Odd Lots - Paul Mcnamara on the Problem With Turkey, and the Attempt To Save the Lira

Episode Date: January 17, 2022

Near the end of 2021, Turkey's government undertook a bold measure to stabilize the lira after the currency got clobbered throughout much of the year. The basic idea is that the government would pay savers to lock up their currency in lira, and compensate them if it fell too far against the dollar. But can it work? Does it address the core problem of the Turkish economy? To understand more, and to get the perspective of outside investors, we speak with Paul McNamara, a fund manager at GAM and a veteran EM watcher, to get a handle on the government's new measure, the challenges with it, and why Turkey is prone to so much volatility.See omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask, Alexa, play the Odd Lots podcast on Amazon Music. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. Unfortunately, my colleague Tracy Alloway is out today, so it will just be me. But I'm very excited nonetheless about this episode because we are going to continue speaking about one of the more interesting. and complicated, or at least seems complicated, stories developing right now in markets. And that is the situation in Turkey. And if you haven't already, a couple weeks ago, we published an episode with the economist Litvila Bingle based in a bank in Istanbul, basically walking through some of the measures that the Erdogan government has taken recently to stabilize the lira. And of course, the lira had a pretty terrible 2021.

It feels like, as we said on that episode, that every nine months or every year, every year and a half, there's a pretty big episode in Turkey where the currency plunges and the government engages in seemingly unorthodox monetary policy. Nonetheless, none of it seems to have worked. Inflation is extremely high. And so the argument is or the attempt by the government is to discourage domestic savers from moving their money into dollars and to hold their money in lira. So far, you know, this has been a goal for a while. Turkey is a heavily dollarized economy. By and large, though, nothing has worked. So I would encourage people to listen to that episode for a discussion of the mechanics. But of course, anything new is bound to be very controversial.

and there's a lot of views and a lot of skepticism about whether anything will improve with the new measures. And so we want to continue on the topic. And of course, in the last episode, we spoke to an economist at a Turkish bank. But this time we want to get the perspective that's a little bit more international from the international investing community. And I'm extremely excited about our guest. He's been on the podcast two or three times in the past, often helping us all. understand what's going on in EM. And I think we've even talked Turkey specifically before, maybe in 2018 or 2019.

Nonetheless, very excited to welcome back to the show. Paul McNamara, he's an investment director at Gam, a longtime specialist in emerging markets. And so we are going to dive right in. So Paul, welcome back to Adlaas. Thanks very much. Before we even get to the current. measures and the current mechanisms that the government has put in place to attempt to stabilize the lira.

How would you characterize the long-term issues facing the country? Why is it in your view that we seemingly come back to Turkey in particular, I don't know, every year or every year and a half during some episode of high inflation and extreme currency volatility? It's something that tends to be particularly true of countries. which have a habit of getting themselves into trouble. Turkey isn't remotely in as much trouble as Argentina, but the mindset there is the same is that if you know a country is prone to, you know, 15, 20 percent or more corrections in the currency to overnight huge rises in interest rates or big

drops in bond prices, you tend to be to react much faster. And this goes as much for, you know, people with a bit of money in the bank, do they switch their money from lira's to dollars or back again or take their money out of the bank? You know, when you get this much volatility, it kind of creates its own volatility because people feel the need to react much faster. And just that willingness to react more quickly kind of creates, sort of enhances the volatility. So you get into this kind of volatility promoting spiral. Now, how much of this spiral would you say, is a function of, say, domestic institutions.

