I say that if this model continues, Turkey will become an unmanageable country. Even if the AK Party wins the election, the administration will lose its inclusiveness to a large extent.
I hope they analyze this themselves.
If they don’t, let me explain by giving an example over banks.
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At the beginning of this year, the banks’ own assets (equity) were 731 billion liras. Let’s say banks are trading ‘cucumbers’ and the cucumber is 1 lira each. Banks could buy exactly 731 billion pieces of cucumber.
And we came to the middle of the year… The price of cucumber rose to 1.8 liras. Banks now need 1 trillion 318 billion liras to buy the same number of cucumbers. This is exactly the breakeven level that the banking sector needs to reach.
Where will banks get these assets from? There are two basic ways: 1-Especially to evaluate their material assets; 2- They will earn profit from their activities.
We look at the balance sheet of the banks: As of July 2022, they made a profit of 208 billion liras. The profit rates for the first 7 months of the year are 28.5%… Even if they go at this pace, the annual profit rates of the banks cannot exceed the 50 percent threshold.
But they certainly can’t go at this pace. Because the Central Bank has introduced a semi-disguised loan interest limit to banks. Banks are now caught in the interest clamp in commercial loans.
The average commercial loan interest rate, which was 31.33% for the week of July 22, decreased to 21.02% for the week of September 09.
This means that the net profits and profitability ratios of banks will decrease rapidly.
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Looking at the banks that made 40 billion lira net profit in the first 7 months of last year; We are criticizing that they should double their profits this year to 208 billion liras… In fact, banks are not growing, on the contrary, they are melting.
The decline is like this… The owners of the banks were able to earn 208 billion liras in the first 7 months by banking with their assets of 731 billion liras. They earned this money by giving loans, etc., both their own money and the money of the nation.
As a result, a total of 7-month net income is 208 billion liras…
Whereas What would bank shareholders gain if they did not lend their money and invested it in housing? Let’s say it from the website of the Central Bank: The value of a house purchased at the beginning of this year increased by more than 100 percent in the first 7 months of the year.
There was even another option… If the banks had invested their own capital in KKM, they would have earned close to 40 percent nominal gain by now. However, they remained in nominal gain of only 28.5 percent in the first 7 months of the year by remaining in TL, giving TL loans and even mediating the money of other depositors.
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Let’s give a summary of the work:
Banking is a set of transactions made with money. Therefore, it is essential to protect the value of money. Otherwise, when the capital adequacy problem arises, it is necessary to think about where the business can lead.
Even though banks seem to have increased their profits by 5 times in the current system, they actually lose capital against inflation. If this loss of capital continues over time, there will be a situation of switching to negative capital. Or, as the capital ratios will not be enough, their lending situation will deteriorate.
We are in an order or model that will force banks very seriously under all circumstances. For now, no one is making a sound about it, but you should know that this system will never, ever last.
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Let me give this example from a construction job: When a contractor sold his flat worth 700 thousand TL in the first half of last year, when he started to work again, he was happy that the price of the flat increased to 1.5 million TL. But since he sold his own capital cheaply and because the cost of the new flat was too high (150%), it was actually a long time to lose, let alone make a profit.
The contractor, who had a construction capital of 100 flats before the new model, is now able to build 60 flats with his capital.
If you notice, I’m talking about only 1 year loss here. If this model is maintained, no one will have any capital left in 2 years.
Bankruptcies and unemployment will make the country unmanageable both as a capital movement and as a social movement.
Let me say this and warn you in advance… The DECISION is yours.