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Turkey will default, precipitating a financial crisis. How widespread? Temporary. Volatile. Not widespread.

Turkey is a mess. Its lira has fallen 40% this year and will fall further. The Euro also will fall since German banks have lent Turks money they can’t repay. It’s actually already fallen in the last few days. My ATM rate to buy Euros is down from 1.16 to 1.154. Just in the last day.

But, Turkey precipitating a global financial crisis and a major hit to our markets? It’s hard to see.

This is a good time to have cash. Be ready to pounce should stock prices drop big-time. Today is a good day to put in buy limit orders on your favorite stocks at ultra-low prices. Upcoming volatility could snag you some bargains. Try 15% below where we were on Friday.

Previous overseas financial crises all bounce back. And quickly. You can read about them all on Wikipedia.

The common causes of financial crises are:

+ Too much borrowed currency doesn’t bring in many dollars.

+ The local currency drops and drops and drops some more.

The country’s ultimate recovery depends three things:

+ The loans being “restructured” (i.e. a million dollar loan is now a $500,000 loan)

+ The IMF and/or someone steps in with loans and help.

+ The local government steps up and acts intelligently. That means raising interest rates, restricting capital flows and making financial reforms. That’s not the situation with Turkey nor Venezuela — today’s two disasters — whose “management” is blaming their disasters on the U.S.

Venezuela’s total disaster has not affected world financial markets. Turkey is bigger at 80 million people, Its inflation is around 20% — but rising. The Turkish Lira’s loss of 40% this year is huge for any currency. Venezuela’s currency doesn’t exist. So Turkey has a ways to go for more collapsing. More than half the people in both countries (and Iran) wish they had different rulers. But the rulers control the military and enforce their rule harshly — killing and imprisoning their own people.

That’s my simple words and advice. Lots of thinking and lots of reading.

Put in low buy limit orders on your favorite stocks.

Now for some fantastical stuff. Remember Joel Ross? He writes The Ross Rant. Here’s are some excerpts from his latest newsletter (from this weekend):

The black swans are really circling now in the Mideast. There is a very high chance for war on several fronts at once. It is my view that the whole Mideast geopolitics are going to change dramatically over the next year. It will be extremely violent, and when it is over, it is likely the US, the Sunnis, and Israel will be in control. Iran will be driven out of Iraq. Iran will be under a new regime, Erdogan may be deposed, and Russia and the US will have arrived at some sort of modus operandi in Syria so that the risk of confrontation is minimal and refugees can start to return. Hamas will be decimated. Hezbollah may be greatly weakened, or at least left unconnected with Iran no longer there to back it.

Iran will fight to disrupt oil shipping, but the US, Israel and Saudis and UAE will fight back and destroy the Iranian navy and air force. There is nothing China and Russia can do to save the mullahs. The war in Yemen will end with some type of agreement with the Houthis, but with the Saudi/ US backed government in control and Al Qaeda wiped out in Yemen. Destroying the Iran regime is the key to everything. There are so many sparks and flashpoints, that it seems almost inevitable that war will break out in the next week to one year. The current situation cannot go on without some sort of war or revolution occurring, and there is nothing the UN or the EU can do. They are just not relevant in all of this.

I have no information as to exactly what the administration is trying to accomplish with Turkey, but one can speculate. I do not believe the confrontation of this magnitude with Turkey is really about the one pastor. That is just the excuse. Turkey has gone much more Islamic under Erdogan, and has cozied up to Putin. They have created serious issues for the US and its Kurdish allies in Syria. In various ways, Turkey, under Erdogan, has become a major problem for the US and Israel. Related to that, it appears the Mideast is about to explode. Israel is very likely to invade Gaza again, and this time maybe they will really end it, and wipe out Hamas once and for all. Having the US full backing makes a huge difference, as opposed to the resistance to Israel and the Sunnis by Obama who was intent to do the nuke deal with Iran. Nicky Haley will have Israel’s back at the UN this time, as opposed to Obama stabbing them in the back with their refusal to veto.

The current situation cannot continue, and if they do wipe out Hamas, that is a major setback for Iran and allows Fatah to once again take control. That is key to any hope of a resolution of the Palestinian issue. When I was in Turkey, and based on reports since, it is pretty clear, 50% of Turks are against Erdogan, so this time, he might be overthrown by the generals if the economy crashes and he loses popular support. He cannot fight the US trashing the Lira and imposing tariffs which will crash his economy. He might throw the US out of the airbase, but that is no major setback to US military interests. They have many options.

Once the oil and banking sanctions are in place on Iran in November, their economy cannot survive. It is already crashing, and the protests are growing rapidly. This time the protestors know the US is there for them working for regime change, and it is very unlike the situation in 2009, when Obama sided with the mullahs and against the people. Things will get very violent inside Iran by early next year, if not much sooner. If we can bring about regime change in Turkey and Iran, everything in the world of geopolitics changes for the better. The Obama support for the mullahs is over, and now is the moment when Trump can exert maximum pressure to encourage a regime change. The EU still does not get it at all, and continues to try to help the mullahs instead of the US and Israel, and the people of Iran.

… There are direct parallels to the Reagan Gorbachov era, except Gorbachov understood that the Soviets could not compete, and acted to change the world without war. There is no such leader in Iran and Turkey. We need to be prepared for a very uncertain and potentially violent period over the next year. Erdogan and the mullahs in Iran are not going quietly. It is a shame and a real issue that the Dems will resist this effort, and even try to impeach Trump if they get control of the House just as all of this is playing out.

…This will likely lead to a lot more volatility in the markets, currencies and the economy of the EU. However, we have been here before, and the stock market will be fine since the economy is so strong.

No jokes today. Sorry.

Harry Newton, who is writing this blog in the ultra-modern Venice Airport (more about that later). Susan and I are on our way to Copenhagen (where it’s thankfully cooler). We’ll join a cruise around the Baltic, with three days visiting museums in St Petersburg, Russia. This is only our second cruise. My idea is you use cruises to visit hard-get-to places, like Alaska’s Inland Passageway, which was our first cruise.

For more things to read on Turkey and other financial crises:

Click here and here and here and here. and here. and here and here.