As readers know, assorted Crawfs went to a Turkish resort for a short holiday last year. The signs of feverish economic activity were there to be seen on the way from the airport - all sorts of buildings and other structures popping up in a madcap way.

Turkey is booming! Or is it?

I have not linked to the ever-gloomy Spengler for a while, but here he is with some unnerving graphs and accompanying analysis indicating that Turkey too has borrowed too much, too unwisely:

Erdogan has the weirdest economic views of any serving head of government. He justified the credit bubble on religious grounds, pledging repeatedly to cut the "real" interest rate (the cost of interest minus the inflation rate) to zero.

"We aim to cut the real interest rate in the long run, so people will increase their incomes through working, not through interest," he said last April. "Eventually we aim to equalize the interest rate and inflation rate."

Erdoğan believes that this would fulfill the Islamic injunction against lending for interest; if the real interest rate is zero, he seems to think, the sharia ban on interest is fulfilled de facto. In order words, Turkey provided nearly free money to bank customers. Erdogan's program set in motion a series of perverse effects. One is a sharp fall in the exchange rate...

... The result is a vicious cycle: excess credit creation weakens the currency, forcing the central bank to put up interest rates; higher interest rates push up the cost of debt service for Turkish borrowers; Turkish banks lend more money to their customers to finance the higher interest costs, so that credit keeps expanding and the currency keeps weakening.

Turkish banks continue to increase lending at a 40% annual rate, but most of the new lending will finance interest payments on the old loans.
Fine. Then what?

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So, the same old story. Political leaders believing they can defy reality and gravity, combining with banks keen to cash in. Result? A fast emerging mess.

The notable feature of the apparently looming Turkish mess - as Spengler points out - is that the booming 'Turkish model' (ie a dynamic, modernising economy with strong Muslim features) was hailed for a while as the best outcome of the Arab Spring tendency. What if that model flops too? 

Spengler's view of what this means:

Now I predict that Turkey's economic crisis will undermine the stability of the Turkish state as well, leaving the Muslim world without a single enclave of stability from the Libyan-Algerian border to China's Xinjiang province...