The other side of the coin in credit

The other side of the coin in credit
The other side of the coin in credit

In the face of rising inflation during the week, a number of central banks, especially the Fed, increased interest rates. The central bank of the UK, Switzerland, Norway, Indonesia, Philippines, Saudi Arabia, Argentina raised interest rates. Government bond rates rise with policy rates. The amount of bonds traded with negative interest in the world decreased from 18.4 trillion dollars to 1.5 trillion dollars.

➔ The only central bank that did not increase but decrease interest rates is Japan. Japan has been dealing with recession for years.

➔ There are three central banks in the caravan of those who lower the interest rates.

➔ Last week, the People’s Bank of China cut interest rates. China’s economy is declining below 5 percent after 40 years of high growth.

➔ The Russian Central Bank is also cutting interest rates due to the deep contraction in the economy due to the Ukraine War.

DECREASE INTEREST FOR GROWTH

➔ One of the three central banks that lowered interest rates is the CBRT.

➔ Turkey’s economy grew by 1.6 percent even in 2020, the year of the pandemic, when the world contracted by 3.3 percent on average. It reached a record 55-year growth rate of 11.4 percent in 2021. The growth in the first half of this year was 7.6 percent.

➔ The Central Bank cut interest rates. “Deceleration in economic activity with the effect of decreasing foreign demand” tied up. An institution whose main duty is price stability is written in its law, and it takes a decision to maximize growth.

➔ Moreover, he made this decision at a time when inflation reached its second highest level after 1980 and exceeded 80 percent.

➔ In addition, such a decision is taken at a time when interest rates have fallen to the most negative level both in the republican period and in the world.

DOES THE CENTRAL BANK WANT A LOAN?

➔ The decision mechanism of the Central Bank is disturbed by the widening of the policy rate and loan interest rate in the recent period and announced that it will follow the situation closely and take precautions.

➔ Measures came as of last night. Exceeding the ceiling on loan interests by banks through fees and commissions was also limited.

➔ Naturally, banks do not want to give a loan at a loss or for which they cannot make a profit. After the decision, they will either find new ways and methods or slow down the loans even more.

➔ The Central Bank does not want to be given loans anyway. Does an institution that wants to increase loans ever set a 10 percent increase limit for the remaining 5 months of the year with the decision taken in August?

➔ An upper limit has been set for the interest rate. If it passes, it will have to buy Treasury bonds with an interest rate of 20 percent to 80 percent of the loan amount and reduced to one-seventh of the inflation rate.

SELECTIVE CREDIT POLICY

➔ On the one hand, credit restrictions are applied and the growth of credits is now slowing down, on the other hand, what is the reason of lowering interest rates and lowering loan rates? What is to be done?

➔ My conclusion is that the management power only wants to be given loans to the sectors and companies it prefers. It’s called selective credit policy.

➔ It also stipulates that the loan interest rate should be kept at one quarter of the inflation rate.

➔ No one cares about the situation of other companies, they will be roasted with their own oil.

➔ Meanwhile, there is no credit facility for exporters. The amount of credits opened does not change, but the number of companies that opened credits has been doubled. Credit spread to the base, but decreased by half on a company basis.

➔ There is a situation like the cut off the travel money of the caregiver, who needs to bring medicine to the patient.. Export growth is the medicine of the economy. Is there any other explanation for halving the loan amount on a company basis from year to year?

➔ The necessity of limiting the granting of loans while reducing the interest rate of the loans, of course, stems from the effect of raising the exchange rate and decreasing the inflation.

POLITICAL FOOT OF THE BUSINESS

➔ One reason for lowering the interest rate to the world’s most negative level (-68%) may be the pursuit of a political goal, as well as the selected companies and sectors that are desired to grow.

➔ For this purpose, it is most appropriate to reduce the interest rates to single digits. After all, starting from November, inflation will decrease in December, January and the following months due to the base effect.

➔ In addition, since these months will coincide with the election, public price hikes will also be kept and inflation will decrease in that direction.

➔ If this is not enough, subsidizing the price of some basic goods can also be introduced. There is already this subsidy in energy prices.

➔ “We struggled, first we reduced the interest rates to single digits, look, inflation is also decreasing. Now it’s time to reduce inflation to single digits” will be called.

➔ If the picture is more or less like this in the case of credit and interest, what is the meaning of commission, fee and similar restrictions?

➔ Let’s focus on the show part of the job or saving the honor of the bath.

The article is in Turkish

Tags: side coin credit

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