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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. It's pretty incredible,

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Speaker 1: how like every you know, for the last several years,

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Speaker 1: maybe five, six, seven years, I feel like there's this

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Speaker 1: rhythm where, maybe like every nine months or every year,

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Speaker 1: the world really turns its focus to what's going on

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Speaker 1: with Turkey, what's going on with Turkish monetary policy, and

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Speaker 1: what's going on with the Lira. Yeah, I know what

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Speaker 1: you mean. It does seem to pop up like at

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Speaker 1: least once a year and suddenly everyone's very focused on it,

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Speaker 1: and then within a month or two people seem to

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Speaker 1: have forgotten it, or at least it's moved out of

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Speaker 1: the limelight. But I have to say we're recording this

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Speaker 1: on Christmas Eve, December, and this week in particular or

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Speaker 1: has been one of those weeks where everyone wakes up

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Speaker 1: and decides that they all have opinions on Turkey and

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Speaker 1: what's going on there. And to be fair, we have

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Speaker 1: seen this enormous amount of volatility in the lira. So

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Speaker 1: I think the lira was up something like twenty five

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Speaker 1: per cent on a single day this week after are

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Speaker 1: to Wan announced a new mechanism to try to stop

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Speaker 1: its halt, and before that it was down. I think

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Speaker 1: it had lost like half its value over the past

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Speaker 1: three months. So just crazy moves in the currency. Yeah, right.

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Speaker 1: There are a lot of e m s which see

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Speaker 1: significant currency volatility. You know, we see it in Brazil

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Speaker 1: from time to time, we see it in South Africa

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Speaker 1: and so forth, but there seems to be nothing quite

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Speaker 1: like the volatility that we see in the Lira, and

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Speaker 1: it's incredibly volatile. And as you mentioned, and you said

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Speaker 1: there a day I think it was up like thirty

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Speaker 1: five from the lows of that day, because I think

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Speaker 1: in the morning it was down ten percent. But as

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Speaker 1: you mentioned, President Radwan having instituted a new mechanism to

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Speaker 1: attempt to stem the decline, and we'll get into how

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Speaker 1: that works. I think it was up thirty like truly,

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Speaker 1: any sort of like macro tourist and what is interest

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Speaker 1: in currencies, monetary policy, etcetera, had to be sort of

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Speaker 1: like jaw dropping at that move that day, right. And

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Speaker 1: the other thing going on with Turkey, of course, is this,

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Speaker 1: I guess, rejection of economic orthodoxy. So when it comes

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Speaker 1: to emerging markets, I think there's often a perception that,

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Speaker 1: you know, e M s are different to developed economies

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Speaker 1: for a variety of reasons. But there's always concern about

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Speaker 1: fiscal discipline and whether or not they're going to be conservative,

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Speaker 1: whether or not they have the institutional strength to you know,

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Speaker 1: keep the economy in check and keep it stable. And

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Speaker 1: then when it comes to Turkey, we've seen just I guess,

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Speaker 1: an extreme version of these concerns, where are Doowan is

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Speaker 1: rejecting economic orthodoxy. He keeps lowering interest rates and that's

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Speaker 1: leading to inflation and that's causing the currency to fall,

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Speaker 1: and no one really knows how to interpret it. I guess, yeah,

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Speaker 1: I think that's exactly right. And you see it from

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Speaker 1: time to time that various e M s will say,

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Speaker 1: have a central banker who is very steeped in a

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Speaker 1: sort of neoclassical economics, and whether the sort of measures

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Speaker 1: are successful or not, there's always this sort of there's

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Speaker 1: often this sort of portrayal to foreign investors of like

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Speaker 1: fiscal discipline in central bank independence and macroeconomic orthodoxy. And

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Speaker 1: I think, uh, you know, people look at Turkey and

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Speaker 1: they see an example of a country and a system

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Speaker 1: that very much not playing by those sort of like

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Speaker 1: the standard playbook, and then they see the volatility and

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Speaker 1: they say, oh, well, this is what happens when you

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Speaker 1: don't when you don't follow the rules laid out by

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Speaker 1: the University of Chicago Economics department. Yeah, that's one way

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Speaker 1: of putting it. Yeah, anyway, but I still, you know,

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Speaker 1: I again I sort of edgine, like, you know, we're

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Speaker 1: all so many like tourists look at Turkey, and I

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Speaker 1: don't think we have like a truly deep understanding of

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Speaker 1: what is going on in the economy, approach to monetary policy,

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Speaker 1: what is going on with the leer and so forth.

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Speaker 1: So I'm very excited about our guest today who is

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Speaker 1: going to help us understand everything about how the Turkish

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Speaker 1: economy and monetary system works. We're gonna be speaking with

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Speaker 1: Lutfla Bingo. He's an economist at a bank in Istanbul

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Speaker 1: al Baraka Turk Lutfala. Thank you so much for joining us,

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Speaker 1: Thanks for having So why don't we start? I mean,

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Speaker 1: would you say it's I mean, it's a fair characterization,

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Speaker 1: this idea that in this very Turkey, in a very

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Speaker 1: sort of overt sense does not sort of make the

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Speaker 1: same I guess that. Yeah, I want to play by

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Speaker 1: the same playbook as many emerging markets typically attempted. There

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Speaker 1: are some similarities with some periods with some countries, but

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Speaker 1: Turkey has some very unique fundamental conditions. Some of these

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Speaker 1: are issues, and some of these are strengths, and the

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Speaker 1: Turkey Turkish economy is of course bound by these. That

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Speaker 1: is why sometimes Turkey makes different choices than the rule book.

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Speaker 1: I'm not even sure a proper rule book exists for

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Speaker 1: emerging markets, but that will be one of my arguments today.

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Speaker 1: There is no rule book for what Turkey goes through

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Speaker 1: it and there will be one if this instrument works.

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Speaker 1: You're talking about the attempt to stabilize the lerou that

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Speaker 1: was announced this week. But before we get to that,

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Speaker 1: can I just ask a really basic and I guess

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Speaker 1: this is the obvious question, but you know what is

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Speaker 1: where all the interest rate cuts? Like, where does the

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Speaker 1: refusal to actually raise interest rates come from? And what's

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Speaker 1: the rationale for going in that direction? To answer that question,

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Speaker 1: I'm going to have to provide an entire framework, which

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Speaker 1: I was planning to do anyway. Ship So who should

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Speaker 1: I go and do that? Ye? Sure, please go for it? First, off.

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Speaker 1: It's going to sound like a cliche, but I do

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Speaker 1: not believe in structures or you know, claims. I believe

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Speaker 1: in incentives, and for various reasons I'm going to talk

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Speaker 1: about today the central bankers goal of price stability and

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Speaker 1: the policymakers goal of you know, having growth providing jobs.

