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Money is far too important to be left to the politicians

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Published : November 19th, 2012
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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.

Asia’s forbidden love for gold

Over in Asia, a continent full of citizens who understand gold, we are also seeing problems with governments’ relationship with gold.

In Viet Nam which, like Iran, has major inflation issues, gold is discouraged from being held within homes. This is in order to ‘stabilize’ the economy which continues to see devaluation of the dong but increasing faith in the US Dollar and gold, the latter is even used to price houses.

Earlier this year gold as a medium of exchange was banned and 7 ‘solutions’ to combat the ‘goldization’ of the economy were put in place. Later this month credit institutions will no longer be able to lend in gold.

All this in a country where overall gold demand accounts for 3.1% of GDP alongside double digit inflation. Clamping down on the use of gold in both the banking system and the marketplace is yet another attempt by government to prove their money is the best money…but they need to control gold in order to prove it.

Indian persuasions

India, the country which has more gold market eyes on it at this time of year than any other, is said to be able to affect the international gold market with a single sneeze. The Indian government seem almost a step behind the Turkish.

Whilst India has nowhere near the same current account deficit problems they are growing increasingly concerned of the impact of gold imports on the current account. They have not yet moved to persuading individuals to put their gold into the banking system but they are working hard to persuade them to save in cash rather than the yellow stuff. Duties on imports were also increased and as a result met with heavy protests from gold-sellers.

The weak rupee, a growing issue of contention, is being blamed on gold imports rather than economic mismanagement. Like all the other brief examples I’ve mentioned, gold appears to be an easy target which, when hit, punishes the people but puts the banks and governments in a fairly prosperous and stable position all thanks to gold’s faceless value.

Don’t trust governments who trust in gold

We should know by now that as soon as government offers anything in return for our gold, we should turn them down straight away. We should also know that the second any kind of ‘control’ is put on the movement of our gold we should jump for joy because it is on its way to being recognised as money.

If proof that gold is money was ever needed then this is it. Four countries, each with significant financial problems caused by the spend-easy qualities that come with fiat money, see their citizens turning to gold; a trait passed down through history and generations who know that money which can only be affected in any way by the owner is the one to trust.

The black-market in gold is undoubtedly growing, evidence that fiat money and its managers, which can only survive if one has faith in the issuer, are indeed fighting an on-going retreat.

Jan Skoyles

Want protection from government money meddling? Buy gold online in minutes…

Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.



Companies Mentionned : Dong |
Data and Statistics for these countries : India | Iran | Turkey | All
Gold and Silver Prices for these countries : India | Iran | Turkey | All
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Jan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of sites including Kitco, GATA and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.
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Latest comment posted for this article
Hilarious premise to those in the know.... Governments and politicians have not had any say about a nation's Gold reserves for almost a century. That far back, CBs decreed that politicians were too irresponsible to have any part in Gold dealings. Of co  Read more
Goldgirlme - 11/20/2012 at 8:21 PM GMT
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Hilarious premise to those in the know.... Governments and politicians have not had any say about a nation's Gold reserves for almost a century. That far back, CBs decreed that politicians were too irresponsible to have any part in Gold dealings.

Of course, it might sit most conveniently for you to buy the lie that Brown sold the Gold. He didn't. All politicians are mere clerks. Business is conducted at a level several stages removed from their grubby hands. If you don't know this yet, then it's time you learnt some history, and applied some intelligence to the world around you.

Here's one that will stump you mere Bachelors/Masters grads (and the appallingly dishonest intellectual reasoning you have been trained like chimps to adopt). No country owns its Gold reserves. I'll repeat that- NO country owns its Gold reserves. That is a fact! The BIS has a claim on ALL of it; the BIS decides who gets the Gold Bullion; the BIS shuffles the Gold Bullion around, dispatching it to where the BIS has decided it will reside.

There are those who have been making this public since the 50s, but you don't want to hear. You want to accept the versions your self-serving educational end cultural institutions jam down your all too eager-to-please throats. (Pathetic what people will do for a meaningless certificate with 'First Class' inscribed upon it).

There are those who are passing on the truth still today. Preciousmetalspete (at his blogspot) is one who has since 1978 had access to the true Gold market, all the charades and facades, and insider info on who pulls the strings. Education can be a wonderful thing, but not if its recipients use it to simply serve their masters.

Or they tread the well-worn path of deceiving the foolish buyers of paper claims that the Bullion they hold for said ignoranti is unencumbered. Liars and scam artists.
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