Turks Flee to Gold, Bitcoin, and Foreign Currency as Government Devalues Lira
The rising price of everything is hard to miss when you see it in the groceries, holiday gifts, and the tab at the fuel pump. Inflation isn’t just an American problem, either, with prices rising across the world or, more accurately, the purchasing power of many nations’ currencies declining. An important example is found in Turkey, where people hustle to spend or exchange paychecks denominated in the country’s lira before it loses even more of its value. At a time when officials want to squeeze out independent cryptocurrencies and even eliminate anonymous cash, it’s a chilling warning of the danger of giving governments free rein to mess with our money.
“The Turkish lira’s rapid slide—13% in one day this month and about 38% since the beginning of the year—resulted in a wave of Turks exchanging their liras for dollars, euros and other currency,” The Wall Street Journal reported last week.
The value of the currency isn’t just a curiosity for foreign-exchange traders. It represents the purchasing power of people’s paychecks, of the money storekeepers receive for their sales, and of the payments that companies take in for their goods and services.
“I had never experienced such a deplorable life. I go to sleep, I wake up and the prices have gone up. I bought a 5-litre can of (cooking) oil, it was 40 lira. I went back, it was 80 lira,” a widowed mother of two told the AP in November. “We don’t deserve this as a nation.”
Officially, inflation in Turkey is running at about 20 percent, though independent economists say it’s more than double that figure. As a result, while the lira can be used to make purchases, it no longer functions as a store of value. To put cash aside for a rainy day is to watch it deteriorate to the status of toilet paper. This isn’t Turks’ first go-round with unreliable money, which is why they long ago developed the habit of keeping part of their savings denominated in other, more-stable currencies.
“About 59% of retail bank deposits are now in foreign currencies, up from nearly 57% the week before,” The Wall Street Journal added.
Dollars and euros aren’t the only alternatives to the lira.
“Turks have traditionally used gold as savings and there may be as much as 5,000 tonnes of it ‘under mattresses’, with more added after the recent buying spree,” Reuters reported last year even before the currency lost so much of its value.
Tellingly, even though Turkish banks accept deposits in both gold and foreign currency, many people avoid them out of fear the government might seize private funds to bail itself out.
“Smart Turks are keeping their savings at home, whether in gold or FX,” The National Interest noted earlier this year.
Looking for a safe haven, many people also take to cryptocurrency. While volatile, independent digital currencies appear to be a better bet than a lira that loses value by the day. Bitcoin and its competitors can also be transferred over long distances and across national borders.
“The latest economic turmoil has led to a surge in cryptocurrency trading in the c
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