All focus is on Turkey right now as their currency goes into freefall and 5-year credit default swaps (insurance against default) have now spiked to levels last seen during the 2008-2009 financial crisis.
Is Turkey the Next Bear Stearns?
Russell Napier, co-founder of the Electronic Research Interchange, warned on our podcast in 2015 that Turkey is equivalent to Bear Stearns in terms of risk. Here’s what he had to say:
“Just to put it in context: the amount of money borrowed by Turkey is similar to the amount of money that was borrowed by Bear Stearns—it’s about $400 billion. Bear Stearns of course had off-sheet liabilities as well, but on-sheet liabilities of $400 billion. Lehman Brothers was $600 billion, so that puts it in context. This is a big number and it’s lent from outside the system so it does have issues for financial stability, particularly in Europe and we need to make that clear.”
Possible Trigger for EM Crisis, Wider Outlows
Full article: Turkey Default Risk Spikes to 2008-2009 Crisis Levels; Possible Contagion, Warns Russell Napier (Financial Sense Online)