Turkey’s president launches a plan to shore up his plummeting currency

WHEN speaks, the Turkish lira generally listens, shudders, and falls off a cliff. For once, something different happened. Facing a , Turkey’s leader took a dramatic step to save the lira on December 20th, moments after the currency had plummeted to a new record low. The government, he announced, would guarantee bank deposits in lira, protecting them from swings in the exchange rate. The lira rebounded spectacularly on the news, moving from 18.36 to as low as 11.11 against the dollar, its biggest rally for nearly four decades. Under the new plan, the Turkish government will compensate holders of lira deposits whenever the currency’s depreciation tops the interest rate offered by their banks. For example, were the lira to slide by 30% against the dollar in a single year, an account holder at a bank with a 14% deposit rate would pocket the difference, courtesy of Turkey’s treasury.