And of course, people perceive the Erdogan government to be engaged in, I would say, highly unorthodox views of how monetary policy works, lowering rates, blaming high rates for high inflation, et cetera. How much of this spiral is sort of the government's disinclination towards more orthodox policies versus sort of more behavioral explanations on the part of Turkish savers and their disinclination to hold a lira? Like, what is, why in particular does Turkey seem to exhibit this, this doom loop? I mean, I think it's really interesting because it's, it's kind of unusual to have a crisis,

which is, which is largely voluntary. It's not like you have to do some sort of thought experiment, you know, that what would be the counterfactual if Turkey had higher interest rates, because we know that, that before President Erdogan sacked Mr. Abbaal, the, the, the, the, the, the, previous head of the central bank. We had much higher interest rates and we had a lira that had been appreciating solidly for a couple of months. So in terms of the trigger for this particular situation, it's entirely, I think, on the shoulders of the government that they decided that they were going to play games, I think, is maybe a little bit casual, but they decided that

you know, that they could conduct a complete experiment in monetary policy. I mean, I think there are longer-term reasons why Turkey has been particularly prone to this boom-bust cycle. It's a country where the external deficit, you know, dips on a regular basis into deficit, into very substantial deficit. It's got much, much lower level of foreign exchange reserves than pretty much any of the other big EMs except maybe South Africa. You know, so it has fewer natural safeguards. I mean, I think the history of the volatility makes the consequences of policy experiments more serious. But, you know, primarily the, you know, the recent huge amount of volatility was a political choice by the government.

So, you know, why is that? Like, when we talk about these EMs that, flare up of the news from time to time. And Turkey, South Africa, Brazil, from time to time. What is it structurally? And you mentioned the lack of foreign exchange reserves and the sort of the thin cushion that the country has. Is there something structural about, well, what is it that I guess about the way the Turkish economy is structured in terms of domestic industry and so forth, such that

it maintains these vulnerabilities? and in your view, does a policy exist that could reverse some of these factors? I mean, I think the very substantial role for foreign currency and especially the U.S. dollar is definitely something that makes Turkey much more vulnerable, you know, that depositors regularly switch their money between lira and dollars, depending on, you know, on what they perceive the outlook for the currency to be. But probably more important is that an awful lot of the onshore debt is in US dollars. So not only do Turkish depositors keep a decent chunk of their savings in, well, I'll keep saying dollars. I mean, it does include especially euros. There's a few

other currencies, but we'll say dollars for simplicity, is that not just genuine foreign debt, I mean, debt owed to external institutions, but also onshore, the Turkish banks lend dollars to domestic borrowers. And if you owe a lot of dollars and the lira plunges, then you're going to end up chasing the lira. And that's especially true if you'll say running real estate or something like that, something without a natural stream of dollars. I mean, if you're a big exporter, then I think it makes a lot of sense, your revenues are in dollars. It makes a lot of sense to have your debt in dollars. Sure. But in Turkey, you know, a big, it's got a very, very strong and, well, I mean, not always vibrant, real estate sector, you know,

for a couple of years, I mean, before COVID, the share of real estate construction was ticking up towards the level we saw before the euro crisis in places like Spain. And if you're borrowing dollars without a natural source of dollars, then the very big role of the dollar in the economy is going to create volatility in itself, because it does mean that when the dollar strengthens, instead of making people look, oh, the dollar is expensive. if I won't buy some now, it's I desperately need these dollars, and if it moves even more, I'm going to be even further underwater. So I think the big role of the dollar, not just on the deposit side, but also on the debt side, is very important there. So this gets to, you know,

this sort of this gets to our discussion in our last episode in Turkey, which is people look at Turkey and they say, okay, what's, what's all this, you know, cutting interest rates where they should be hiking them and diminishing the independence of the central bank, sacking the central bank, and so forth. But how much is the core issue really the high level of dollarization? And is there an argument that nothing can be solved or no stability can be achieved until that's reversed in some manner? It's fairly clear that, you know, that the high level of dollarization creates more volatility. It makes any bad policy decision, any big external change. You be it a spike in the oil price or something like that, it will generate more volatility in a

