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Turkey is currently on the cusp of a hyperinflation apparently triggered by its president's policy of maintaining nominal interest rates far below inflation. Thus Turkish banks are currently giving loans at a real interest rate of perhaps -16%, based on numbers I just read. It would thus seem to be a promising idea to borrow some lira, convert it to dollars, euros, stocks, or even gold, and then convert part back after a year or so pay back the loan using highly inflated currency. I assume there's no way for a non-Turkish person to do this (if it were too easy, probably lots of big Western institutions would be borrowing lira right now, which might even reduce the inflationary pressures) but I thought I'd ask anyhow: can a non-Turk (say, an American) plausibly take out a lira-denominated loan?

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  • this actually adds to the inflationary pressure since it releases even more currency into the money supply while reducing foreign currency reserves. But why go far? Same thing is happening in the US, although not to the same extent just yet
    – littleadv
    Commented Jan 27, 2022 at 23:13
  • @littleadv Hmm, yeah, I think I was forgetting that bank loans create new currency, don't just push it around. The dollar is inflating, sure, but it's not nearly so obviously inflating against some other reliable asset. I was thinking that pounds, euros etc ought to do better, but so far the dollar has remained very strong. Even against gold! Commented Jan 27, 2022 at 23:14
  • USD has significantly weakened compared to ILS, for example, over the last several years. I don't know how long the decline would last, but I don't see any reasons for it to change unless the feds raise the rates dramatically
    – littleadv
    Commented Jan 27, 2022 at 23:19
  • @littleadv I see less than 20% over five years, and flat over the last year. Even if we buy your "don't see any reasons" argument, that seems self-evidently not worth the risk for almost anybody who needs to buy things in USD. Commented Jan 27, 2022 at 23:21
  • Kevin, you may want to listen to this podcast. Commented Jan 29, 2022 at 13:02

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A forex buy of a USD/TRY currency-pair is essentially a borrowing and selling of the TRY and then a buying of the USD.

However, the annual interest-rate in Turkey is 14% such that the forex rollover interest to be paid by the trader would be about 14.75% annually on the leveraged amount.

Some some traders would sell the USD/TRY currency-pair and draw about 13.25% annual interest.

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