is highly dependent on commodity exports. Thus, a fall in commodity prices, excessive government spending and a social upheaval against the government in the summer all proved troublesome for the Brazilian economy. The general election in October will decide if President Dilma retains her position or replaced by the opposition.

South Africa

In South Africa, the African National Congress party has won every election after the apartheid era. But they are now being challenged by the Democratic Alliance which won 16% of the votes in the 2009 elections and has grown in popularity ever since. Come election time in April, the ANC’s hegemony over South African politics may come to an end.

Turkey

Recep Tayyip Erdogan and his AK Party have dominated every local and national election since they first came to office in 2002. During their term in power, they have further liberalized and grown the Turkish economy and have also increased Turkey’s influence on the global stage. However, resentment against Erdogan’s authoritarian tendencies and his party’s encroachment on personal freedoms exploded this year during the nationwide Gezi Park protests. Furthermore, a recent corruption scandal charged against several AK ministers have led to their resignation and has made the AK Party lose even more of its influence. The AK Party is still highly popular throughout Turkey, but it will be interesting to see the effect of recent events on the local elections in March.

India

The Indian economy currently faces stagflation as it is stuck in a state of high inflation and below average growth. Incumbent president Manmohan Singh has stated that even if his United Progressive Alliance party wins, he will not be president for a third term. Investors are hoping for a victory by pro-reformist Bharatiya Janata Party. Only time will tell the outcome of the general elections in May.

Indonesia

In July, whoever wins the Indonesian general election to replace outgoing two-term president Susilo Bambang Yudhoyono will have a full plate. Growth has slowed, politically popular fuel subsidies are draining the treasury and corruption remains rife.

All of these countries require the implementation of unpopular but important reforms to aid their economies and remedy social issues. However, because of upcoming elections, ruling parties are unfortunately likely to delay these reforms till after the elections are over.

“Emerging markets are hugely important.”
-James Dyson