Here's an excerpt from my Forbes article yesterday: “Turkey’s Bubble Is Bursting.”

For the past five years, I’ve been warning about a dangerous credit bubble that has been developing in Turkey’s economy. Ultra-low interest rates led to a borrowing binge that created an artificial economic boom that most people thought was a legitimate, sustainable boom. Since the summer of 2018, however, Turkey’s central bank was forced to raise interest rates dramatically to stem the sharp decline of the lira. At the time, I cautioned that those aggressive rate hikes would be the pin that pops Turkey’s long-lasting credit bubble, which has proven to be correct, so far.

As the chart below shows, Turkey’s credit bubble started in the early-2000s. Private sector credit grew from approximately 15% of GDP in 2003 to 70% of GDP in 2016. Loans to the private sector sextupled from 2010 to 2018.