Turkish President Fires Another Shot in an Escalating War Against the Dollar
Turkey went on a gold-buying spree in 2017 and that trend continued in the first two months of 2018. Turkish President Recep Tayyip Erdoğan likes gold and it’s pretty clear the president has been pushing Turkey’s central bank to buy gold and reduce foreign currency reserves in an effort to move away from dependence on the dollar and euro.
On April 16, Erdoğan got a little more overt in his apparent quest to dethrone the dollar, suggesting international loans should be made in gold instead of greenbacks in order to prevent exchange rate pressure on economies.
I made a suggestion at a G20 meeting. I asked, ‘Why do we make all loans in dollars? Let’s use another currency.’ I suggest that the loans should be made based on gold.”
According to a Turkish newspaper, Erdoğan confirmed making the suggestion at the G20 meeting during a speech at the opening ceremony of the Global Entrepreneurship Congress in Istanbul. Turkey’s president inferred that global dependence on the dollar was a “tool of oppression.”
With the dollar, the world is always under exchange rate pressure. We should save states and nations from this exchange rate pressure. Gold has never been a tool of oppression throughout history.”
Turkey is experiencing that exchange rate pressure firsthand. The Turkish lira hit a record low of 4.1920 against the dollar on April 11. According to the Hurriyet Daily, the lira lost 7% of its value last month, making it the second-worst performing currency in the world behind the Russian ruble.
Erdoğan has been trying to boost Turkish currency for months, and gold has played an important role in his strategy. Last year, the president urged Turks to use gold instead of dollars to help stem a drop in the lira. London-based Metals Focus Ltd. consultant Cagdas Kucukemiroglu said at the time that the president is also likely pushing the country’s central bank to buy gold.
The president has always been pro-gold and is against the dollar, and that’s informing the central bank’s decision as well.”
Turkey isn’t the only country working to dethrone the dollar. China recently launched yuan-based oil contract to directly compete with the petrodollar. Last June, China took the first step toward establishing a “petroyuan” when it launched a direct trade relationship with Russia, allowing oil purchases to be made strictly in the Chinese currency. Yuan-based oil contracts began trading in Shanghai in March. As a Bloomberg report put it, “China’s hoping the yuan could challenge the dominance of the greenback in international trade.”
There have been reports that China may back some yuan-based oil contracts with gold. Last fall, the Chinese announced the launch of a gold-backed, yuan-denominated oil futures contract. These contracts would be priced in yuan, but convertible to gold. As Alasdair Macleod, head of research at Goldmoney, told the Asian Review, including an option to have the contract paid in physical gold would ease some of the wariness oil exporters have about the yuan.
Dollar-dominance has given the US a great deal of leverage over other countries. Moves by Turkey, Russia, China and other countries with rocky relationships with the US to diminish their dependence on the dollar and even undermine its position as the global reserve currency makes sense. It also makes sense that gold would make up part of their plans. As we’ve reported in the past, Gold plays a key role in both China and Russia’s plans for economic independence. Gold cannot be easily controlled and manipulated like fiat currencies.
Erdoğan’s comments about using gold as the basis for international loans seem to be another shot in the escalating war against the dollar.
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