highly dollarized economy like Turkey. But, you know, I mean, dollarization is by no means unique to Turkey, you know, that we've seen, I mean, most of the economies of central Europe were to a significant degree, maybe not to the same degree as Turkey, you know, oriented to, you know, first the Deutsche Mark and later the Euro. You know, there was a huge role for foreign debt in the Asian financial crisis going back a bit further. A lot of Latin America still has a significant role of dollar for dollarization. But, you know, an awful lot of countries across the emerging world have managed to reduce the level of dollarization in their economies. And that happens when they just manage to maintain macroeconomic stability. I mean, the one thing we haven't mentioned

yet is inflation. Sure. But the current crash or whatever you want to call it is primarily about inflation. I mean, nobody really cares that much. You know, there's no suggestion, if you look globally, that foreign investors demand a certain level of real interest rates generally to put money into a foreign economy or that, you know, domestics will always prefer to, you know, to hold foreign currency if real interest rates get too low. But in the specific situation we have here, where inflation is, well, I mean, even before the latest round of nightmarish numbers, inflation was already very high and have this perception that any sort of orthodox policy or not even or even an unorthodox policy which had some kind of logic behind it, you know, that there was no possibility

of anything like that. That's what's kind of creating its own kind of spiral because we saw the big drop in the LERA. And the result of that is that the latest CPI that was announced was 36% year on year, including 13 and a half percent in one month. And the PPI is 80. I mean, this is inflation ticking up from sort of nuisance and, you know, minor disruptive factor to something that becomes a real problem that makes taking economic decisions, even with a horizon of a few months, really very difficult. The key problem is not, oh, you know, interest rates are here rather than there. It's that inflation is very, very high, and the government either doesn't have a clue or doesn't

care. On inflation specifically, I mean, how much of this is just, I guess I would say, the inverse of the lira. And so how much of it is passed through from import? And so mechanistically, when the lira weakens, inflation goes up, et cetera, or are there other dynamics at play? There's a lot of other stuff at work. I mean, you know, as a very, very loose rule of thumb, the estimate of the pass through, you know, say is very, very very. roughly about a quarter or somewhere between a quarter and a fifth. So if you get a 10% rise and inflation, sorry, 10% drop in the lira, then that'll probably add somewhere between 2 and 2.5% to inflation. So it's part of it. But the factors which are at work everywhere else in the world, which is, you know, a huge buildup of cash balances, both at firms and at individual and household

levels, people being pushed out of the economy and then suddenly kind of coming back, bottlenecks, big rise in oil prices because all energy, effectively all Turkey's energy needs are imported, which is quite unusual in EM. So the Lera is a very important part of it. It's a particularly important part in the recent big spike, but it's overlaid on a general global. reflationary picture, which I think may affect Turkey more than a lot of others as well. And of course, you've got stuff like the government just pushed through a very, very big rise in the minimum wage, for example. You know, there's inflationary factors all over.

Zooming out for a second. And you mentioned that, of course, heavy dollarization is not unique to Turkey, so it's a factor, but it can't explain everything. And you noted that other EMs either have been able to deal with dollarization. It hasn't created the same level of volatility or they've actually been able to reduce dollarization over time. What's worked? Like, is there a playbook more broadly setting aside Turkey and what would work? Is there a consistent playbook that you've seen in your career watching different ones where it's like, yes, this has been a path towards reducing the dollarization and the risk that comes with that?

Yeah, I mean, it's extremely simple macro stability. I mean, obviously, inflation coming down and staying down. I mean, it looked as if Turkey was well on this course. I mean, actually the best part of a decade ago now when they got inflation well down and persistently into single digits, then you start to see the currency stabilized, you see real appreciation. It's not just a question of inflation.

