Is the Lira a Good Investment?

[Ovacikpeedoff]

It depends on when Starman was converting sterling into TL. Through the 70s and 80s inflation in Turkey was over 40%. This eroded the value of the TL. In 1966 a dollar was worth 9 old TL. Within 15 years that had gone up to 1,500,000 old TL. This hyperinflation would have just decimated the value of your investments.

Stoop going back to your earlier comment that FX is a risky business and you are totally correct. In no way am I defending bankers bonuses but a good trader could make a bank millions in one morning. He could also lose millions and that is why massive bonuses are paid to keep the good staff. You can be sure that the best traders get approached probably weekly by headhunters.I was not a trader but an auditor with a knowledge of treasury and the products that get traded and I had been approached a number of times to go to work in the city for twice what I was being paid for working in the sticks. I never fancied the rat race so I stayed in the sticks.

It is a myth if people think the banks are making a fortune out of personal banking. They do make a great deal on those that go overdrawn and do not pay off their credit cards. The vast majority of personal bank customers are loss makers. The banks hope to make profits from us by cross selling other products like loans, mortgages, credit cards and insurance.

[thebillet]

And the really scary thing is currencies are now not linked to anything such as gold they are all based on promises to pay, and one only has to look at he current state of us, Europe and USA and I expect China isn't in such a great position either as they hold plenty of US dollars to see the problems with paying debts. Fiat currency; you couldn't make it up, but they did.

[starman™]

I am talking the 1990s not 70s

[Scunner]

Taking the interest on £100,000 in the 90s may well have left you with £890 today but how much interest did it make over the 20 odd years - if it generated enough to live on over that period then £100k for 20 years full life expense is money pretty well invested  

[Rimms]

But the change over to new lira was well publicised, so the week before the change you would convert old lira back into dollars, pounds or Euro and the week following the change buy YTL with your currency?

[Scunner]

No, there was no need to do that - a ten million note became a ten lira note, both accepted for a time and both worth the same - noughts or not. There would have been no loss in value from 890,000,000 old lira one day becoming becoming 890 new lira.

[thebillet]

Turkish lira makes the calculations complicated not least because of the 000s involved in the past but the rule of 72 helps to calculate the future value of money which is subject to inflation. So if inflation is 10% it takes about 7 years before your money is equal to half its original value. It would take a heck of a calculation to factor in exchange rate fluctuations as well.

[Ovacikpeedoff]

Scunner, you are right as the noughts are irrelevant when calculating the value of the currency. The decrease in the value is not the number of noughts but the fact that the TL in 2005 was worth 3.5% of its value 10 years earlier. The value of the TL against the dollar went from 45000TL in 1985 to the dollar to 1,350,000TL by 2005.In 1995 100 dollars got you 4,500,000TL.Ten years later 4,500,000TL got you 3 dollars.

The gold standard was a farce and linking currencies to gold was never going to work and it never worked. It was one of the greatest causes of instability in the markets.The greenback is still the major currency of the world and none of the new nations like germany and China have not replaced it. It is the currency that is used to price commodities. The price of oil is linked to it. North sea crude is priced in dollars and not sterling.

[Scunner]

I think Starman is maybe attempting to use that little adjustment in noughts to hoodwink us   No matter what happened to your 100k over 20 years, if it was worth (say) £23,000 the day before they knocked off the noughts, it was worth £23,000 the day after too, so irrelevant to his point

[starman™]

the knocking the zeros off had no effect on the value at all. What I am trying to say is if you withdrew the interest every month and left the initial investment alone, that is what you are left with. Back then the interest rate was as much as 120% which sounds great but the lira was diving so fast.
There is no hoodwinking or fiddling the figures.
In 1992 the exchange rate when I came here was 8900 to the pound, now it is 2800000 (or 2.8 in todays money), do the math. Remember not to take into consideration the interest accumulating as you are withdrawing itevery month as an income remember.