Money Is Far Too Important To Be Left To The Politicians

By Jan Skoyles * GoldSeek.com

When I first joined The Real Asset Company I attended a discussion on the oncoming collapse of the paper money system, held in a small room at the Houses of Parliament. It was in this historical place where a (now) good friend of mine said something which has stuck with me ever since, ‘I don’t know which money is the right money, but whichever the people choose must be the right one.’ I couldn’t agree more, but, as we all know, governments do not.

As this monetary system fights a hard fight to its bitter end, governments are working harder than ever to stop individuals choosing how to store their money. Whilst here in the West we seem blinkered by the monopoly money governments woo us with, our compatriots elsewhere are onto something; saving vociferously in gold, aware that their governments are proving poor stewards of the monetary system. But in many cases, if not all, the government is putting up a fight.

Whilst governments and loyal Bernanke followers out there continue to tell us that ‘gold is not money’ their actions continue to prove them wrong.

Gold Turkey

As I wrote before the summer, the Turkish government has launched a campaign to encourage citizens to bring their gold investments out from under their mattresses (an estimated 5,512 tonnes).

As the World Gold Council reported earlier this year, there has been a gradual movement from gold jewellery purchases to investment in gold coins and bars, with an increase in demand of 80% for the coins and bars. Turkey’s economic history has not exactly been an easy ride, with an average inflation rate of 39.78% between 1965 and 2010, it’s not surprising gold investment is changing face as politics in neighbouring countries and their own economic record become increasingly shaky.

The campaign for gold-accounts is part of an on-going effort to reduce the country’s current account deficit, the second largest, after the US, in absolute terms. The government hope that by drawing in individual holdings of gold into the banking system they can make a significant impact on the deficit. They officially state it is a way to ‘encourage household savings’ failing to realise that just because you don’t store within a government recognised savings scheme does not mean you are not ‘saving’.

Customers opening these gold-based deposit accounts are given the equivalent value to the gold’s weight in lira, which they may withdraw or take out further loans. The bank meanwhile is able lend or even sell the gold. This is good news for banks that have seen the legal proportion of reserves held in gold increased to 30%.

As Zerohedge said at the time this is just another way to legally implement gold confiscation. It’s also further proof that the government need the ultimate form of money to sort out the mess they’ve made of their own.

The Turkish government, as we alluded to previously, are aware of the dangers of paper money and the safety of gold. Earlier this week Turkish Prime Minister Recep Tayyip Erdoğan, said the IMF would be better to use gold when it provides aid to a country rather than US dollars. Gold, the Prime Minster said is ‘an international constant’ which has ”maintained its honor throughout history”. In contrast, the supply of dollars can actually be harmful.

Iran bans gold exports

Iranians who have seen their currency reduced to almost zero-value this year on account of government policies, both their own and foreign, have been choosing to buy gold like nobody’s business in order to protect the value of their savings. There are now signs Turkey has been sending gold to Dubai for Iranian buyers, using the country as a conduit.

The government has also been working hard to stock up; in the first six months of this year, gold exports from Turkey to the Islamic republic were in excess of $6 billion.

As we all know, sanctions have lead the Iranian government to hoard gold to be used in exchange for necessary goods. Now the Iranian government are imposing sanctions of their own; effectively banning citizens from exporting gold because of ‘exchange rate fluctuations at Iran’s markets’. That may be one reason, but it is also part of an effort to keep some form of real money within the economy for when the rial finally collapses.

continue at GoldSeek.com:

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