A woman sits beside a digital billboard giving updates on various currencies and the Turkish stock exchange in Istanbul.
Credit: Yasin Akgul/AFP

Turkey’s currency, the lira, fell to a record low on Monday as investors panicked over a perfect storm of internal and external factors casting doubt on that country’s economic stability. The lira has fallen 40 percent against the dollar since the start of the year, from 3.8 per dollar to around 7 to the dollar, as long-simmering problems with the Turkish economy have begun to boil over.

Turkey’s economy has been on a collision course with reality for years, as President Recep Tayyip Erdogan bought his popularity with low interest rates and cheap credit, which has fueled several years of rapid growth in the country’s real GDP. Unfortunately, it has also fueled high inflation and a massive current account deficit: All that growth was greased with easily available loans in foreign currencies, and with the collapse of the lira, that debt has suddenly become unmanageable.