You need to have the banking sector seen as safe. You need to see government debt seen as effectively risk-free locally. But in a word, stability, if domestic institutions are stable, if domestic macro variables are stable, then people don't want the uncertainty of owning a foreign currency because then owning foreign currency becomes a two-way risk. You get the domestic currency appreciating. And then it's the holders of foreign currency who get hit very hard. I mean, a particularly good example is what happened in Poland and Hungary from the other side when people who'd taken mortgages in Swiss francs in particular, about in foreign currencies. The volatility between foreign currencies and local currencies makes both

borrowers and lenders want to prefer domestic currency, not on the grounds of wanting a directional move that looks after them, but just on the grounds of certainty that you will not, you know, even in somewhere like Poland or Hungary, you can comfortably get a move in Euros lot or Euro-Forrent of five, six, seven percent. And people don't want that uncertainty. So, I mean, the natural preferences for people to use as their unit of account the domestic currency. And you need Turkish-level disruption to chase people out of domestic currency. This gets into when people pinpoint Erdogan or when they talk about the diminishing role, the diminishing independence of the central bank, or the frequent changing of key central

bankers or ministerial points. This is where you would say it sounds like is a real negative contributing factor. essentially the uncertainty factor? Yeah, I mean, I think it's an attitude of the government kind of wants to have its cake and eat it, that they want low inflation, but they also want high growth. They want financial conditions, which are good for the, good for it, well, especially the property sector, but, you know, for rich people generally. and a reluctance to recognize, you know, that there are trade-offs in economics.

I mean, specifically the idea that the best way to reduce inflation is to cut interest rates, you know, which has been repeated and actually loud, amplified as we went through December. It just adds to the volatility. And it's the same thing that they've intervened very heavily. We think that the intervention since the last couple of weeks of November. was ticking up towards $20 billion. And, you know, and gross reserves are, you know, are what about $120, $130 billion, never mind net, that they've been running these big swap books with the domestic banks, which distort the usefulness for the figures, that under the previous,

well, a couple of finance ministers ago, Mr. Al-Birac, the state banks were de facto intervening to keep the lira stable. It's this incoherent. mismatch of ideas based on the idea that things are only really going wrong from Turkey in Turkey because of foreigners, especially people like me, and not because they have a policy set up that is designed to produce inflation. So let's get to some of the more recent moves. And it seems like the core idea, and again, we discussed this recently, is how to give people, you know, obviously you laid it out in the beginning as well, there's this, people are very quick, to buy more dollars.

And there is this sort of loop that happens, the dollar strength, and doesn't people want to buy more. So you get these very extreme moves, very rapid in dollar lira. And that's, of course, destabilizing. So the idea for the government,

that the government is like, how do you give people protect, lira protection without encouraging them to move to dollars? And so, okay, we're going to, the basic idea is we're going to pay you, you keep your money in Lira in a, for a,

a certain amount of time, and if the lira weakens during that, we'll compensate you by giving, giving you more lira. What is your sort of initial read on these types of programs, or this program in particular? It looks kind of incoherent. I mean, there's an attempt to change people's expectations, you know, and thus create a kind of a virtuous circle that people will move their money out of dollars into Lera, stabilize the banking system, and it all work fine. And if you could just somehow spontaneously make people start shifting their money out of dollars

into lira, creating a bid for lira, stabilize the currency, bring inflation down, you could see how this would work. The trouble is that this is, and I think your previous interviewee made the same point, that this is the government writing effectively put options on the lira. Now, if you write an at the money put option on the lira right now, it's going to cost you about 11% of the sum in short. Even if kind of, you know, lira volatility or implied volatility goes down to the lowest levels it's been for the last couple of years, it's still going to cost you somewhere

close to 5% of the amount. So this is the government writing a very, very valuable put option for free. Right. And that's, you know, we saw something, I mean, the counter argument, and I wouldn't, you know, I'm not making an exact comparison, but the logic is quite. similar to, for example, the Irish government deciding to guarantee its banks in 2008 on the basis that if people believe the government stands behind the banks, they won't pull their money out of the banks, you know, and therefore the banks won't need protecting, and it's effectively

a free option, a free bit of underwriting. I mean, what happened in Ireland is, of course, that the banks were in Seoul, were basically unsafe at any speed, you know, that no matter who, and that the Irish government clearly couldn't really afford to underwrite the banking sector as it was. So all you really got was effectively a free lunch for the existing debtors of Anglo-Irish Bank who got fully repaid from a bank that was subsequently very, very, very, very clearly insolvent. And so the worry is this, that this is an option that the Turkish bank. And if you look at it like this, I mean, the logic would be that around half, the Turkish deposit base right now is in dollars.

