Home Economic Trends Turkey’s Central Bank $10 Billion Accounting Trick – Robert Aro

Turkey’s Central Bank $10 Billion Accounting Trick – Robert Aro

Seems strange that as of December 30, 2021, Turkey’s central bank was carrying a loss of $5.2 billion USD; then on the last day of the year it miraculously made $10 billion, closing the year with a gain of $4.4 billion USD. Was it a lucky break or just an accounting trick?

As reported by AlJazeera:

The central bank declined to comment on the dramatic move on its balance sheet…

It’s unclear why they have yet to disclose the secret of their money-making strategy.

But if it’s any consolation:

Two officials familiar with the matter said it was in line with independent auditors’ accounting advice, but asked not to be identified because of the sensitivity of the matter.

It’s also unclear which accounting firm gave the advice. However, in 2020 a member firm of Ernst and Young signed off on the audited financial statements.

Nonetheless, the billion-dollar windfall could mean a lot for the Turkish treasury. According to the article:

In February, the Ministry of Treasury and Finance – as the central bank’s biggest stakeholder – will begin collecting much of that sum as dividends.

Unfortunately, all that glitters may not be gold, as the former deputy governor of the bank says:

…a possible explanation for the sizable overnight profit boost could lie in the sale of foreign-exchange reserves to the Treasury.

Which is strange because, if so:

The same amount of dollars would then have to be bought back to maintain the reserves level.

If the central bank made its profit from a sale to the treasury, but must buy back from the treasury, and even remit a dividend to the treasury, the economic benefits of the $10 billion become scarcely understood. Even worse, the central bank would have to acquire money from somewhere.

But what does it matter? It’s 2022. This may go down in history as the lost decade under lockdown where governments and their central banks did practically anything they wanted… No matter how blatant the lie, egregious the claim, or how much an economic policy goes against public interest, they face little to no consequences sans perhaps a little backlash on social media.

It’s important to look at other nations, such as Turkey, to see the effects of inflationism as a monetary policy, realizing how all sorts of economic schemes are nothing more than just that: schemes. The major component of these schemes requires increasing the amount of money and credit in circulation with the hope of leading to wealth creation.

Back at home, we too can blame the powers that be for spreading faulty economic ideas. But it’s not just coming from those at the top. CNBC reported a story where a restaurant owner from Denver started an online petition:

…calling for $2,000 per month in aid to every American during the pandemic.

As of today, over 3,000,000 Americans signed the petition. Feel free to join the cause here if you are so inclined.

Just remember, you can’t turn stones into bread. The road to prosperity is not created through accounting gimmicks, money creation schemes, stimulus checks, fluctuations in interest rates, changes to the money supply, nor any other monetary scheme. Whether policy decisions from the Turkish central bank, the Federal Reserve, Congress, or millions of Americans asking for government aid, these schemes ultimately fail. It seems like a lost art, but using labor to produce goods and services, or utilizing savings for capital investment remains the best ways in which wealth creation occurs.