Turkey Awakens That Old Contagion-y Feeling

Today’s Agenda

Turkey Awakens That Old Contagion-y Feeling

Turkey in the Craw

(Bloomberg Opinion) -- On the list of things that will blow up the global financial system, Turkey may not be very high. But it invigorated markets this morning with a wake-up splash of Eau de Contagion. 

Global stock indexes fell and the U.S. dollar jumped as Turkey’s lira plunged to a record low, raising fears of losses spreading to European banks and beyond and maybe even a sovereign bond default. Turkey’s currency has been tumbling for weeks, and President Recep Tayyip Erdogan has done his darnedest to keep it falling, mainly by warning his central bank away from the massive interest-rate hikes needed to put a net under it. U.S. President Donald Trump helped out today by proclaiming a doubling of tariffs on Turkish steel and aluminum. Mark Gilbert warns it’s up to Turkey’s central bank to be the grownup here, by declaring its independence from Erdogan to save the economy. There’s not yet much reason to hope that will happen.

Trump’s gleeful attack on Turkey – a key NATO ally – escalates a very weirdly paced diplomatic dispute between the two countries. Just last month, Trump fist-bumped and praised Erdogan, if only to annoy other NATO allies. Things haven’t gotten so bad yet that the relationship is permanently broken, writes Therese Raphael – but it will be forever altered: “The U.S. will have to settle for something less loyal, less an alliance and more a transactional relationship. But then that seems to define these times pretty aptly.”

As for those European banks, Lionel Laurent warns they may yet pay a heavy price for sticking with their plan of plucking dollars from in front of a steamroller driven by runaway inflation and the rational governance of “Lord of the Flies.” And as we know from past contagion events, when the banks suffer, we all suffer. 

The Musk of a Popping Bubble

It’s been an eventful week for Tesla Inc., to say the least. It might have even been a turning-point week – when the reality distortion field surrounding Elon Musk and his electric-car maker started to dissolve. Liam Denning steps way back to figure out where it all went wrong for Tesla. Back in 2006, it had a Master Plan for making enough expensive cars to raise cash to make some cheaper cars. Somewhere along the way, it wandered off into solar power, a Gigafactory, robo-taxis and owning the shorts on Twitter. And now the SEC is reportedly looking into whether Musk manipulated his stock as part of that latter crusade. As Liam writes: “We’re a long way from the simple life of car A funding car B. The stock price now appears to drive strategy and operations, rather than the other way around.” Click here to read the rest.

Musk, meanwhile is in increasingly desperate need of a good explanation for his dubious claim that “funding” was “secured” for taking Tesla private. Bloomberg News reported today that Tesla is still looking for a “wide range” of investors to take it private. So far the best excuses include “it was all a joke” to “come on, I didn’t really mean that,” writes Matt Levine – none of which should make Tesla’s sleepy board feel too good about Musk’s CEO-ing abilities.

Bonus Tesla reading: 

It’s Not a Trap!

Trump supporters, including his lawyers, say he shouldn’t testify under oath for special counsel Robert Mueller because it will be a “perjury trap.” Jonathan Bernstein unpacks what this term means and suggests it maybe won’t apply in this particular case: Mueller likely won’t try to trick Trump into lying under oath just to zing him with a single perjury charge. Meanwhile, not testifying could make Trump look worse than he already does, and fighting a subpoena might lead to impeachment anyway. Of course, there’s also the risk that Trump might end up looking far, far worse if he does testify, Jonathan concedes.

Make Congress Stop Insider Trading Again

The insider-trading charges against Rep. Chris Collins are an opportunity to remember that members of Congress are allowed to control big bushels full of stock and sit on corporate boards -- just as Collins did for the biotech company at the center of his troubles. Bloomberg’s editors just have one question: Why is this legal? OK, two questions: How soon can we make it not legal?

Bonus editorial: A new GAO report confirms Trump’s Mexican border wall is an expensive, pointless boondoggle – and Mexico’s not paying for it, taxpayers are. 

Chart Attack

Another step on the road to “Minority Report”: Targeted Google ads are coming to a billboard near you, writes Alex Webb:

Turkey Awakens That Old Contagion-y Feeling

Quick Hits

The Democrats keep knocking down barriers to voting. – Jonathan Bernstein

John Bolton makes the case for hunting witches. – Eli Lake

Jared Kushner’s Middle East peace initiative has made things much, much worse. – Hussein Ibish 

Ten years after Lehman, the banking system isn’t as safe as we’d like to think. – Satyajit Das

Trade wars are a sideshow to stock markets. – Tim Duy

Being kind of a jerk can get you better pay, a study has shown. – Tyler Cowen

ICYMI

A Roger Stone assistant was held in contempt for refusing to testify in the Mueller investigation. Omarosa Manigault Newman said Trump is a racist who furtively eats paper.

Kickers

RIP Richard Jarecki, the German doctor (by way of Asbury Park) who figured out how to beat roulette (he’s also the uncle of “The Jinx” director Andrew Jarecki). (h/t Ellen Dickstein Kominers)

Our genetic ancestors died due to climate change and laziness. (Same!) 

The nastiest feud in science is over what really killed the dinosaurs.

FiveThirtyEight has English Premiere League predictions. (It debuts this weekend.)

The Atlantic’s photos of the week.

National Geographic’s photos of the week.

Pitchfork’s seven new albums you should listen to now.

Note: Please send Los Pollos Hermanos chicken, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal.

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