A woman uses a Turkish flag to cover herself from the sun during a rally (Photographer: Kostas Tsironis/Bloomberg)

How Turkey Could Still Go All Wrong

Today’s Agenda

How Turkey Could Still Go All Wrong

Turkey’s Temporary Tourniquet

(Bloomberg Opinion) -- Turkey has managed to temporarily stop its currency’s bleeding by cracking down on short-sellers and making it easier for Turkish borrowers to avoid an onrushing wall of foreign-currency debt coming due. This afternoon, Qatar also pledged to pitch in with $15 billion in investments.

But nobody believes this crisis is over. President Recep Tayyip Erdogan is still playing hardball in a diplomatic and trade fight with the U.S. that he can’t possibly win, and Turkey’s central bank isn’t raising interest rates fast enough to truly fix what ails the lira. That means it will start bleeding out again. Noah Smith writes that this has all the trappings of currency crises that hit Asia in the 1990s and Latin America in … pick a decade. The truly troubling thing for Turkey is that its economic boom of recent years seems to have been built on piling up debt for iffy real-estate and infrastructure projects. This doesn’t usually end well, Noah observes.

How Turkey Could Still Go All Wrong

Assuming Erdogan doesn’t come to his senses soon, the next tool in his first-aid kit might be capital controls – telling foreign investors that, oops, sorry, they can’t pull their money out of the country after all. So far he has not been desperate enough to try this. It’s a good thing, too, because it could metastasize the crisis beyond all hope, warns Marcus Ashworth: “The unintended consequences would be seismic.”

A bunch of European banks are exposed to Turkish debt, and we’re about to find out if new capital rules will protect them from cascading losses, writes Satyajit Das – who is skeptical. Meanwhile, emerging markets are broadly struggling, with their stocks nearing a bear market. U.S. investors seem confident Turkey’s problems won’t wash up on their shores. But if the crisis continues to follow the ‘98 model, then that belief will be tested too.

Two Turnarounds Hit Rough Patches

Two iconic American companies from two very different industries, General Electric Co. and Macy’s Inc., have gotten themselves into deep trouble in different ways. Both have taken some promising steps lately to reinvent themselves. And both are discovering such reinventions are seldom smooth. GE’s stock today fell below $12 for the first time since July 2009. And Macy’s shares plunged 15 percent even after the retailer reported better-than-expected quarterly sales. 

GE CEO John Flannery has the right idea to break up the sprawling conglomerate, writes Brooke Sutherland. But that sort of thing is complicated and risky – and Flannery’s plan might not yet go far enough, Brooke warns. As for Macy’s, it’s wisely selling off stores while bulking up its online, value and beauty offerings, writes Sarah Halzack. But it still faces the stark reality that brick-and-mortar retail is not exactly a growth industry.

Global Order in Retreat

In part two of his three-part series on the post-World War II global order, Hal Brands explores what’s threatening it these days. First, the twin authoritarian powers of China and Russia are increasingly troublesome. Second, the bonds of NATO and other such alliances are under strain. Finally, the liberalism underpinning the global order is in retreat around the world. All is not lost, Hal writes; the order can be preserved – but only if the U.S. takes the lead. And that is no sure thing these days. Click here to read the whole thing. And click here for part one of the series.

What the World Needs Now Is Toilets

More than half the people in the world live without safely functioning toilets, according to WHO data. Such unsanitary conditions expose people to deadly infections, including from antibiotic-resistant bacteria. Governments around the world should spend money to fix this – but they first need to convince skeptical populations of the value of toilets, write Bloomberg’s editors. And such campaigns don’t have to cost much money at all.

Trump’s Unnecessary Economic Exaggerations

The U.S. economy has done pretty well so far under President Donald Trump. GDP growth has been solid. The longest hiring streak on record, which began under Barack Obama, has continued. Unemployment is at its lowest since the top of the dot-com boom. So why, Justin Fox wonders, does Trump feel the need to keep selling it as the GREATEST ECONOMY EVER, when plainly it’s not that, but rather just really good? The risk is that, when the economy inevitably slows down, the blow to Trump will be even greater. 

As for that slowdown: U.S. Treasury bond yields aren’t as high as you might expect, if you were expecting an impending economic boom. Gary Shilling suggests bond traders realize Trump’s tax cuts are taking money from the government and putting it in the pockets of the wealthy, who will save rather than spend it. One great vehicle for their savings: Treasury bonds.

Chart Attack

The hot new thing in investing is collateralized loan obligations, writes Stephen Gandel

How Turkey Could Still Go All Wrong

Ford Motor Co. really can’t afford to keep paying such a high dividend, warns Chris Bryant.

How Turkey Could Still Go All Wrong

Quick Hits

While Democrats keep nominating candidates who are right for their regions, the GOP keeps …  not doing that. – Jonathan Bernstein

Trump probably won’t face a primary challenge from John Kasich in 2020. – Ramesh Ponnuru

Facebook Inc. is smart to wade – very gingerly – into live sports. – Alex Webb

A trio of new “Buffer” ETFs promise to “buffer” “investors” from big losses. But what they really amount to is pricey casino gambling. – Nir Kaissar

Maybe we shouldn’t use our real names on the Internet after all. – Elaine Ou

SOFR is starting to look like a good replacement for Libor. – Brian Chappatta


Trump revoked John Brennan’s security clearance. Goldman Sachs said it’s advising on taking Tesla Inc. private – several days after Elon Musk claimed he already had the bank on board. Uber lost a bunch of money.


What does Donald Trump have against dogs, and what does it say about him? – Cass Sunstein 

Barry Bonds made San Francisco what it is today. – Conor Sen

The new James Webb telescope will be a lot more expensive than planned – but worth it. – Faye Flam

For online daters, women peak at 18, while men peak at 50, a study has shown. 

Seven rules for avoiding shark attacks.

Here are 24 photos of Tuvalu, the tiny, slowly sinking Pacific nation.

Note: Please send dogs, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.


New subscribers can sign up here

Like Bloomberg Opinion Today? Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.

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.

©2018 Bloomberg L.P.