PROTECTION AND WEALTH BUILDING STRATEGIES 221was a great chance to gather market intelligence on the world’s
eighth-largest emerging market.
If you visit Istanbul, you cannot help but be impressed with
the indelible beauty of the city. It’s easily on a par with Paris,
Venice and other beautiful cities of the world. Istanbul also
has more than its share of history, having witnessed the rise,
fall and clash of empires from late-antiquity Romans, through
Greek Byzantines, Ottoman conquerors and Persian rivals. The
mix of East and West, Christian and Muslim and old and new
is like no other city in the world.
Today, Istanbul is an emerging financial center not just for
Turkey but also for a broad region including Eastern Europe,
Central Asia and the Middle East. Although Turkey is classified
as an emerging market (EM), it is closely aligned with major
developed countries as a longstanding member of NATO. It
also aspires to join the European Union.
Turkey is a test-tube study in how EM countries reach
developed status. As such, it is subject to the interactions
between developed and emerging markets, including hot
money capital flows, currency wars and the struggles with
interest rate policy and inflation.
I returned with good news and bad news. The good news is
that the banking system is functioning well, inflation is contained
and the currency is fairly stable against the dollar and euro.
This contrasts sharply with a disastrous period of hyperin-
flation from 1995–2005, at the end of which a short taxi ride
cost 20 million Turkish lira. In 2005, the government engaged
in currency reform that started by dropping six zeros so that
the 20 million lira note became a 20 lira note. The currency
has been fairly stable for the past 10 years, and inflation has
been mild.
The bad news is that Turkish financial markets are now sub-
ject to many of the adverse trends affecting all EM economies
around the world. The central bank is under pressure from pol-