Through a tweet, Hanke stated that Turkey, which has spent billions to strengthen the lira, can recover only through hard money.
At the time of writing this article, the Turkish lira is making new lows against the US dollar and other major currencies, in addition to Bitcoin (BTC).
Notably, the US dollar remains weak against several major currencies. However, that does not stop the lira from sliding to the lowest levels recorded in May.
#Turkey’s #Lira is toast. The central bank’s net foreign assets are a staggering negative $32 billion. Turkey has run out of ammunition in its futile defense of the hopeless lira. Only a gold-backed currency board can save the lira.https://t.co/d5dheA2ymS
— Prof. Steve Hanke (@steve_hanke) August 3, 2020
Hanke commented:
“#Turkey’s #Lira is toast.”
“The central bank’s net foreign assets are a staggering negative $32 billion. Turkey has run out of ammunition in its futile defense of the hopeless lira. Only a gold-backed currency board can save the lira.”
Turkey’s current scenario reminds us of Russia’s situation in 2014, when the Ukraine issue triggered a rout leading to a continuous selling of forex reserves by the Bank of Russia to stabilize the ruble.
A currency analyst at Netherland based Rabobank said that “They’re intervening quite heavily. And the question is how long they can do that.”
Ankara has decided not to intervene in Bitcoin related activities and at the same time has not recognized it as well, a decision starkly contrasts with PayPal ban four years back.
Hanke is not an advocate of Bitcoin and prefers other traditional assets. Back in June, he opined that Bitcoin is “not a currency.”
His opinion matches with that of Peter Schiff, an ardent supporter of gold, which is currently trading near historical high of $1,975.
Interventions in currency market is done by central banks, whenever necessary, to maintain stability or for some other specific reasons. Such interventions are usually pointed out while arguing in support of Bitcoin as an alternative to fiat money.
In his popular book titled “The Bitcoin Standard,” Saifedean Ammous has pointed out that Turkey is able to have a say in currency market only after the gold standard (pegging fiat to gold) was removed.
#Bitcoin is a highly speculative asset, not a currency. Unreliability, lack of stability, and susceptibility to fraud will continue to plague this #cryptocurrency. Don’t be tricked, buying bitcoin is a fool’s game. pic.twitter.com/OxToyYyWjv
— Prof. Steve Hanke (@steve_hanke) June 23, 2020
Through a post made on right time, Ammous pointed out a 1957 write up made by Ludvig von Mises as a critical tool against kneeling down to what he referred to as the “inflationist nonsense” of fiat.
The theory put forth by Mises is as follows:
“Nothing is more important today than to enlighten public opinion about the basic differences between genuine liberalism, which advocates the free market economy, and the various interventionist parties which are advocating government interference.”
Imagine how much better the world would be if this essay from Mises was taught at universities instead of semi-literate Keynesian totalitarian inflationist nonsense.https://t.co/2aLHV25z4q fixes this!https://t.co/qPpVG2GFJO pic.twitter.com/4mR3pxgd7M
— Saifedean Ammous (@saifedean) August 3, 2020