Despite Trump's insistence, Turkey has not budged in freeing American pastor Andrew Brunson, who has been detained by Turkey for nearly two years on charges that he was working with a terrorist organization and was a spy.
Turkey's troubles, compounded by a new round of U.S. sanctions, are unlikely to cause any kind of permanent hit to United States markets or its economy, but it does offer two cautionary tales, one for President Donald Trump and the other for Federal Reserve Chairman Jerome Powell. Trump tweeted out on Friday.
Erdogan said during an address to supporters: "Change the euros, the dollars and the gold that you are keeping beneath your pillows into lira at our banks. This is a national, domestic battle", he told a crowd in the northeastern city of Bayburt.
On Friday, Erdogan asked Turkish citizens to sell off their gold and dollars and exchange them for the lira, in an attempt to prop up the currency. The markets reacted swiftly, and the lira dropped even further.
Turkish lira fell to an all-time low against the dollar yesterday, making it worth about 16 cents.
A plunge in the Turkish lira rocked global equities and emerging markets on Friday and fear of more turmoil sent investors scurrying for safety in assets like the yen and USA government bonds.
Woman helps man short on cash -- it was Keith Urban
She said that for the last several years she has made it a resolution to pay for someone's purchases at Wawa at least once a week. She says, "It was then I realised what an idiot I was". "I said, 'OK, I don't think she would lie to some old lady'".
New Finance Minister Berat Albayrak - Erdogan's son-in-law - rolled out the government's new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors.
"Unless the United States starts respecting Turkey's sovereignty and proves that it understands the dangers that our nation faces, our partnership could be in jeopardy", the Turkish president stated.
"Don't forget, if they have their dollars, we have our people, our God", he said.
Far worse than that, though, is this has also sent Turkey's currency on a downward spiral that threatens to destroy its entire economy. But invoking national security is the only way to square Trump's policy with USA law and WTO rules. The U.S. exported $9.75 billion worth of goods-mostly cotton, scrap iron, steel, civilian aircraft parts, coal, and petroleum gases-to Turkey, and imported $9.42 billion worth of goods from them.
UBS chief economist for EMEA emerging markets Gyorgy Kovacs said a giant rate hike of 350-400 basis points would be "consistent with real rate levels that in the past helped to stabilise the currency" but warned a deal to normalise ties with the USA may also be needed.
Some US officials say Turkey is holding Brunson as a bargaining chip after an executive at Turkey's state-owned Halkbank was convicted and imprisoned in the United States in May for helping Iran evade US sanctions.
The central bank raised interest rates to support the lira in an emergency move in May, but it did not tighten at its last meeting.
He did not offer an explanation for the tariff hike, which raises the tariffs to 20 percent on aluminum and 50 percent on steel, though there are a couple of possibilities.
Turkey was facing artificial financial volatility, Erdogan said, and people should not pay close attention to foreign exchange prices, and should instead focus on the "big picture". Overnight it had retreated to its lowest since November 2016 on threats of new US sanctions, weakening beyond the psychologically important 65-per-dollar threshold. Two days later, Secretary of State Mike Pompeo warned that Turkey that the "clock had run out" to release Brunson. Hard currency debt issued by Turkish banks suffered similar falls.