Erdogan Lashes Out At The U.S.: Escalating War Of Words

In Furious Rant Erdogan Lashes Out At Trump: "We See The Game You're Playing, We Dare You"

In the wake of the U.S. doubling tariffs on Turkish steel and aluminum on Friday which sent the Turkish lira and capital markets into free fall, Erdogan wrote a Friday New York Times op-ed cataloging his grievances and threatening to walk away from the decades-old alliance. "Failure to reverse this trend of unilateralism and disrespect will require us to start looking for new friends and allies," he wrote. Meanwhile, while announcing the new sanctions aimed at Turkey, Trump tweeted his "analysis" of the situation: "Our relations with Turkey are not good at this time!"

The escalating war of words continued on Saturday, when speaking at a rally in the Black Sea town of Unye, Erdogan said that "it is wrong to dare bring Turkey to its knees through threats over a pastor," and blasted "shame on you, shame on you. You are exchanging your strategic partner in NATO for a priest." At the same time, Ibrahim Kalin, Erdogan’s spokesman, said that the U.S. is "facing the risk of completely losing Turkey."

And if anyone was hoping that Erdogan's temper would have cooled one day later with just hours left before FX markets reopen, they were sorely disappointed on Sunday when in his latest public address in the town of Trabzon, Erdogan doubled down on his belligerent rhetoric against the US once again, via Bloomberg:

• ERDOGAN: WE SEE THE GAME YOU'RE PLAYING; WE DARE YOU
• ERDOGAN: THEY'RE TRYING W/ MONEY WHAT THEY COULDN'T DO IN COUP

Erdogan then continued by calling for all Turks to convert their foreign currency holdings, i.e. mostly dollars, to liras, and warning that "economic attacks will only increase Turkey's unity."

Among the other notable highlights, Erdogan said that "we will say bye-bye to those who are ready to give up their strategic partnership for their relations with terror organizations" and that Turkey can "respond to those who started a trade war against the entire world and included our country in it by gravitating towards new co-operations, new alliances" i.e. China and Russia (which earlier today said it was considering dropping the US dollar altogether in oil trade), and warned that "it is foolish to think that Turkey can be thrown off by FX" although with inflation set to explode as the currency collapses, the local population may have a different view of this. 

As for higher interest rates, a critical requirement to at least slow down the country's economic descent, Erdogan had some words as well: "

• "They are trying to do with money what they couldn’t with provocations and the coup. This is clearly called an economic war" 
• "Interest rates are tools of exploitation that make the rich richer and the poor poorer. As long as I’m alive, we will not fall into the interest-rate trap"

And the punchline:

• ERDOGAN SAYS READY TO RESPOND W NEW FINANCIAL TOOLS VS DOLLAR

It was not clear what those tools would be, but they certainly would not be welcome by the market. After all, as Bloomberg reported overnight, investors believe that Turkey’s central bank will have to flout Erdogan’s desires and announce a significant increase to its benchmark 17.75 percent benchmark rate just to stop the currency’s free-fall as it touches levels that had been unimaginable even a month ago.