Just as was the case prior to last year’s presidential and general election in Turkey, in the run up to this year’s local elections, western currency speculators are doing all that they can to increase pressure against the Turkish lira. Turkey’s central bank has rightly stated that it plans to build up its reserves in order to better leverage external pressure. This is clearly a good short and even medium term solution but in the long term, Turkey must seriously consider a shift to a traditional gold standard.
Turkey is actually well placed to begin a gradual shift to a gold standard. Unlike large countries that would need incredibly large gold reserves to maintain present living standards or impoverished countries that simply have no means to buy enough gold to run even a small economy, Turkey’s economy is one that continues to grow while holding tremendous potential for long term growth. Beyond this, Turkey’s ideal position within Belt and Road trading routes makes the country one that will come to play an ever more important role in key Pacific to Mediterranean trading routes.
Although clearly it would take a number of years for Turkey to build up gold reserves that could be used to guarantee the redeemable value of the lira in one’s pocket, this process could be expedited by the government if Ankara encouraged those from around the world to deposit their gold in Turkey. Turkey’s position as a geopolitical power that refuses to take sides in the “neo Cold War” offers an immediate attraction to gold holders who do not want to see their holdings held hostage by political developments as is the case with Venezuelan gold being hoarded by the Bank of England.
For a country like Turkey whose lira has been hit hard by foreign speculators, a golden lira would have several distinct advantages:
1. Gold’s value is largely immune from geopolitical conditions whilst in terms of major global crises, gold tends to go up while the value of non-metallic backed currencies plummet
2. George Soros and his ilk cannot manipulated the price of gold as they can in respect of fiat currencies
3. A Gold standard is the only way to maintain high growth through low interest rates without causing inflation
4. So long as a nation can maintain a gold standard prudently, more nations will be willing to lend to a country with a gold standard because they know that they will be paid back in a currency that will retain its value
5. A Gold standard is immune from domestic political shifts
6. A Gold standard would make imported energy cheaper vis-a-vis converting the lira to the petrodollar.
Over the last year, Turkey’s President Recep Tayyip Erdoğan has successfully named and shamed those behind unethical speculation against the national currency. Beyond naming the notorious George Soros in particular, the Turkish government has banned all Soros related political bodies from the country as it emerged that Soros backed groups were behind the 2013 provocation in Istanbul’s Gezi Park.
Now that Turkey has successfully diagnosed the cause of the lira’s problems, the long term solution is to make it so that the lira becomes a safe and stable currency that continues to allow for high growth but without being prone to inflation.
A gradual shift to a gold standard would allow this to happen whilst giving Turkey many new opportunities in the future that a sound money principle can provide.