News reports claim that the Turkish government ordered banks this week not to lend a single lira to overseas borrowers, making it hard to hedge the beleaguered Turkish currency. The lira held for the moment, but the cost of hedging against Turkish risk in credit and foreign exchange markets spiked and Turkish equities collapsed, with the US-traded Turkish ETF down around 8% on the day.

Nothing like this has ever happened. The Turkish central bank is like the condemned man who tries to beat the gas chamber by holding his breath. The absolute lack of liquidity will shut down the Turkish economy within weeks, and the lira will collapse anyway.

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