FX‑Protected Deposits Shift Risk to State

Türkiye’s KKM guaranteed bank deposits against currency depreciation, effectively lifting savers’ returns while keeping borrower rates low. The scheme stabilized the lira temporarily but created large contingent fiscal liabilities and made the system vulnerable to self‑fulfilling currency and debt crises. — It shows how novel financial 'fixes' for low‑rate politics can hide sovereign risk and destabilize the monetary‑fiscal nexus, a warning for other governments facing rate‑cut pressure.

Sources

Thomas Sargent is a wise man

Tyler Cowen 2026.01.15 78% relevant

While the article doesn’t describe FX‑protected deposits, it outlines how exchange‑rate policy and sanctions produce large contingent fiscal risks and public panic; that connects to the existing concern that state interventions to 'fix' currency losses (or to insure against them) move private currency risk onto the sovereign balance sheet and can create fragile fiscal exposures.

Türkiye’s Homemade Crises

Tyler Cowen 2025.10.04 100% relevant

NBER paper by A. Hakan Kara and Alp Simsek modeling KKM’s mechanics and crisis vulnerabilities cited in the post.