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Speaker 1: Those are two conflicting goals in the case of Turkey,

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Speaker 1: and that is for precisely one reason, because there is

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Speaker 1: a huge amount of dulverization. And that is precisely why

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Speaker 1: I do not see this week's move as just the

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Speaker 1: short term measure to you know, stabilize the er. I

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Speaker 1: see it as a crucial structural reform. I begin this

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Speaker 1: week extremely pessimistically. I had almost no hope, but now

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Speaker 1: I'm rather hopeful because what they announced it tells me

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Speaker 1: that they diagnose the problem right, and if the mechanisms

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Speaker 1: announced work, we won't have that problem anymore. So for

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Speaker 1: the first time in probably Turkish history, after the end

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Speaker 1: of you know, Breton Woods, perhaps we will have a

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Speaker 1: proper alignments of incentives. So I think I will have

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Speaker 1: answered the question why the policy makers you know, add

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Speaker 1: fuel to the fire whenever there is a global USD

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Speaker 1: cycle downturn. Whenever fed heights interest rate, you see central

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Speaker 1: bank independence and Turkey disappear. I will try to explain

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Speaker 1: why is that? So, what do we get it? Just

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Speaker 1: get give us this sort of basic argument for because

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Speaker 1: I think from a sort of like foreign perspective, the

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Speaker 1: typical story is air do Wan is pushing this sort

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Speaker 1: of like very heterodox, unusual policy. It's not out of

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Speaker 1: the central anchor playbook. It's bad. We get to the lira,

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Speaker 1: people flee to dollars and so forth, and it leads

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Speaker 1: to inflation and price instability. It sounds like your argument

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Speaker 1: is that it's something much deeper and much more structural

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Speaker 1: with the Turkish economy, and that it can simply be

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Speaker 1: attributed to these sort of idiosyncratic policy choices. So before

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Speaker 1: we even get into the mechanism, and we'll talk about that,

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Speaker 1: of course, what is it about the structure of the

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Speaker 1: Turkish economy in your view, that creates these cycles? There

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Speaker 1: are three types of flows that are inconsistent with each other.

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Speaker 1: So you have dollarization, you have the current account balance,

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Speaker 1: and you have the foreign capital inflows and outflows. There

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Speaker 1: is no single interest rate that can balance all three

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Speaker 1: of these in the case of Turkey, so whatever you do,

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Speaker 1: you'll sacrifice something. And in the case of Turkey, if

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Speaker 1: given this structure, if you don't change anything, you take

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Speaker 1: this is given if you aim for price stability, and

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Speaker 1: the global central banks, especially FED, is hiking interest rates.

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Speaker 1: So you do not have that much capful flows, you

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Speaker 1: do not receive that much capital flows, there is no

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Speaker 1: way you can grow. Basically that that will be my argument.

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Speaker 1: And any policymaker anywhere in living in a democracy wants

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Speaker 1: the economy to grow and if something is standing in

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Speaker 1: the way of that, that that thing will be run over.

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Speaker 1: That that that is what's happening in Turkey, and if

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Speaker 1: dollarization issued, it's result I think you'll see are gone

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Speaker 1: talking about interest rates a lot less. Can you, just

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Speaker 1: before we move on, can you talk about how dollarization

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Speaker 1: became such a thing for the Turkish economy, because of course,

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Speaker 1: there are a lot of emerging markets that have dollarization

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Speaker 1: to some degree. They have people who you know, don't

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Speaker 1: necessarily trust the local currency and want to shift into

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Speaker 1: something that they perceive as more safe, or they have

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Speaker 1: a lot of you know, trade that's denominated in dollars,

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Speaker 1: things like that. But in Turkey, as you just laid out,

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Speaker 1: it seems to be extreme or it seems to be

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Speaker 1: more of an issue because of the structure of the economy.

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Speaker 1: So how did that happen. It started with a very

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Speaker 1: premature capital account of done by the late President Turkados

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Speaker 1: All In with that kepital account opening, he also let

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Speaker 1: people have FX deposit accomps in local banks, So that's

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Speaker 1: how it started. And throughout the nineties there was this

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Speaker 1: predictable pattern whenever, whenever there was something wrong with the

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Speaker 1: Turkish economy you know USD Lira exchange, it blew up.

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Speaker 1: So if you are a you know, household, if you're

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Speaker 1: a person observing this pattern, this means you have now

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Speaker 1: access to a put option. That's pretty much it's in

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Speaker 1: the case of Turkey, I argue the main reason for

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Speaker 1: dolorization is that that's the only tail events hedge household

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Speaker 1: has access to. And that's what makes this problem hugely pernicious,

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Speaker 1: because if you treat it like some sort of simple

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Speaker 1: portfolio choice and tried to solve it that way, it

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Speaker 1: doesn't work. And I'll tell how they treated that way

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Speaker 1: and it didn't work. And now for the first time,

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Speaker 1: diagnosing the problem right that you know, dollarization, households holding

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Speaker 1: dollars is a tail event hedge, and unless you completely

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Speaker 1: replicate the payoff structure of that tail event hedge, there

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Speaker 1: is no way you can prevent dollarization, you know, borring

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Speaker 1: capital controls or something. So this is the first credible

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Speaker 1: attempt to do that. I think that That's what I

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Speaker 1: meant by they seem to be diagnosing the problem, right.

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Speaker 1: What do I mean by you can't solve this problem

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Speaker 1: by treating it as a simple portfolio choice issue. If

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Speaker 1: this is another risky asset, what do you do? You

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Speaker 1: hike interest rates, right, you make the alternative more preferable.

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Speaker 1: You should be able to solve your problem. Right, But

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Speaker 1: that does not work in in the case of Turkey.

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Speaker 1: Whenever you hike interest rates, if other uncertainties are still their,

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Speaker 1: households do not just go ahead and buy lira. They

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Speaker 1: hold onto their dollars, and they buy even more if

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Speaker 1: the uncertainty is extreme. And another issue is if there

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Speaker 1: is saying momentum in the US the Lira exchange eight,

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Speaker 1: you see households buying more. That is typical for the

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Speaker 1: case of a put option. But if it was a

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Speaker 1: simple sort of portfolio choice. There is a chance you

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Speaker 1: might observe that, but it should not be this predictable.

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Speaker 1: So I think one major difference is let me give

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Speaker 1: you an example. Let's say Tesla wants to know dissuade

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Speaker 1: put option buyers and it's stock from buying put options,

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Speaker 1: and to do that, fits increased it's dividends. Would it work?

