Out of Turkey: Turks convert from Ottoman to Mammon

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ISTANBUL - For most Turks, last week's accession in New York of a new prince to lead the disinherited Ottoman dynasty was a mere curiosity. Neither did many people listen when Turkey's Islamic revolutionaries proclaimed a new khalifate from their exile in Germany. And in the country itself, most still prefer to stand on the sidelines as Turkish and Kurdish nationalist strongmen struggle for power.

The real king in these troubled times for Turkey is hard cash. Stacks of foreign banknotes are secretly being squirrelled away, billions of dollars of hot money are overheating the Turkish financial system and working people can only watch the steady erosion of their earnings on electronic bulletin boards as tyrannical exchange rates are broadcast all over the country.

'For about a year now, even schoolchildren have been coming in to buy a dollar or two with their pocket money,' said the operator of my local 'foreign currency buffet', a new generation of dealers who have cropped up all over Turkey in high-street spaces once used by kebab stalls. 'There is no faith left in the lira at all.'

The change in the popular understanding of currencies and finance is nothing short of miraculous. Only a decade ago, it was a serious criminal offence to be caught in possession of a single dollar bill. Mass investment then was in gold and property. Now everything from rents to fridges seems to be linked to the American dollar or the German mark.

Gold has not been forgotten. Istanbul's Grand Covered Bazaar is still an Aladdin's cave that glitters with gold and one-kilo ingots. Up to 3,000 tons of the metal are thought to be kept in rich Turkish men's safes or worn on the forearms of peasant women as bilezik bracelets. The spot price of these is quoted by television business programmes along with the mighty dollar.

But Turks consider precious metals a dull store of value nowadays, when the stock market and foreign currency can jump or drop 10 per cent in a day. Interest rates are also at record levels. Overnight rates have at times exceeded 900 per cent as the Central Bank has fought to prop up the lira, making for huge and practically risk-free profits.

Ordinary men and women at my local bank discuss the latest fashion for 'repos' and 'reverse repos', tax-efficient deposits for a few days or a few weeks that seem to be taking the place of the old Treasury bills. Others juggle large currency investments in Gulf banks.

Even more astonishing is the way Turkey's newly liberalised markets and banking system have stood up to two months of gut-wrenching financial turbulence that has shaken the Turkish government to its very foundations.

Foreign cheques are still quickly credited to accounts for no extra charge and transfers out are let through by some of the lightest exchange controls in Europe. International bank transfers still arrive within a day or two and can be withdrawn in spectacular quantities. My bank appears only to need notice from customers withdrawing more than dollars 10,000 (pounds 6,700) from the battered cash box that my bank manager keeps under her desk.

'Somebody wanted dollars 500,000 yesterday. I had to make him wait until today,' she said. 'Lots of people are withdrawing their funds now, stashing it in safety deposit boxes or at home. Our head office is flying in currency by the planeload. But I'm sure our customers will soon be bringing it back. We've seen these panics all before during the Gulf war.'

None of this does much good to the government, of course, whose international credit rating fell again this week to that of a quite speculative investment. The Turkish state has always paid off its debts in the end, but people remember the last rescheduling in 1982 and can see inflation soaring as the noughts pile up on the banknotes. A million lira, worth pounds 1,000 seven years ago is now worth less than pounds 30.

The Turks have good reasons for optimism, with a young, well-educated population, a strong social structure based on the family and a hungry dynamism that makes everybody outside the state sector work hard.

But they also have reasons to believe that their free-market merry-go-round may come to a temporary halt, despite assertions from the Prime Minister, Tansu Ciller, to the contrary. People can see austerity measures being prepared for the aftermath of Sunday's nation-wide local elections and worry that the government might go for the country's huge private deposits of foreign cash.

All of which is probably why no Turk seems to be without their own hoard of hard cash these days, and why no mattress in Turkey is made without a special zip for stashing it away.