The recent declaration from Ankara, suggesting that the long-standing Turkish practice of household gold accumulation "hurts the economy," provides an instructive, if somewhat myopic, glimpse into the challenges confronting nations grappling with economic instability. While the desire to mobilize dormant assets is understandable from a governmental perspective, characterizing a deeply entrenched cultural savings habit as a primary impediment to growth risks misdiagnosing the underlying pathology.
For generations, Turkish citizens have opted to convert a portion of their wealth into physical gold, often held outside formal banking channels. This practice, frequently described as "under the pillow" savings, is not an exotic anomaly but a rational response to perceived and actual economic uncertainties. When domestic currencies exhibit volatility, when inflation erodes purchasing power with speed, and when confidence in financial institutions or government solvency wanes, individuals instinctively seek tangible stores of value. Gold, with its millennia-long history as a universal medium of exchange and wealth preservation, naturally fits this role.
The assertion that this tradition "hurts the economy" implicitly assumes that these assets, if formally deposited, would automatically translate into productive investment and economic expansion. While it is true that capital held outside the financial system does not directly contribute to bank lending or stock market capitalization, its absence from these circuits is often a symptom, not the root cause, of economic underperformance. A robust financial sector, capable of efficiently allocating capital, thrives on trust, predictability, and a stable macroeconomic environment. When these elements are deficient, households and businesses understandably retreat to safer, albeit less "productive" in the aggregate sense, havens.
From a center-right economic perspective, the emphasis should always be on establishing the conditions under which capital *wants* to be deployed productively. These conditions include fiscal discipline, a commitment to sound monetary policy that prioritizes price stability, strong property rights, and a legal framework that instills confidence in contractual obligations. Governments that prioritize these foundational elements typically find capital, both domestic and foreign, flowing into their formal economies. Conversely, when governments engage in expansive fiscal policies, print money excessively, or interfere unpredictably in markets, individuals will seek refuge wherever they can find it, whether in gold, stable foreign currencies, or even offshore accounts.
The current lament from Ankara over "under the pillow" gold holdings suggests a desire to harness this private wealth for national objectives. While initiatives to integrate these assets into the formal financial system can be beneficial, they must be predicated on earning, rather than demanding, public trust. Voluntary participation requires assurances that deposited funds will retain their value, that they will be accessible, and that the financial system is robust enough to protect them from both inflation and potential government overreach. Without these assurances, any attempt to compel or strongly persuade citizens to relinquish their gold is likely to be met with skepticism and resistance, potentially deepening mistrust rather than alleviating it.
Focusing on the perceived "loss" of this physical gold to the formal economy sidesteps the more critical questions. Why are citizens mistrustful of banks? What specific monetary policies have led to a preference for hard assets over domestic currency savings? And what measures are being taken to re-establish confidence in the nation's economic institutions? Until these fundamental questions are addressed through disciplined policy and consistent action, the gold will likely remain, quite rationally, where it has always been: a tangible bulwark against economic uncertainty. Blaming the symptoms, however traditional, offers little in the way of a durable cure.