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Speaker 1: I think not, because the put option is a tail

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Speaker 1: event hedge and increasing dividends does nothing to that. I mean,

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Speaker 1: it would weaken Tesla's balantie it would it would, yes,

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Speaker 1: I mean that was one of the things that happened

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Speaker 1: in Turkey as well. They would do nothing to Tesla

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Speaker 1: put buyers. So if you want folks from you, if

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Speaker 1: you want to prevent folks on buying Tesla puts, you

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Speaker 1: have to somehow replicate that payoff structure or remove on

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Speaker 1: certainty completely. But removing on certainty completely means you can't

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Speaker 1: grow either, and I'm not sure if that's something you want.

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Speaker 1: I mean, providing a stock that is completely you know,

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Speaker 1: treading with a fixed price would solve that issue, But

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Speaker 1: would you want that? I think not. So I think

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Speaker 1: that's that That's a good example of what we're dealing

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Speaker 1: with here we where we go on. I just wanna

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Speaker 1: clarify this because I think this is important to understanding

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Speaker 1: your argument. So in a typical sort of like portfolio channel,

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Speaker 1: you're like raise the interest rate and that creates some

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Speaker 1: sort of like marginal incentive to hold lira. But if

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Speaker 1: people are holding dollars as a tail risk hedge, then

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Speaker 1: it really doesn't solve the problem. Can you just explain

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Speaker 1: a little bit further this idea, the tail risk hedge

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Speaker 1: against what And you sort of mentioned the premature opening

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Speaker 1: of the capital account in the late eighties, But what

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Speaker 1: is the impulse to hold such a strong um tail

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Speaker 1: risk hedge and how is this not previously appreciated by policy?

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Speaker 1: This is the dynamic of that previously appreciated by policymakers.

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Speaker 1: Let me describe what happened when they tried to hide

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Speaker 1: rates to solve this issue. And for a while it

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Speaker 1: looked like they solved this issue. After the two thousand

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Speaker 1: and one crisis in Turkey, there was this im stirchial

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Speaker 1: program and you know the primary objective of that program,

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Speaker 1: it was to decrease inflation, you know, control inflation, and

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Speaker 1: to do that you have to provide some sort of

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Speaker 1: currency stability, and one of the major roadblocks in front

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Speaker 1: of that was dollarization. And it did something else as well.

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Speaker 1: It dollarization weakens the monetary transmission mechanisms. So you're they

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Speaker 1: hired the dollarization your montree policy works, you know, whereas

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Speaker 1: hiking the interest rates a lot, providing a huge amount

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Speaker 1: of real interest rate to savers should have done the trick,

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Speaker 1: and for a while it did. I mean, after the

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Speaker 1: two thousand and one crisis, at the dollarization rates in

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Speaker 1: Turkey was around sixty percents and in two thousand and

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Speaker 1: twelve it was down to so it seemed like it

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Speaker 1: resolved issue, right. It didn't. It created a huge and

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Speaker 1: various structural issues the Turkish economy is still dealing with today.

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Speaker 1: One of the things that it did it was, you know,

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Speaker 1: by the way, for about ten years, Turkish economy offered

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Speaker 1: twenty points of real interest ring. It is prohibitively expensive.

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Speaker 1: That that's why I said, you know, fixing the price

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Speaker 1: of Tesla indefinitely would solve the issue of put buyers.

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Speaker 1: That that's pretty much what happened. It was so expensive

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Speaker 1: that it removed almost all volatility, so it did not

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Speaker 1: make sense statically, not dynamically to whole dollars, so it

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Speaker 1: decreased tolarization, but it also created another issue. And for

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Speaker 1: us to understand what, you know, how this issue emerged,

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Speaker 1: I'm going to have to talk about the incentive structure

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Speaker 1: of the economy. So the policymaker would want the economy

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Speaker 1: to grow, right, because that's how you create jobs, and

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Speaker 1: if you create jobs, you get reelected. And for you

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Speaker 1: to grow the economy, there two things you can do,

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Speaker 1: you know, on an accounting identity based basis, you can

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Speaker 1: either increase liabilities or you can increase equity. And you can,

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Speaker 1: in the Turkish case, you can increase liabilities in Turkish

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Speaker 1: lira or some other foreign currency. And if you want

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Speaker 1: to do this, if you want to grow sustainably, you preferably,

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Speaker 1: you know, want to do this in Turkish later because

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Speaker 1: you are not able to print the foreign currency. But

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Speaker 1: let's say a bank issued a new loan denominating in

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Speaker 1: Turkish lira. If this was a closed economy, completely closed,

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Speaker 1: no exports, no importonal capital flows, there's and there's a

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Speaker 1: single bank, no no reserve requirements or some sort. If

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Speaker 1: there is one lira of loan issued, you have to

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Speaker 1: have one lira of deposits. Right, it's it's it's an identity.

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Speaker 1: There's no way there's money could escape, so there is

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Speaker 1: no chance of a bank run apart from the you know,

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Speaker 1: uh sure to risk here something like that. So fractional

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Speaker 1: reserve banking this is not you have complete matching events

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Speaker 1: is liability in currency. The problem is there might be

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Speaker 1: some bleeds in the structure. So let's see you issue

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Speaker 1: it a loan. It might turn into dollar deposits by households.

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Speaker 1: It might go to dividend and net dividend and interest

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Speaker 1: rate payments abroad. It might pay for your imports. You

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Speaker 1: might get influence from exports. This adds too, there's this

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Speaker 1: issue for capabling flows and out flows. And I include

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Speaker 1: f d iron here as well. So if you notice

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Speaker 1: what I described, the last four or five components of

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Speaker 1: this equation is precisely the balance of payments equation. So

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Speaker 1: that means if you issue a little loan and you

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Speaker 1: burn reserves, you will have fewer lit deposits than you

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Speaker 1: have little loans. And there are three bonus of this

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Speaker 1: bouncier payments equation, and in d M there are only two.

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Speaker 1: That matters. You have foreign capital inflows and outflows, and

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Speaker 1: you have imports and exports. In the Turkish case, there's

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Speaker 1: a crucial third component that is dollarization. I'm going to

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Speaker 1: explain how these two are impossible to balance. At the

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Speaker 1: same time. Some folks are calling this the fear of floating.

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Speaker 1: I think, I mean they're presenting it as a choice.

