Thread by @RickPetree

Something that’s becoming evident in the current Turkish financial crisis is that since, say, the major financial crisis of 2001, which wiped out 10% of GDP, GDP has more than tripled.

In the process, the middle class has accumulated far more wealth than it had in 2001 (when many were forced to sell their real estate, cars, any hard asset to pay debts).

Some of that middle class wealth is held in hard currencies, and has actually risen by as much as 40% as a result of the lira’s depreciation. Additional wealth is held in gold, which has similarly gained value against the lira.

The expansion of household wealth over the previous two decades is unevenly spread, and there is evidence of widening gaps between classes. The poor are undoubtedly suffering greatly as they struggle with inflation.

But the broad middle class does not seem to be in a panic. Tonight, the upscale Zorlu Center shopping mall’s restaurants and stores were humming. In 2001, at a comparable venue, there was not a single car in a vast parking lot and the place was a ghost town.

This is a wealthier, more resilient Turkey than the one that endured 2001. The crisis is hitting different segments of the society in different ways and the political effects of that will play out over time.

None of the above should be read to excuse or minimize the economic mismanagement which has led a proud country of 84 million into a dark and difficult corner.

Addendum: interesting stats here on individual bank account holdings in foreign currencies (around 65%). These accounts are showing large gains, in lira terms, as a result of lira’s depreciation. That’s the cushion’ I spoke of.
al-monitor.com/originals/2021…