While the approach that the problem was taken under control by "quarantining" the funds liquidated during the fund crisis was discussed, a remarkable warning came from Political Economist İnan Mutlu.
Mutlu stated that the economic management ignored the possibility of the crisis spreading to the real sector and said, "Let alone the grievances being resolved, more victims may emerge at the end of the process."
Speaking to Cumhuriyet, Political Economist İnan Mutlu criticized the economic management's approach to the fund crisis and said that it was risky to limit the problem only to the funds included in the scope of liquidation.
He pointed out that the fact that there are companies investing in funds in search of high returns brings up the possibility that the tremors in the financial markets will reflect on the real sector.
“BURYING IN THE SAND LIKE AN OSTRICH IS NOT A SOLUTION”
Mutlu stated that the economic management was "too optimistic" about the crisis spreading to the real sector; "They hid their heads in the sand like an ostrich. They think that when they do not see the problems, the problems will no longer be real. We have quarantined the funds included in the liquidation, they think that the problem will be solved with the liquidations. I think this analogy is appropriate. They believe that this problem can be solved over time with existing tools, just as they expect inflation to decrease on its own. This attitude, let alone solving the grievances, may cause more victims to emerge at the end of the process," he said.
“THERE ARE NOT ONLY CITIZENS IN THE FUNDS, THERE ARE ALSO COMPANIES”
Mutlu emphasized that the effects of the fund crisis are not limited to citizens who invest their money in funds, and pointed out that companies also turn to these markets with the expectation of high returns:
"Access to credit has always been a problem for zombie companies, which have been tried to float with cheap loans since 2017. The tightening of money markets will make it difficult for such companies to survive. There are not only citizens in these funds, but also companies whose appetite is whetted in pursuit of high returns."
Stating that the risks taken by companies with the expectation of high returns may be reflected in their balance sheets along with the fluctuations in the financial markets, Mutlu said that the current process should not be seen only as a fund liquidation.
Mutlu explained this situation through the relationship between capital and return in Karl Marx's Capital:
"Marx explains in Capital: Capital is timid under low profit rates, it does not approach production. But when it sees high returns, it suddenly forgets its timidity. As the rate of profit, let's consider financial returns in this example, rises, there is no risk that capital cannot take. Until its owner is hanged. In this sense, financialization is the institutionalization of capital's 'knighthood of returns'."
“THERE IS AN INVESTMENT OF 380 MILLION LIRAS”
Stating that companies are also stuck in the funds, Mutlu reminded that Astor Energy announced that it has an investment of approximately 380 million lira in the funds to be liquidated.
Mutlu said, "We know that there are companies stuck in these funds. Astor Enerji announced that they have investments of approximately 380 million liras in the fund to be liquidated."
"Maybe there are different companies that we don't know about. Just today Hedef Holding announced that it went into default for 1 billion liras due to judicial measures," he said.
Stating that the problem cannot be limited to the liquidation of certain funds, Mutlu drew attention to the process by saying, "We have quarantined the problem in a limited area here, the approach that there is no problem in other channels does not match the reality."
“MELTUP IN THE STOCK EXCHANGE EXCEEDED 4 TRILLION LIRAS”
Stating that the loss of confidence in financial markets can also be followed through the stock market, Mutlu drew attention to the loss of value in Borsa Istanbul during the crisis.
Mutlu said:
"Since this crisis began, the meltdown in Borsa Istanbul has exceeded 4 trillion lira, according to some experts. In such periods of financial turmoil, the collapse of some stocks risks triggering a general flight from the stock market. Until then, inflated share values may suddenly collapse."
Mutlu stated that the asset freezing developments over the weekend may also increase the panic in the market:
"The freezing of the assets of 46 companies over the weekend, and then the lifting of the freeze when the list was leaked to the press, further fuels such moments of panic. It further exacerbates the problems of companies whose shares are traded on the stock exchange."
“INSANE, PANIC, COLLAPSE”
Stating that loss of confidence in financial markets may trigger capital outflow after a certain point, Mutlu said that the steps taken by the economic management will be decisive in the course of the crisis:
"If the government's economic precautionary measures further intensify the fire created by fund profiteering and trigger a capital outflow, it may cause a collapse for the overall economy. Business in financial markets is based on the expectation of future returns. If the panic that these returns will not be realized increases, there is always the risk of encountering a more general collapse."