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Speaker 1: I'm arguing that this is not a choice. This is

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Speaker 1: simply a result of this structure. If you have this structure,

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Speaker 1: you have no other choice, then you know, go for

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Speaker 1: fear of fear of floating. So let's say you want

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Speaker 1: to solve the issue of dollarization, and to do that,

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Speaker 1: if you want to go the way of fiking interest

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Speaker 1: rates like Turkey did in two thousand and twelve, you

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Speaker 1: have to increase it by a lot, untoven twenty points

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Speaker 1: of real interest rates. When you do that, currency stabilizes,

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Speaker 1: so that that's that's good, all right. Foreign capital probably

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Speaker 1: flows in because you're paying a huge amount of money

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Speaker 1: for them to do that, but your exports and imports

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Speaker 1: are not going to match because you now made your

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Speaker 1: exports hugely expensive for others and imports hugely cheap for

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Speaker 1: your own consumers. So if you try to solve with

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Speaker 1: dollarization by congrades, you'll have earrant account issues. If you

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Speaker 1: try to solve euarant account issues, you know, by devaluing

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Speaker 1: your currency, then you'll have dollarization issues and form capital

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Speaker 1: netflorm capital issues. Capital will flow out because there's momentum,

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Speaker 1: and instability breeds instability. There will be dollarization. If you

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Speaker 1: want to solve form capital and flow out flow issues

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Speaker 1: with let's say you hide interest rates again, you will

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Speaker 1: have the problem with Guarentt account. What I'm trying to

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Speaker 1: say is if you want to take the structure given

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Speaker 1: and acts as among Montrey policy maker, there is no

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Speaker 1: way you can do policy growth policy based on lyra.

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Speaker 1: If you want to solve dollarization, you can't grow by

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Speaker 1: issuing lira loans. Issuing lieral LANs with the structured will

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Speaker 1: breed instability. So what did the Turkish policy makers do

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Speaker 1: to grow? They took the structure as given an act

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Speaker 1: in accordance with that, so they preferred foreign capital. If

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Speaker 1: you can't issue lira loans, you can get lira sorry,

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Speaker 1: foreign currency loans from abroad and invests in consume with that.

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Speaker 1: And that's precisely what happened, and Turkey was able to

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Speaker 1: grow on average seven percent every year in the first

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Speaker 1: five six years of that period after the two thousand

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Speaker 1: and one prices. The problem is, this only works when

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Speaker 1: the global USD cycle works in your favor, and it

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Speaker 1: did work in Turkey's favor at the time. There was

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Speaker 1: this lot of us D liquidity and that kept on

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Speaker 1: going until the taper tension of two thousand and twelve.

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Speaker 1: And that was the reckoning because until that moment, everybody

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Speaker 1: was praising the Turkish economy. You know, Montree policy is independent,

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Speaker 1: but they are still able to grow and they solve

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Speaker 1: the issue of dollarization and there is no inflation. This

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Speaker 1: is a successful economy, they were saying, and it did

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Speaker 1: look that way. The problem is, once that global USD

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Speaker 1: cycle reckoning came, this old structure king trumbling down because

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Speaker 1: now you can't get effects loans from abroad as well,

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Speaker 1: you have a huge issue with form capital flows and

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Speaker 1: because of this structure, you are not able to grow

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Speaker 1: by issuing literal loans in a sustainable manner or either.

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Speaker 1: So after that point you started to see Mr President

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Speaker 1: getting more anxious, getting more restless about the Montree policy.

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Speaker 1: That's why I in the beginning said I you know

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Speaker 1: look at incentives. I do not I tried to analyze

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Speaker 1: incentive because it is completely a result of the incented structure.

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Speaker 1: So can I just jump in here? And so just

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Speaker 1: to recap, so Turkey has the stollarization problem. It's difficult

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Speaker 1: for it to adjust interest rates in the way it

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Speaker 1: needs to without causing some sort of current account issue.

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Speaker 1: And that wasn't a problem for a while, but then

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Speaker 1: we had the Taper tantrum and we had a retreat

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Speaker 1: of dollar liquidity, and suddenly this issue of dollarization really

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Speaker 1: comes to the four Could you maybe walk us through

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Speaker 1: what exactly are Dowan announced this week when it comes

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Speaker 1: to the new um effex mechanism, this new program to

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Speaker 1: try to halt the slide in the lira, and how

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Speaker 1: it anticipates trying to solve that problem of using the

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Speaker 1: dollar as a tail risk hedge as you described. I mean,

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Speaker 1: the most popular press covered this ethics deposit instrument the most,

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Speaker 1: but there were two other things in there as well.

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Speaker 1: The main piece in that package was an instrument that

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Speaker 1: completely replicates the payoff structure that tailhage. So if you

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Speaker 1: deposit your money and through this new instrument and the

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Speaker 1: US de lira exchange rates does not depreciate more than

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Speaker 1: the prevailing central bank interest rate, you're gonna receive the

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Speaker 1: central bank interest rate. But if it literally depreciates more

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Speaker 1: than that interest rates, you're going to be paid for that.

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Speaker 1: So if literally depreciates eight and the interest rate prevailing

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Speaker 1: interest rate is fourteen percent, either the Treasury or the

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Speaker 1: CBRT will cover your air quotes loss. There as I

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Speaker 1: said it, it is a free call option on US

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Speaker 1: de leer exchange. If you are getting into this instrument

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Speaker 1: from your usc deposit accounts, you're going to be dealing

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Speaker 1: with cb r T and CBRT will be covering your loss.

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Speaker 1: And if you have already a lirac condition you put

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Speaker 1: your liric account money to into this new instrument, you're

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Speaker 1: going to be dealing with the Treasury and they will

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Speaker 1: be covering the losses. And why did they do this

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Speaker 1: Probably because you know, if it's already a USD deposit,

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Speaker 1: dealing with the CBRT directly is easier. It becomes a

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Speaker 1: CBRT reserve dat amounts. And if you have a Lira accounts,

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Speaker 1: dealing with the Treasury is easier because you know there's

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Speaker 1: nothing for the central thing to do, and it is

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Speaker 1: some sort of a risk sharing program because if you know,

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Speaker 1: half of the new money into this instrument comes from

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Speaker 1: already US accounts and the risk comes from Turkish there accounts,

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Speaker 1: the treasury will not be assuming that much risk, which

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Speaker 1: was the main discussion point in the press. I guess

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Speaker 1: one of the things that people wonder is like, well,

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Speaker 1: doesn't this just put pressure on the fiscal balance, taking

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Speaker 1: it off the central banks balance shade, putting out on

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Speaker 1: the fiscal balance. We've seen Turkish credit default swaps rise

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Speaker 1: in recent days. Perhaps why does this actually fundamentally change

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Speaker 1: anything rather than just as you put it, um, you know,

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Speaker 1: shift risk away from the central bank to the treasury.

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Speaker 1: Joey's it works. It actually decreases I think will decrease

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Speaker 1: the CDs premiums because it transforms balance of payments issue

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Speaker 1: to a fiscal issue, and that fiscal issue is completely

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Speaker 1: denominated in Turkish lyrists. It is something you can print

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Speaker 1: and it should degrees risk in your foreign currency of liabilities.

