Our short-termism can be a serious source of problems, as latest visa tension shows
Visa conflict with the US pushed us into a kind of bottleneck. If we consider only what happened to the dollar exchange rate or how the stock market reacted, we will miss the most important point. That would only bring us to judgments with no future. But actually the consequences of such tension is not merely limited to some price volatility in financial markets, it is usually carried a step further. If we consider the case with such prudence we can see what happens next and act accordingly.
I call the first approach short-termism. The latter is more interested in the consequences of improvements on economic trends. That means a long-term approach that will bring us to build long haul remarks.
Short-termism is an approach that stands out and has settled with the liberalization of the markets, articulation of the markets on a global scale and the fund flow increasing in volume and more quickly.
End product of global zat on
In this regard we can also define short-termism as an end product of liberalization and globalization. Economic decisions simply went through a substitution process and short-term decisions replaced long-term ones. In this context, it can be said that there is a shift in areas where economic decisions verge. Short-term decisions are more related to shortterm financial transactions. Long-term decisions are more about real transactions that stand out among decisions on good and service markets. A significant part of the decisions about financial markets are speculative ones by nature. Speculative decisions can’t extend to the long term, nor do they have the required vision for long-termism.
On the other hand, the economic environment affects the time dimensions of economic decisions. In an environment with sovereign uncertainty it’s more risky to allocate resources for long-term goals. Risk is the main decisive element for financial decisions. The possibility of yields realized in the short-term and loss can be compensated in the short-term, the decision period growing shorter in times of uncertainty and the high risk in the financial environment makes it a rational choice.
Under these conditions, it is inevitable that the long-term decisions, which are more real investment oriented, fall behind in the economic decision spectrum. Substitution between decisions occurs in such situations. Depending on the nature of the economic environment, long-term economic decisions are replaced by short-term decisions.
In fact, this process can be traced back to the 1970s, when the first concrete steps of liberalization and internationalization began. It can be observed that in the next quarter of a century globalization spread rapidly, the financial market gained weight and the substitution of economic decisions did the same. It is possible to say that the financial crisis, which started in 2008 and still continues to this day, accelerated this process by making the uncertainty an intense and widespread factor, skyrocketed the risks and consolidated.
F nanc al pr ces soared
The recent environment of visa tension showed that short-termism can be a serious source of problems. The uncertainty and risk perception towards Turkey rose rapidly at the start of the events. As a result, financial prices soared. The dollar parity peaked at TL 3.83. Short-termist observers considered these events a disaster. Speculative decision makers drained their dollar accounts and made money. Immediately afterwards, we witnessed that the process reversed, the lira appreciated and parity fell back to below TL 3.70.
Our ‘short term sm’ d sease
Our comments immediately shifted towards a bravado discourse of “What makes you sorry about that, nothing will ever happen to us,” a mere 24 hours after the perception of catastrophe. However, the fact is the start of the reversal process stemmed from the depreciation of the dollar rather than the strengthening of the lira.
The Fed had released the minutes of the last meeting. It was understood that the bank was gaining more weight in view of the fact that it was in a relatively hawkish position, scooped badly from inflationary pressures, and that the possibility of raising interest rates at the end of the year still likely. This change in the perception of dollar in its homeland was actually causing the depreciation of the dollar. Our shorttermists interpreted it as the problem being solved.
But nothing has really changed. This event added a risk premium to our financial assets. It won’t change in a day or two. It is a product of our “short-termism” disease; trying to transgress a grave event that concerns the future of the country with the daily fluctuations in financial prices, and holding onto the misconception that everything is rosy. This also condemns us not to grow up. We have to solve this dilemma as soon as possible. Otherwise, we will get more confused with the ongoing “dollar parity soared, dollar parity fell” conversation.