It comes out at something like $150 billion. The lira moved 50% sort of peaked to trot, or not even peaked to trough, 50% move in about a month. You know, there's no way the Turkish government can afford to pay for moves of that magnitude. I mean, the idea of making a guarantee and therefore it never happens to be, never has to be used is obviously quite attractive, but you have to have some sort of logic that if the guarantee does have to be used, it's not going to make everybody's credit worth. And then you just have the banks contaminating what is still a pretty clean government balance sheet.

Yeah, I mean, this seems to be the key point because we have seen over the years, various governments or central banks essentially make a blanket promise. And many, and the successful ones never actually end up being used. And the one that you mentioned Irish government, but the one that really stands out to my mind as highly effective was Mario Draghi's OMT when they said, you know, if a country gets into financial trouble and if it's willing to undergo a program of restructuring, then the, the East. C.B will backstop its debt. And that close spreads extremely fast and no country had to, no country ever entered into a program. And the OMT was never used. But regardless, it was an extremely successful program. We saw it similarly here in March 2020 with the Fed promising to back municipal bonds for cities and states that got into trouble. In the end, that basically did the trick. I think a couple

localities ended up using it, but by and large, the mechanism wasn't used much. You know, obviously, the ECB and the Fed, you can't beat them. They have essentially, you know, they're free-floated, their own currencies. Well, yeah, I mean, you can't beat the Fed in dollars. You can't beat the ECB in euros. Right. But, I mean, what the Turks are saying is that, you know, they're effectively underwriting a dollar debt. I mean, whether or not they say they're paying it in lira doesn't really matter. It means that they're underwriting. writing a dollar debt and the central bank of Turkey cannot print dollars. Right. So in theory, they're only guaranteeing you Lira. So technically they're not,

they're not guaranteeing you dollars. But if they're guaranteeing a level of Lira dollar stability, which I think is how you'd character, then de facto they're trying to, they're promising to give you some sort of, they're implicitly offering to sort of pay dollars, it seems like. And that is something that neither the government nor the central bank can do. Yeah. I mean, one of the reasons you want to hold your, you're willing to hold lira is that you can freely convert it into dollars at any time. If we get to the point where you have a dollar lira spiral that is threatening, you know, that that is moving the way it was in December, the last thing you want to be doing is printing huge amounts of lira and giving those to people who treasure dollar, dollar

stability because then they'll just rush out and then when the time comes, they'll buy dollars and make the spiral worse. It seems like to me that the nightmare scenario would be that you get significant take-up of the new accounts, but not significant enough such that it actually puts a floor into the lira. So in theory, if everyone were to put their lira into these locked accounts, it seems to me that that could have a stabilizing effect. But it also is if you have a lot of people putting their money in these accounts, but not enough. You could still have significant lira weakness and the payout gets triggered such that the government is then forced to print more lira, accelerating the downward spiral.

Yeah, I mean, the argument is if you compare it to an insurance contract, I mean, the way the conventional insurance is, you know, you insure your car. If somebody sets fire to your car, we'll give you the money. But what these guys are saying, or what the Turkish is, you know, authorities are effectively saying is, you know, if we insure your car, we will make it much less likely that your car catches fire. But if your car catches fire, then we'll set fire to your house as well. Is that the consequences of a big dollar lira spiral become worse through the existence of these insurance contracts of these financial products. They might make a crisis

less likely. But if a crisis does happen, it's going to be much worse. Because the sovereign balance sheet is contaminated as well, and you're printing Lera at the very worst time to be printing more Lera. Well, what are you watching for in the weeks ahead to see if some sense of stability is going to be achieved or if, you know, we'll see a further downward spiral? Well, I mean, two things. One is just what happens to the Lera by itself, because obviously we saw this massive, I think, something like a 30% intraday move.