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Speaker 1: And did it? This is the direct interpretation. If you

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Speaker 1: use the framework, if you somehow solve the dollarization issue,

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Speaker 1: if you if you're able to create this kitchen sync

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Speaker 1: so whenever you issue new lera loans, you do you

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Speaker 1: do not have to deal with the dollarization pressure. It

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Speaker 1: will be the first time in I said this in

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Speaker 1: the beginning, but it will be the first time in

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Speaker 1: Turkish history that the growth goal of the policy maker

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Speaker 1: and the price stability goal of the central bank are

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Speaker 1: not going to be in direct contradiction. So that is

430
00:28:54,000 --> 00:28:58,080
Speaker 1: why I think it it is hugely risk positive. So

431
00:28:58,320 --> 00:29:00,880
Speaker 1: in other words, it sounds like basically what you're saying,

432
00:29:00,960 --> 00:29:03,840
Speaker 1: if I could just sort of essentially, this creates a

433
00:29:03,880 --> 00:29:07,080
Speaker 1: way for Turkish household to have a tail risk hedge

434
00:29:07,280 --> 00:29:13,480
Speaker 1: that doesn't involve automatically buying dollars, Yes, yes, that is yes.

435
00:29:15,320 --> 00:29:18,920
Speaker 1: So can I just ask just on the fiscal question

436
00:29:19,000 --> 00:29:21,960
Speaker 1: and whether or not this is going to impact Turkey's

437
00:29:22,000 --> 00:29:24,160
Speaker 1: balance sheet, which has been you know, one of the

438
00:29:24,200 --> 00:29:28,080
Speaker 1: bright spots of the Turkish economy recently. So one of

439
00:29:28,120 --> 00:29:32,480
Speaker 1: the perhaps unfair things about the way the world currently

440
00:29:32,560 --> 00:29:37,000
Speaker 1: works is that foreign investors do have an enormous amount

441
00:29:37,000 --> 00:29:41,440
Speaker 1: of power on emerging market economies in particular, and this

442
00:29:41,480 --> 00:29:43,760
Speaker 1: is you know, part of the problem of what's happened

443
00:29:43,760 --> 00:29:48,120
Speaker 1: in Turkey is that we have bond vigilantes or inflation

444
00:29:48,200 --> 00:29:52,000
Speaker 1: vigilantes who have gotten nervous about what's happening there and

445
00:29:52,160 --> 00:29:56,040
Speaker 1: have you know, put additional pressure on the currency. So

446
00:29:56,120 --> 00:29:59,840
Speaker 1: I guess my question is how is Turkey going to

447
00:30:00,040 --> 00:30:06,000
Speaker 1: at foreign investors on side for a new currency stability

448
00:30:06,040 --> 00:30:10,960
Speaker 1: mechanism that people are unfamiliar with and which on the

449
00:30:11,000 --> 00:30:14,920
Speaker 1: surface looks like it's going to diminish the country's fiscal

450
00:30:15,480 --> 00:30:22,120
Speaker 1: ability or fiscal strength. I think they're basically three scenarios. First,

451
00:30:22,520 --> 00:30:25,760
Speaker 1: if the take up rate of this new instrument is low,

452
00:30:26,560 --> 00:30:29,640
Speaker 1: that means the treasury is not assuming that much risk

453
00:30:30,520 --> 00:30:32,160
Speaker 1: that will be did you boy? I guess if the

454
00:30:32,280 --> 00:30:37,120
Speaker 1: take up rate is high because of the current stock

455
00:30:37,160 --> 00:30:40,920
Speaker 1: of foreign investment Disturkey, which which is extremely low, especially

456
00:30:40,920 --> 00:30:46,120
Speaker 1: in bonds, it is almost non existent, and they I

457
00:30:46,120 --> 00:30:49,400
Speaker 1: mean foreigners can almost completely lift the swaps as well.

458
00:30:49,760 --> 00:30:53,400
Speaker 1: There is some amount of investment iniquities, but that is

459
00:30:53,480 --> 00:30:56,680
Speaker 1: for some reason rather stable. I mean that lived through

460
00:30:56,840 --> 00:30:58,719
Speaker 1: any type of crisis we had in the last four

461
00:30:58,760 --> 00:31:03,160
Speaker 1: or five years in looting the twenty eighteen prices. So

462
00:31:03,240 --> 00:31:06,440
Speaker 1: if you assume that equity stock, who is going to

463
00:31:06,520 --> 00:31:12,040
Speaker 1: be stable going forward? I don't think foreign investors matter

464
00:31:12,240 --> 00:31:16,240
Speaker 1: that much. So that leaves dollarization and current accounts as

465
00:31:16,320 --> 00:31:20,200
Speaker 1: the determinants of reserves. Then the exchange yates. So if

466
00:31:20,240 --> 00:31:23,840
Speaker 1: you if the take up rate is high and currently

467
00:31:24,160 --> 00:31:30,600
Speaker 1: the Church economy is having current account surpluses, and our

468
00:31:30,680 --> 00:31:35,000
Speaker 1: internal analyses show that for their first time in September,

469
00:31:35,560 --> 00:31:39,360
Speaker 1: as far as I remember, Turkey had a seasonally adjusted

470
00:31:39,560 --> 00:31:43,960
Speaker 1: current account surplus. This is especially positive because Turkey is

471
00:31:43,960 --> 00:31:49,920
Speaker 1: a huge commodity importer and despite the global commodity prices

472
00:31:50,000 --> 00:31:54,960
Speaker 1: sky racting, Turkey is able to have current count surpluses,

473
00:31:55,240 --> 00:31:58,040
Speaker 1: so that's good. That leaves the dollarization and if the

474
00:31:58,080 --> 00:32:00,840
Speaker 1: take up rate is high here, that's that means the

475
00:32:00,920 --> 00:32:06,640
Speaker 1: totalization issue is getting resolved. In that case you will

476
00:32:06,720 --> 00:32:11,600
Speaker 1: not have ANFX pressure, so the treasury you will not

477
00:32:11,680 --> 00:32:15,360
Speaker 1: have much to deal with there either. So the last

478
00:32:15,360 --> 00:32:20,120
Speaker 1: case is some exogenous shock that is unpredictable. Can it happen?

479
00:32:20,200 --> 00:32:25,560
Speaker 1: It can, but I don't think this mechanism increasing the

480
00:32:26,160 --> 00:32:29,640
Speaker 1: you know, pressure on the treasury and increasing the risk

481
00:32:29,720 --> 00:32:33,280
Speaker 1: there is a very assessment based on the base cases.

482
00:32:34,320 --> 00:32:38,360
Speaker 1: You know, the world is an interesting place. Some incredible

483
00:32:38,360 --> 00:32:41,240
Speaker 1: thing might happen, but it's not my base case, let's

484
00:32:41,320 --> 00:32:44,320
Speaker 1: phrase it like that. Can you just expect real quickly?

