Turkey should shift to gold standard to protect lira - analyst

Turkey’s government should shift to the gold standard to cure the country's economic ills and protect it from speculators, Adam Garrie wrote for Eurasia Future, a policy and analysis think tank.

Turkey is well-placed to shift to gold as its economy is traditionally fast-growing, Garrie said in an article published late on Monday. Ankara could build gold reserves by encouraging holders from around the world to invest the precious metal in Turkey, which is remaining neutral between East and West, Garrie said.

Owners of gold “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,” he said. “Turkey’s position as a geopolitical power that refuses to take sides in the “neo Cold War” offers an immediate attraction.”

Turkey’s central bank has already begun building its stock of gold. Venezuela is among entities that have deposited billions of dollars in the country, drawing the ire of the United States, which has threatened possible sanctions against Turkey.

A “golden lira” would have several advantages, including protecting the economy from global financial crises, preventing speculators such as George Soros from manipulating the price of the lira and maintaining high economic growth through low interest rates without sparking more inflation, Garrie said.

The lira lost almost a third of its value last year after investors sold the currency due to fears of an overheating economy and during a political crisis with the United States over the detention of a U.S. pastor. The lira slumped more than 4 percent on Friday, prompting Turkish regulators to start an investigation against U.S. investment bank JPMorgan and other financial institutions for suspected currency manipulation.

Gold would also render imported energy cheaper – Turkey imports nearly all the energy it consumes -- and would encourage investors to lend to Turkey in hard currency as they’d know they’d be repaid in a currency that didn’t devalue, Garrie said.

Garrie is a geopolitical expert with an emphasis on Eurasia. He also writes for institutions including the Montreal-based Centre for Research on Globalization.