Now, the interesting thing or the relevant thing to us is at the time, people are saying, well, everybody's clearly buying into this idea it's going to work. But it's subsequently turned out that there was very, very heavy intervention by the Turkish Central Bank, even while the speech was taking place and presumably timed in order to coincide. I mean, I've seen various estimates, but most of them, you know, on the day alone. And this is after markets had shut. it's about 6pm London, so kind of 8, 9% local time, that the central bank kind of put somewhere between $4 and $5 billion to buy up lira and thus ramping the lira very, very much. And it would be interesting to see, you know, just can the lira sustain these improved

valuations even without? But the other thing that we think is probably more of a medium-term variable and will drive other things is domestic credit growth. Because it's not just a question of what's the level of interest rates. It's also the quantity of new credit. And Turkey's problems, certainly since the global financial crisis, have always coincided with growth in domestic lending. But it doesn't really matter if it's leas or dollars, is that lending picks up, activity picks up, that creates demand for imports. It also creates leakage into dollars, and it tends to weaken the currency. So what we need to see, I think, above all, is monetary discipline, not just in terms of

the actual level of interest rates, both the policy rate and effective rates. It's very hard to see how a level of credit growth, compatible with strong domestic demand growth, is also compatible with Lera's stability. I mean, how much of, you know, we're still in the middle of a pandemic globally and obviously even in the U.S., you know, there's inflation is elevated right now and there's a hope that when things normalize, whatever that means, that, you know, inflation will moderate. How much of the stress on Turkey's economy is, in part, a extreme version of what many places are and in theory should moderate somewhat just if, you know, the health situation and the global

travel situation and the business situation or to begin to normalize. I mean, specifically for Turkey, a calmer coronavirus situation is terribly important because the tourist season is incredibly important to their balance of payments. So, you know, if this summer looks like 2021 or better, that's very positive for Turkey. if it looks like 2020, then really that's seriously problematic for Turkey. I mean, in terms of the global forces, you know, I mean, Turkey is unusual in terms of relying on external energy for essentially all its energy needs. So very high, that very high oil price, the very high gas prices, those are a big negative.

But I think, you know, Turkey's, you know, inflation in the mid-30s is a point where they can't just rely on external factors to bail them out. They need to get the policy mix more right than it's been so far. Opinions vary. I know that your previous interviewee was much more positive on the new savings plan than I am, but it's going to require policymaker in action, even in the most benevolent scenario. If they keep doing what they're doing, they will be able to have a crisis. So at some point, you know, in theory, a currency weakens significantly that crushes imports. I guess it makes exports more competitive, tourism, maybe a few other industries. How do things stabilize?

And, you know, obviously, look, we can talk about how rough things are and the problems and policy. But at some point, whether we're talking about the currency or whether we're talking about real assets and the economy, you know, something becomes a buy. And you don't, if you wait for good things to emerge, perhaps it's too late. What do you look for? And not just Turkey specifically, but, you know, in other sort of like EMs that really like hit rough times, what do you look for to see inflection points and when it's like, yes, it's still really bad, but it's all, you know, priced in, whatever that means. Yeah, I mean, inflection, inflection points tend to be

much more about what's going on than valuations. I mean, there is no absolute level for a dollar owed by Turkey. You know, I mean, at the moment, the external debt is trading close enough to par that makes no difference. But, you know, it's not, there's no feeling that, you know, a dollar debt price of 30 cents and the dollar, a Turkish lira rate that's 40% below long-term trend. There's no absolute level of valuation that on its own constitutes a buy. And you can see this, for example, in the really extreme cases, places like Lebanon or Venezuela or Argentina. And I absolutely am not saying that Turkey's in the same class as those countries, but you can't rely on valuation alone to make the case to buy. We do need to find a situation where we think