485
00:32:44,400 --> 00:32:48,520
Speaker 1: You mentioned Turkey as a commodity importer. Uh, commodities are

486
00:32:48,600 --> 00:32:54,120
Speaker 1: very high. Howard's current Howard Turkey currently running a current account. Surplus.

487
00:32:54,800 --> 00:33:00,320
Speaker 1: Services are induced surplus, mainly tourism. And you know, one

488
00:33:00,360 --> 00:33:05,240
Speaker 1: good thing about Turkish tourism is it it's elasticity to

489
00:33:06,160 --> 00:33:10,320
Speaker 1: the real effective exchange. It is pretty high. So when

490
00:33:10,360 --> 00:33:13,600
Speaker 1: you depreciate your currency, you get more bank for your

491
00:33:13,720 --> 00:33:17,080
Speaker 1: buck than what you have in the good side. So

492
00:33:17,200 --> 00:33:22,040
Speaker 1: that is a huge positive. And if COVID is you know,

493
00:33:22,440 --> 00:33:24,160
Speaker 1: if coal is not going to be a huge issue

494
00:33:24,200 --> 00:33:27,640
Speaker 1: in the near future, which I think it will not be,

495
00:33:28,240 --> 00:33:31,720
Speaker 1: but you know, that's a debate. Turkey will keep giving

496
00:33:31,760 --> 00:33:37,040
Speaker 1: current account of surpluses. One risk is, yeah, imports are

497
00:33:37,560 --> 00:33:40,520
Speaker 1: way higher because of the community prices, but exports are

498
00:33:40,600 --> 00:33:43,360
Speaker 1: higher as well because the global economy was staging an

499
00:33:43,360 --> 00:33:47,600
Speaker 1: impressive recovery. If some have the global central bank moves

500
00:33:49,080 --> 00:33:53,440
Speaker 1: decrease that, you know, hurt that recovery more than they

501
00:33:53,440 --> 00:33:58,800
Speaker 1: decrease communty prices. Turkey might have some issues, but again

502
00:33:58,880 --> 00:34:01,600
Speaker 1: that's not my space out there or anything. Come on,

503
00:34:01,680 --> 00:34:05,760
Speaker 1: two prices are much more susceptible to the USD cycle

504
00:34:05,920 --> 00:34:12,040
Speaker 1: than global growth. So I'm overall optimistic about the future

505
00:34:12,239 --> 00:34:15,960
Speaker 1: curan ticun of situation in Turkey. I guess my next

506
00:34:16,040 --> 00:34:19,160
Speaker 1: question is when would we expect to see or would

507
00:34:19,200 --> 00:34:23,480
Speaker 1: we expect to see published take up figures for the

508
00:34:23,600 --> 00:34:28,359
Speaker 1: new m X plan. And then secondly, what are you

509
00:34:28,400 --> 00:34:32,680
Speaker 1: watching in order to see whether or not it's working?

510
00:34:32,760 --> 00:34:35,600
Speaker 1: And I realized, you know, watching the lira would be

511
00:34:36,200 --> 00:34:39,279
Speaker 1: the obvious thing to do. But are you looking at

512
00:34:39,560 --> 00:34:42,440
Speaker 1: the take up figures or I don't know, maybe pressure

513
00:34:42,480 --> 00:34:45,680
Speaker 1: on Turkey's foreign reserves or something like that to see

514
00:34:45,760 --> 00:34:52,920
Speaker 1: whether or not, uh, this is actually pressuring Turkey's fiscal position. Well,

515
00:34:53,040 --> 00:34:56,239
Speaker 1: there's one main thing I'm looking at. I mean, the

516
00:34:56,320 --> 00:35:01,319
Speaker 1: equation I talked about is more or less than identity.

517
00:35:01,400 --> 00:35:04,719
Speaker 1: So I look at the difference between new literal loan

518
00:35:04,800 --> 00:35:11,239
Speaker 1: shoeings minus the new deposits in Neurope. So if that

519
00:35:11,400 --> 00:35:15,919
Speaker 1: is not a huge number, that means things are going well,

520
00:35:16,560 --> 00:35:19,880
Speaker 1: we are not burning that much you know that many reserves.

521
00:35:20,520 --> 00:35:26,560
Speaker 1: If that number is giving negative signals, that means dollarization, shoot,

522
00:35:26,640 --> 00:35:30,040
Speaker 1: dollalization pressure is still there despite the current accome surplus,

523
00:35:30,680 --> 00:35:33,200
Speaker 1: so that might be alarming, and I'm going to keep

524
00:35:33,239 --> 00:35:37,840
Speaker 1: watching that number going forward. You know, it's interesting because

525
00:35:37,840 --> 00:35:42,279
Speaker 1: earlier Tracy asked about what it would take to sort

526
00:35:42,280 --> 00:35:45,680
Speaker 1: of get foreign capital on side. But to my you know,

527
00:35:45,760 --> 00:35:48,360
Speaker 1: like the question that I'm sort of wondering about is

528
00:35:49,080 --> 00:35:51,279
Speaker 1: this sort of like I guess, the domestic take up.

529
00:35:51,280 --> 00:35:54,000
Speaker 1: I mean, basically what Tracy just asked, this domestic take up?

530
00:35:54,360 --> 00:35:57,440
Speaker 1: How much understanding does there have to be and how

531
00:35:57,520 --> 00:36:02,120
Speaker 1: much convincing from this sort of government, from banks to

532
00:36:02,480 --> 00:36:06,799
Speaker 1: retail depositors, to the public to the depositors about how

533
00:36:06,840 --> 00:36:09,759
Speaker 1: these new mechanisms will work, and how does the how

534
00:36:09,760 --> 00:36:13,680
Speaker 1: do the banks and government establish credibility that this uh

535
00:36:13,840 --> 00:36:16,040
Speaker 1: you know, this free put or this free dollar lyric

536
00:36:16,080 --> 00:36:19,120
Speaker 1: call option that they're being offered is actually going to

537
00:36:19,200 --> 00:36:22,640
Speaker 1: be given to them? How is there a credibility risk

538
00:36:22,680 --> 00:36:27,799
Speaker 1: on that side after such a hugely mulatile period, there

539
00:36:27,960 --> 00:36:32,240
Speaker 1: is a risk of credibility deficit. The fiscal positive position

540
00:36:32,239 --> 00:36:35,799
Speaker 1: of Turkey is you know, I mean, it's Tracy put

541
00:36:35,800 --> 00:36:40,719
Speaker 1: it one of his biggest strengths. So that argument and

542
00:36:40,840 --> 00:36:45,319
Speaker 1: the basic structure of the new instrument should suffice. It

543
00:36:45,440 --> 00:36:49,959
Speaker 1: is almost a no brainer. Excuse my language, but you're

544
00:36:50,160 --> 00:36:55,680
Speaker 1: being offered lira interest rates on effects deposits. Basically, effects

545
00:36:55,760 --> 00:37:02,160
Speaker 1: deposits currently pay like one and lira pays around and

546
00:37:02,719 --> 00:37:07,320
Speaker 1: you are hasty against any upside in U S delera exchange,

547
00:37:07,400 --> 00:37:12,080
Speaker 1: and so it is a complete no brainer. I think

548
00:37:12,840 --> 00:37:17,279
Speaker 1: people will want to see, you know, their friends or

549
00:37:17,560 --> 00:37:21,480
Speaker 1: and family who got into this instrument getting paid first,

550
00:37:21,600 --> 00:37:25,160
Speaker 1: and after that, I think the take up rate will increase.

