Socionomic Alert: Military Takes Control in Turkey

Turkey's slow motion slide into an Islamic state appears over as the Turkish military once again moved to restore secular rule.
Bloomberg: Turkey’s Army Says It Seized Power as Premier Vows to Resist
The army said in an e-mailed statement that it took power to restore freedom and democracy. It said all international agreements will be honored.
The coup effort won’t be permitted to succeed, Yildirim told NTV television. He said army units have besieged “some institutions,” and he said police -- traditionally closer to his government than the army -- have been ordered to use arms if necessary. He said the elected government remains in power.

It wasn’t immediately clear how much of the country is now under military control.

Since 1960, the NATO member has experienced at least three takeovers by the secular-minded army. But since the Islamist-rooted Ak Party government came to power in 2002, the political influence of the military has been trimmed.
Assuming it is not an extremist Islamic faction in the military, this is good news for Turkey and regional stability. ISIS just lost it's supply line.

Back in August 2015 I posted Geopolitical Forecasting Through Technical Analysis: Is Turkey About to Destabilize the Middle East?
All of which is to say, I can see the Turkey ETF (TUR) hitting single digits solely through currency depreciation and financial crisis. There's enough fuel there for it. However, geopolitical developments concern because they are likely to deteriorate along with the economy. If the chart is correct, economics and politics are going to get much worse for Turkey in the months ahead. Of course, the chart might reverse and the pattern may break, making a short of TUR a bad trade and a forecast of instability a wrong one. If it doesn't, Turkey may quickly become the new center of attention in the Middle East.
It was a direct hit in terms of expecting something major out of Turkey, but wrong as a trade so far. On the day of the post, TUR was $37.77 and it closed Friday at $41.60, falling after hours to $39.02 after hours. The dip to $33 was a result of global markets, not Turkey specific news.

Other posts on Turkey: 2016 Forecast: Turkey Collapses
2016 Will Be A Bad Year for Turkey

Things could go badly for Turkey in the short-term given the credit bubble, but as with Thailand's coup, things could also improve quickly. The second chart shows that relative to emerging markets, Thailand has consistently outperformed since the coup.
A difference from Thailand's coup is that it came after a long spell of turmoil. The coup was a last stage event in Thailand. In Turkey, it may be more middle stage because there are outstanding problems with debt.

Reuters: Bad loans and bankruptcies sound the alarm for Turkey's economy
After years of growth fueled by credit and domestic consumption, bad debts and bankruptcies are rising in Turkey, squeezing banks and exposing a fragile real economy which risks denting support for the ruling AK Party.

In its first decade in power, the AKP, founded by President Tayyip Erdogan, built its reputation on growing Turkey's wealth, overseeing a sharp rise in incomes and providing new roads, hospitals and airports in what was long an economic backwater.

But as he seeks support for an executive presidency to replace Turkey's parliamentary system, a decision that could be put to a national vote later this year, Erdogan may no longer be able to count on Turkey's rising prosperity to win him votes.
FT: Turkish corporate debt: ‘a few shocks away’ from a crisis
It is a big problem,” says Ozgur Altug, chief Turkey economist at BGC Partners, an international brokerage, in Istanbul. “Turkey’s next crisis will be caused by the huge increase in private-sector debt.”

He argues that while the level of debt is already high, it is not alarming, yet. But there is an immediate problem, he says, in the ability of Turkish companies to generate enough foreign currency to meet their obligations.

There are three ways Turkish non-bank companies can earn foreign currency: as exporters; as members of the tourism industry; or as sellers to the domestic market who use their revenues in Turkish lira to buy US dollars on foreign exchange markets.

All three sources, says Mr Altug, are under stress. Exports, which were growing at 10 to 15 per cent a year for most of this century, have collapsed in the past 18 months. Revenues from tourism have suffered under a Russian boycott, the threat of terrorist attacks and the Syrian refugee crisis.
Assuming the coup is successful, this will restore stability to Turkey and the Middle East over the long-run. There's too many factors to turn bullish, but the immediate impact shifts the long-term outlook in a positive direction.

Update: A claim that this coup is led by the Gulenist faction, in which case it would not be the purely secular Kemalist military. If true, this throws the outcome of the coup into question.

Daily Caller: New Ties Emerge Between Clinton And Mysterious Islamic Cleric
A newly-released email and lobbying documents filed with Congress reveals new ties between Clintonworld and members of a network operated by a mysterious Islamic cleric from Turkey.

Connections between Clinton and acolytes of the imam, Fethullah Gulen, could muddle the complex relationship between the U.S. and Turkey, a key NATO ally, if the former secretary of state wins the White House.

Turkey’s president, Recep Tayyip Erdoğan, has mounted an aggressive crackdown against Gulen and his followers, known as Gulenists. Erdoğan, who was once allied with Gulen, has even personally asked President Obama to extradite the 74-year-old guru, who has lived in self-exile in Pennsylvania’s Pocono mountains since 1999.i
Gulenists are effectively funded by the U.S. government.

The economics of the Gulen cult's American charter schools
Why does the Gulenist cult of Turkey want to be the largest operator of taxpayer supported charter schools in America? What's in it for them?

One reason is because it allows the cult to build up a caste of Gulenist businesses at taxpayer expense by doing business largely with other Turkish Gulenist immigrants. They appear to be skimming somewhat, but not too much that they get in trouble. Instead they are playing a long game to use American taxpayer money as seed capital to build up Gulenist economic power in America.

Think of it this way: banks are one of the big gatekeepers to deciding who grows and who fails in run of the mill businesses like construction and food service. Banks like to give loans to companies that have sizable government contracts, such as from schools, because the government's checks are less likely to bounce nor will the government suddenly vanish. So, firms that have cozy relationships with public schools can get loans to grow bigger.
The Shadowy Imam of the Poconos
Hizmet runs something like 130 charter schools in the US. Why? Because that’s the kind of thing you do in 21st-century America when you have tons of money and a potential image problem: teach math to black children. Remember when Mark Zuckerberg of Facebook was concerned about the upcoming Social Network biopic, so he suddenly gave $100 million to Newark public schools? Think of the children!

In contrast to the Zuck’s donation, however, the Gülenist charters are paid for by you and me to the tune of many hundreds of millions of dollars annually in American taxpayer money. Charter schools represent a giant opportunity for anybody skilled at bureaucratic maneuvering. It’s common for schools costing $50 to $100 million to be turned over to charter operators claiming to be in it for the children.

It is rumored that Gülen’s charters are intimately wrapped up with immigration fraud.
From July 13: File to request Gülen's extradition from US ready
Prosecutors in the capital Ankara have prepared a file for extraditing U.S.-based Fetullah Gülen, who is accused of leading a terrorist organization, as well as trying to infiltrate and overthrow the elected government, sources said Wednesday.

Sources from the Ankara Chief Public Prosecutor's Office, speaking on condition of anonymity due to restrictions on talking to the media, said the file will be sent to the Justice Ministry on Thursday, and then to the U.S. Justice Department with a formal extradition request.

The network led by Gülen, who is self-exiled in the U.S, is accused of wiretapping senior Turkish government figures, including the former prime minister and current president, National Intelligence Organization (MIT) chief, and Cabinet ministers, as well as journalists and other prominent figures via state officials.

Last October, an Istanbul court issued an arrest warrant for Gülen after approving a 1,453-page indictment charging him with "attempting to overthrow the government of the Republic of Turkey or obstructing it from conducting its duties by force."

Update: Reports of the coup failing.

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