Desperate times call for desperate measures. Or tyrannical men do tyrannical things when it comes to propping up paper money whose value is circling the drain.
This in the same week that “[n]ewly appointed Turkish finance minister Nureddin Nebati delivered a sales pitch to investors in London on Tuesday, offering an upbeat assessment of the country’s economic outlook despite acute currency weakness and raging inflation,” according to “Almost Daily Grant’s.”
BlueBay Asset Management emerging market strategist Timothy Ash was impressed, telling the Financial Times that “this guy had a pitch. He’d prepared. The message was clear: foreign capital is welcome. Forget about capital controls, we’re not going to do that. That’s encouraging.”
But just in case, Nebati figures there is 300 million dollars worth of gold under the beds of the Turkish populous, and the government would like to trade more than 10 percent of the hoarded yellow metal for their flimsy paper lira.
Refineries have even been commissioned to meltdown jewelry into bullion. Laura Pitel writes, “A traditional gift given for weddings and births, gold has long been a preferred way for Turks suspicious of the banking system—and their country’s history of inflation—to guard their wealth.”
To illustrate, I continued, “In 1966, one U.S. dollar bought 9 lira. By 2001, a dollar bought 1.65 million lira. Four years later, six zeros were lopped off the lira and a dollar equaled 1.29 new Turkish lira. Today (2012), a dollar can be traded for around 1.80 lire.” Ten years later a U.S. dollar will buy more than 13 lire, having rallied from 17 to the buck in December.
Nebati said his plan aims to gather $25 billion of the yellow metal for the local banking system.
FDR’s next step made it illegal to “require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby.”
Law then resorted to despotic power, banning the export of coins and bullion. Next he prohibited the purchase or wearing of diamonds and other jewels. When this didn’t stop the exit from paper, Law outlawed the production and sale of all gold and silver artifacts with the exception of religious paraphernalia, resulting in soaring prices in crosses and chalices.