551
00:37:25,200 --> 00:37:30,400
Speaker 1: By the way, the Treasury Ministry today announced that, uh,

552
00:37:30,600 --> 00:37:36,000
Speaker 1: there was you know, about ten billion lyrists up until

553
00:37:36,040 --> 00:37:40,759
Speaker 1: now that got in to this new instrument. I don't

554
00:37:40,760 --> 00:37:44,920
Speaker 1: know if they're gonna regularly publish the figures about this,

555
00:37:45,239 --> 00:37:47,840
Speaker 1: but you know, we have this state at this moment.

556
00:37:48,440 --> 00:37:50,840
Speaker 1: You know, one question I have. It seems to me,

557
00:37:51,719 --> 00:37:53,520
Speaker 1: and I don't know if this is if I'm thinking

558
00:37:53,520 --> 00:37:55,840
Speaker 1: about this exactly right, but it seems to me that

559
00:37:56,840 --> 00:38:00,400
Speaker 1: it's one of these things where if it works, it

560
00:38:00,560 --> 00:38:03,720
Speaker 1: will in theory wouldn't even be necessary. So you offer

561
00:38:03,840 --> 00:38:08,840
Speaker 1: these special effects hedged accounts. Basically some people have described

562
00:38:08,880 --> 00:38:12,800
Speaker 1: them as like tips meat c d s and obviously,

563
00:38:12,800 --> 00:38:15,360
Speaker 1: as you put it, a three dollarlier call option. But

564
00:38:15,400 --> 00:38:17,880
Speaker 1: it seems to me that the in theory, if it works,

565
00:38:18,320 --> 00:38:21,840
Speaker 1: you don't actually need people to transfer the money into

566
00:38:21,880 --> 00:38:26,080
Speaker 1: these accounts because the existence of these accounts is essentially

567
00:38:26,440 --> 00:38:28,560
Speaker 1: stemmed the sell off. Is that a sort of like

568
00:38:28,880 --> 00:38:32,480
Speaker 1: fair characterization or is that something that victory would look like?

569
00:38:34,000 --> 00:38:39,759
Speaker 1: That is a completely fair characterization, and it is basically

570
00:38:39,800 --> 00:38:45,400
Speaker 1: how it went in other countries that applied similar schemes,

571
00:38:45,440 --> 00:38:49,200
Speaker 1: like Brazil and Israel. There's a lot of talk about,

572
00:38:49,400 --> 00:38:52,000
Speaker 1: you know, what tricky is doing, has tried before and

573
00:38:52,080 --> 00:38:55,160
Speaker 1: it failed, things like that. You know, I'd like to

574
00:38:55,160 --> 00:38:58,719
Speaker 1: address that because there's a crucial difference. That's why I

575
00:38:58,760 --> 00:39:02,200
Speaker 1: think they diagnosed a proba right, because this is strictly

576
00:39:02,280 --> 00:39:07,360
Speaker 1: limited to real people. This excludes corporates, this exclude foreigners.

577
00:39:08,360 --> 00:39:11,640
Speaker 1: Because there were some schemes in Argentina, there was some

578
00:39:12,280 --> 00:39:15,600
Speaker 1: there was one in Turkey's past and like seventies or

579
00:39:15,640 --> 00:39:21,000
Speaker 1: something that targeted folks living abroad, and that is a

580
00:39:21,160 --> 00:39:24,040
Speaker 1: short fire way of creating a balance of payments issue

581
00:39:24,120 --> 00:39:28,880
Speaker 1: because if her target group has a balance sheet denominated

582
00:39:28,880 --> 00:39:32,560
Speaker 1: in a foreign currency, anytime they want to take their

583
00:39:32,600 --> 00:39:35,520
Speaker 1: money out, you're gonna have issues with your reserves. But

584
00:39:36,719 --> 00:39:41,280
Speaker 1: because This is just you know, exclusively for local folks

585
00:39:41,320 --> 00:39:46,319
Speaker 1: who consume goods in Turkish lyra, and you know they

586
00:39:46,360 --> 00:39:49,640
Speaker 1: care about the Turkish lyra. They do not care about there.

587
00:39:49,920 --> 00:39:52,879
Speaker 1: They do not have a foreign currency denominated balance sheet.

588
00:39:53,520 --> 00:39:55,839
Speaker 1: That is why I think they got it right, and

589
00:39:55,920 --> 00:39:58,120
Speaker 1: that is why I think this has a chance of working.

590
00:39:58,640 --> 00:40:03,080
Speaker 1: Because wherever it work, like in Brazil and Israel, this

591
00:40:03,239 --> 00:40:05,719
Speaker 1: is why it worked. They did not target foreigners. They

592
00:40:05,760 --> 00:40:09,160
Speaker 1: targeted to locals. They tried to solve dollarization. They did

593
00:40:09,239 --> 00:40:12,239
Speaker 1: not want to attract form in flows because if you

594
00:40:12,280 --> 00:40:15,359
Speaker 1: want to attract formnin flows sustainably, this is a bad

595
00:40:15,400 --> 00:40:17,799
Speaker 1: way of doing that. If you want to solve dollarization.

596
00:40:17,960 --> 00:40:23,880
Speaker 1: Just this word. Thank you so much that I genuinely

597
00:40:24,160 --> 00:40:27,080
Speaker 1: learned a lot from that conversation. Thank you for having me.

598
00:40:27,880 --> 00:40:31,360
Speaker 1: But yeah, that was great. Thanks, that was really interesting.

