The currency crisis comes in the wake of a series of events, including the European Parliament voting to suspend talks with Turkey on EU membership; Donald Trump's election, which roiled emerging markets; and the erratic behavior by Erdoğan.
In the past three weeks, he has threatened to allow about 3 million migrants to flood the European Union if the EU halted membership talks, which it did temporarily in response to his targeting of political dissidents. Erdoğan also launched what Hanke called "a war with his own central bank."
He has been resisting the normal response to a sliding currency — higher interest rates — and instead asked Turkish citizens to buy lira and gold to prop up the lira.
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Just as alarming is the crackdown Erdoğan has imposed to root out perceived internal enemies. It has included shutting down social media channels, including Facebook and Twitter, and taking over some 496 companies, some with publicly held units, in the hunt for coup plotters. Purges have even included the Capital Markets Board, preventing voting on debt and capital issuances for more than two months until the government appointed new board members.
For U.S. companies with major investments in Turkey, the turbulence is unsettling. Microsoft, Intel and Coca-Cola are among U.S.-based multinationals that have regional headquarters there and are exposed to domestic market turmoil.
— By Elizabeth MacBride, special to CNBC.com