Earlier this week, I wrote a series of posts about Turkey’s central bank, which sold and swapped 50 tons of gold to bolster its foreign exchange reserves in its fight to keep the Lira from suffering a large devaluation. The spike in oil prices hits an energy importer like Turkey hard. It widens an already large current account deficit still further, which puts depreciation pressure on the currency. If the central bank fights this pressure, it must buy back its own currency using a finite stock of hard currency. The problem is that - if a shock is big and long enough - the central bank runs out of hard currency. ... (full story)