599
00:40:41,440 --> 00:40:47,120
Speaker 1: I felt that extremely helpful. It's pretty complicated, obviously, and

600
00:40:47,480 --> 00:40:50,919
Speaker 1: you know when sometimes in all these conversations my head

601
00:40:50,960 --> 00:40:53,680
Speaker 1: can hurt thinking about you know, the capital account, the

602
00:40:53,719 --> 00:40:57,800
Speaker 1: current account and all this. But this idea of understanding

603
00:40:57,880 --> 00:41:00,759
Speaker 1: that understanding this new scheme is like you know, a

604
00:41:00,840 --> 00:41:05,160
Speaker 1: tail risk hedge. Very interesting and very definitely helped me

605
00:41:05,200 --> 00:41:09,320
Speaker 1: understand the situation better. Yeah. Also your question about um

606
00:41:09,360 --> 00:41:12,879
Speaker 1: sort of the less people use it, the more it

607
00:41:13,000 --> 00:41:16,360
Speaker 1: might work. That kind of reminded me of the FEDS

608
00:41:16,360 --> 00:41:20,720
Speaker 1: corporate bond buying program from last year, where it actually

609
00:41:20,840 --> 00:41:24,160
Speaker 1: didn't end up buying that many corporate bonds because it

610
00:41:24,200 --> 00:41:27,200
Speaker 1: didn't need to. Just the promise of coming in and

611
00:41:27,239 --> 00:41:30,400
Speaker 1: stabilizing the market had the effect of stabilizing the market.

612
00:41:30,800 --> 00:41:35,440
Speaker 1: But that said, it's clearly a big bet on people

613
00:41:35,560 --> 00:41:39,279
Speaker 1: actually believing in this mechanism, right, and if it goes

614
00:41:39,320 --> 00:41:43,000
Speaker 1: the other way, if there's a massive take up and uh,

615
00:41:43,080 --> 00:41:46,720
Speaker 1: you know, the Turkish government ends up having to monetize

616
00:41:47,160 --> 00:41:49,719
Speaker 1: it's funding for that, then then you could see it

617
00:41:49,760 --> 00:41:53,640
Speaker 1: being a problem. This is exactly right, And I think

618
00:41:53,719 --> 00:41:56,080
Speaker 1: you know, if you think about first of all, you

619
00:41:56,080 --> 00:41:59,279
Speaker 1: mentioned the corporate bond buying program, also the municipal bond

620
00:41:59,320 --> 00:42:03,319
Speaker 1: buying program would also put m the o MT in

621
00:42:03,440 --> 00:42:07,239
Speaker 1: the Euro Area crisis, very similar thing. This idea of

622
00:42:07,280 --> 00:42:10,000
Speaker 1: like if you make a credible enough promise, you actually

623
00:42:10,000 --> 00:42:11,840
Speaker 1: never have to spend any money is sort of like

624
00:42:11,840 --> 00:42:14,880
Speaker 1: one of these core like ideas in uh, sort of

625
00:42:14,880 --> 00:42:17,840
Speaker 1: like central banking, and it's like this too. It's like, Okay,

626
00:42:17,840 --> 00:42:22,080
Speaker 1: we credibly promised to compensate you if the lyric plunges,

627
00:42:22,520 --> 00:42:24,800
Speaker 1: so hold your money and lira. And if the promise

628
00:42:24,880 --> 00:42:27,160
Speaker 1: is credible and everyone holds their money and lira, then

629
00:42:27,200 --> 00:42:29,239
Speaker 1: you don't have the problem of the lyric plunging and

630
00:42:29,239 --> 00:42:31,880
Speaker 1: you solve the dollarization problem, which could be huge. So

631
00:42:31,920 --> 00:42:35,000
Speaker 1: that's like a really interesting way that was really helpful

632
00:42:35,040 --> 00:42:36,839
Speaker 1: to think about it. But as you said just now,

633
00:42:37,080 --> 00:42:40,040
Speaker 1: like it is a really big bet because the fear,

634
00:42:40,520 --> 00:42:42,799
Speaker 1: it seems to me, would be you have a significant

635
00:42:43,000 --> 00:42:46,279
Speaker 1: portion of the population taken up essentially like take up

636
00:42:46,320 --> 00:42:49,120
Speaker 1: this insurance, but then you also have a significant portion

637
00:42:49,120 --> 00:42:52,680
Speaker 1: of the population who like if they continue to dollarize

638
00:42:52,680 --> 00:42:55,560
Speaker 1: in the lira, uh continue where to continue to plunge,

639
00:42:56,080 --> 00:42:58,120
Speaker 1: and then the government is on the hook for this

640
00:42:58,200 --> 00:43:01,880
Speaker 1: big put option that it's given everyone or a call option. However,

641
00:43:02,200 --> 00:43:04,320
Speaker 1: depending on which side of the pea trade you're talking about,

642
00:43:04,640 --> 00:43:07,400
Speaker 1: then you could see it being like a very costly

643
00:43:07,480 --> 00:43:12,239
Speaker 1: bed from the fiscal perspective totally. And I know you

644
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Speaker 1: and I have both spoken about this already, but it

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Speaker 1: is a little bit reminiscent of certain cryptocurrencies that tell

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Speaker 1: everyone to you know, hoddle or if everyone just holds

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Speaker 1: on and never sells, everyone is going to benefit. There

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Speaker 1: is a threat of that in there. They're definitely there's gay.

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Speaker 1: It's gay. I mean it's exactly right because like the

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Speaker 1: sort of like the game theory of crypto, it's like

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Speaker 1: we all go to the one side of the payoff matrix,

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Speaker 1: we all win. It does feel like there is like

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Speaker 1: an element of game theory, and it really is going

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Speaker 1: to seem does the government have the credibility to get

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Speaker 1: everyone into this one corner of the matrix or enough

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Speaker 1: people that it stems the decline? But look like it

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Speaker 1: was a huge rally in the era when they announced that,

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Speaker 1: and so there is obviously litla point out some sort

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Speaker 1: of like wow this potentially it could be a game changer. Yeah, um,

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Speaker 1: it's working so far, but obviously we'll have to keep

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Speaker 1: an eye on it. Yeah, alright, shall we leave it there,

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Speaker 1: Let's leave it there. Okay. This has been another episode

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Speaker 1: of the All Thoughts Podcast. I'm Tracy Alloway. You can

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Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe

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00:44:21,400 --> 00:44:23,879
Speaker 1: wi Isn't Thal. You can follow me on Twitter at

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00:44:23,920 --> 00:44:27,759
Speaker 1: the Stalwart. Follow our producer on Twitter, Laura Carlson. She's

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00:44:27,840 --> 00:44:31,120
Speaker 1: at Laura M. Carlson. Followed the Bloomberg head of podcast

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00:44:31,160 --> 00:44:34,800
Speaker 1: Francesca Levi at Francesca Today and check out all of

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Speaker 1: our podcasts at Bloomberg under the handle at podcasts. Thanks

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Speaker 1: for listening year