While packing for my redeye flight to Istanbul tonight, I remembered the last time I had travelled to Turkey around 6 years ago. After getting sort of stranded in Kazakhstan for a day, I ended up wandering back alleys of Istanbul talking to questionable people in the non-bank financial service sector.

A planning error left me with no choice but to run an experiment on the fringes of the global forex market.

At the time, I was working at an investment bank in China, but I got a week off for a some sort of Communist Party workers holiday in October. My then girlfriend now wife was a grad student in the US. We decided to meet in Turkey for a little getaway.

As I prepared for the trip I was flush with RMB(Chinese yuan), but short on dollars and Euros(1). None of the banks in Beijing I went to would directly change RMB to Turkish Lira. Plus all them had silly wide bid-ask spreads on RMB/USD or RMB/EUR transactions. No point in changing here I thought, I’ll just change once when I get to Turkey. Turns out that was a rookie mistake.

I was on the Air Astana flight from Beijing to Istanbul with a layover in Almaty, Kazakhstan. Checking in was a bit of a debacle. I  had to wait in a long line behind migrant laborers who had absurdly large quantities of luggage to check, much of it in non-traditional suitcases (ie barely sealed cardboard boxes).

The guy in front of me in the line to check in  was about 6 foot 4, bald, big boned, with the look of a football referee who let himself go. After some sort of commotion at the front of the line , he turned around, smiled and said in a baritone, probably Russian Accent: “Almaty airlines ,this always happens. “

The flight was delayed a few hours but it ultimately did take off. However we were late enough that I missed my connecting flight. I had a day to wait for the next flight to Istanbul.

Almaty airport wasn’t fancy, but it was no worse than many of the small airports I’ve been to around the globe. I went to a cafe to get some food.

Turns out they wouldn’t accept RMB. No problem I thought, and I walked over to the one moneychanger accessible from the terminal I was at.

Turns out they wouldn’t change RMB at all.

I went to the ATM, and it wouldn’t accept my card for some reason.

For amusement I tested if any of the shops there would take RMB. None would.

At least I got a lot of reading done passing the time with no money to entertain myself in the airport for a day. I don’t remember what the meal was on the next leg of the flight, but I remember it was quite delicious.

When I got to Istanbul, and ran into identical forex issues with shops, moneychangers, and ATMs.(2)

So I wandered the streets going into moneychangers asking to change money. Even banks with China origins wouldn’t do it. Finally one money changer looked surprised, and asked “how much,” as he motioned me over towards the other end of the counter.

I answered him, then he took out a pen and a piece of scrap paper, and started to draw a map.

It was a long journey. As I recall, I had to go to the far end of one of the subway lines, then walk for about 15 minutes. Finally I found a shop that would change RMB. But their rate was horrible so I said I’d be right back.

I finally found another one a block over with a much better rate. I was relieved to at last clutch a fistful of Lira.

The rest of the trip went smoothly. Of course those days were before Erdogan, um “changed” (3).

This time I’m going back to Istanbul, with a mix of USD and Euro I’m excited to enjoy deeply discounted falafel, and drink coffee while working from a deck on the Asia side of the bosphorus, with a perfect view of the river, and Europe on the other side. I won’t have time to explore the far ends of the subway lines since I’ll only be in Istanbul for a day. After that I’ll be going to Sofia Bulgaria and working there for a week.

…

(1)When if ever will the RMB be a global currency? I don’t know. My general view on currencies is I never make pure directional bets. I just try to avoid getting killed by sudden changes. This basically means cautious sizing of any position that is exposed to fringe markets. Smart operational decisions have real alpha implications in these areas as well I guess you can say I learned this on the streets, the hard way.

Anyways, while there is now a surplus of superficial media coverage of China’s One Belt One Road policy,few people are talking about the capital markets implications. China is basically throwing money at every country to its west all the way to Europe, with a potentially huge impact of the smaller countries. What I find interesting is that most of it is going to be financed with yuan denominated debt, not dollar denominated debt. Combined with a yuan denominated oil futures contract hitting the market, One Belt One Road will result in a lot more financial market activity in yuan rather than dollars. I would still consider yuan internationalization(and a decline in the dollars status) a bit of a long shot near term, but these recent changes make it a lot more plausible over the next decade. At the very least there will soon be a lot more funky securities denominated in yuan(many probably, ahem, distressed and deeply discounted), so it makes sense to get comfortable with custody and banking issues involving the currency.

(2) My ATM card ended up getting flagged with a security alert for suspected fraud, which I was later able to resolve.

(3) Much as been said about his more populist tendencies. I also find it amusing how non-populist policies have had unintended consequences contributing to the current crisis. For example, the government incentivized small and medium sized companies to borrow in non-Lira currencies, by loosening restrictions on loans over a threshold(IIRC, $5 million). This part of the economy is seriously hurting now. Alas there will be some fun picking in the distressed debt space before too long.