Why Not Gold Instead Of The US Dollar, Says Turkish Prime Minister

The international pressure on the usage of the US dollar as a world reserve currency is increasing. Turkish Prime Minister Erdoğan openly asked why the International Monetary Fund is not using gold as its reserves instead of the dollar. It’s becoming increasingly clear that the dollar isn’t necessarily a blessing but rather an issue for some countries. These are some highlights from what Erdoğan publicly said (source: Sabah.com.tr)

Expressing that he doesn’t feel it is right for the IMF to act according to one nation’s currency, Erdoğan states, “The IMF extends aid on a who, where, how and on what conditions bases. For example, if the IMF is under the influence of any single currency then what, are they going rule the world based on the exchange rates of that particular currency?

Why do we not switch then to a monetary unit such as gold, which is at the very least an international constant and indicator which has maintained its honor throughout history. This is something to think about.”

Explaining that Turkey had to pay a heavy price for the agreement they made with the IMF, Erdoğan stated, “We have not made a stand-by agreement for the past three periods. In April, we will have zeroed out our debt completely and we have no intentions of working with the IMF again.”

Prime Minister Erdoğan went on to state: “One would hope that the IMF would help countries in trouble, however at present this is not the case. This is what we need to achieve.”

It shouldn’t really come as a surprise. Earlier this year, in March, Turkish gold exports to Iran have been skyrocketing by 3,692% compared to a year ago, as reported by Bloomberg. Zerohedge wrote in August:

The gold market was the biggest contributor to a $4.3 billion improvement in Turkey’s trade balance this year. That has aided Turkey and sent Turkish yields on benchmark two year notes 155 basis points lower this year. This is the biggest drop among major developing nations.

While Turkey has assured the U.S. government it will cut purchases of oil from Iran by 20% this year, its total trade with the Islamic Republic increased 47% to $4.8 billion in the first quarter from a year earlier.

Sanctions aimed at isolating Iran because of its nuclear program, combined with revolutions in the Middle East, have spurred a tripling in the region’s purchases of Turkish precious metals and jewels to $942 million in the first three months, from $282 million in the same period last year.

“Turkey is exporting massive quantities of gold to Iran and Arab Spring countries as citizens in those countries switch to portable wealth,” Mert Yildiz, chief economist for Turkey at Renaissance Capital, told Bloomberg on April 30.

The increase in trade with Iran comes as sanctions make it harder for trading partners such as Turkey, India and China to pay in dollars and euros.

What we find extremely interesting in this story, is that this debate is becoming public. Moreover, it’s happening exactly at the time when the Central Banks’ gold reserves are being questioned as well. It can only help in building pressure in the gold market and create the awareness that gold deserves.

 

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