The story of why Turkish lira lost so much value in the past decade:
1. President Erdogan's policy of retaining low interest rates amidst high inflation, and negative interest rates discourage holding of the lira and increases demand for foreign currencies
2. High inflation eroded purchasing power of the lira
3. No central bank independence
4. Large current account deficits
5. Loss of investor confidence - in the Turkish economy, stability of the lira and domestic political stability
6. Domestic Political Instability
Each of the above factors now one can relate to the US, because if Trump has his wishes, he would want to lower rates without due to regard to inflation, and he wants to exert considerable influence over the Fed.
Do you see where this is leading to?
Investors globally have reasons to feel worried in advance, because the US is not Turkey, many institutions have hoards of US Treasures and dollar reserves. And no one wants to be the last when the switch is turned off.
And the amplifying part is that Trump and his crew wants a lower dollar. Be Careful What You Wish For.
A lower dollar is not the same as a sinking dollar.