that the Turkish situation is sustainable. That could be any, you know, it could be one that I'm wrong, that inflation peaks starts to drift down, that, you know, that President Erdogan can do a victory lap and while I'm looking for a new job. You know, it can be just that things start getting better by themselves. It could be at the other extreme that they have to close the banks or rationed depositors or convert dollar deposits into lira. None of which I'm saying is particularly likely. I'm just kind of presenting very, very extreme cases of what could happen. I don't think, you know,

this sort of crash scenario is likely at all. But what we do need to see is something like the Lera stabilising. And at the moment, you know, with still half the deposit base in Lera, as long as the Lera is this volatile, I don't think volatility. will continue to be self-sustaining. It's not about valuations. You need some way or other to get to a level where the country moves to a sustainable footing, where inflation stops rising, the currency stabilizes, and so on. Let's say, you know, before we go, and I found this to be very helpful, but before we go,

you know, mentioned the ongoing pandemic. What is your sort of broader view going in, you know, as we look to 2022? one of the stories for years has really been currency. You know, the dollar was extremely strong in 2021. Surprising a lot of people, especially as more rate hikes began to get priced in for 2022, US risk assets once again continue to outperform the world. What is your sort of like broader things you're looking at in the, in the,

in the in the in the in the EM landscape maybe beyond Turkey? Yeah, I mean, this is going to sound like a terribly predictable answer. But, you know, as long as the Fed remains hawkish and, you know, I think three hikes this year, I mean, might not be hawkish by Volker standards, but, you know, it's still seen as a hawkish. That's a difficult environment for EM and it's a difficult environment for anybody who's only, you know, where a stronger dollar is a problem. You know, the ideal thing would be a big growth recovery outside the US. Because when growth is very US-centric, as it basically, you know, almost always is, that tends to be a strong dollar environment and that tends to be a difficult environment for EM

to prosper in. But I think, you know, number one, the Fed and number two, growth even in the developed world, but outside the US are what we're most focused on. Well, Paul, it is always a pleasure to speak to you and this was extremely helpful context on Turkey. So thank you for coming out on Adlons. Thanks very much. Well, obviously Tracy's not here, so I can't go back and forth of her, but we got two, I don't know if I would say competing, but certainly different takes on the lira and what's going on in Turkey. The first one was a little bit more optimistic about the government's ability to encourage domestic savers to hold their money in Lira to essentially use that ability to write a Lira put option to discourage more dollarization.

However, as Paul noted, you know, the issue with the government writing such an option in this case is that unlike, say, with the ECB or the Fed, you know, they're not, it's not strictly a matter of printing the own currency because the implicit problem. is to hold the lira stable relative to the dollar. And so it's a little trickier. But I would have found it very useful. I don't have a side, obviously. I'm just a journalist.

But I found it very useful to get multiple perspectives. And maybe we'll talk more Turkey, but I found it useful to get multiple perspectives because as the cliche goes, that's what makes a market. So we'll just leave it there. And people can decide for themselves and we'll follow the currency. and the Lira, and we'll see what happens. Maybe we'll have more episodes.

But this has been another episode of the Odd Lots podcast. I'm Joe Wisenthal. You can follow me on Twitter at the stalwart. Follow my co-host, Tracy Allaway, at Tracy Allaway. Follow our guest, Paul McNamara, EM expert. His handle is at M underscore Paul McNamara. Follow our producer, Laura Carlson. She's at Laura M. Carlson.

Follow the Bloomberg head of podcast, Frances. Lievy at Francesca Today and check out all of our podcast at Bloomberg under the handle at podcasts. Thanks for listening.