A golden lesson from ancient cultures

J. Keith Johnson Senior Writer, The Gold Informant
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This week, in a surprise move, the People’s Bank of China announced an interest rate cut for the first time in four years. Markets seemed to respond positively; though much of the move may have been on false expectations that Ben Bernanke would announce QE3 in Thursday’s speech.

We all remember what happened in 2008. World economies went through a very difficult season. The Chinese are clearly concerned that they’re not immune to current pressures facing central banks in all major economies. Furthermore, many economists claim that China’s perceived growth has been largely smoke and mirrors, based on government efforts to stimulate through unneeded building programs. True or not, this move is obviously an effort to cushion the country’s economic landing.

Recent efforts to make gold more available in China may go a long way toward helping the economy in the long run, though the short-term effect may be greater constriction. Banks in the country sell precious metals directly to customers. Now, with China’s increased exposure to world metals markets, even more opportunities have arisen. Demand for gold in both the public and private sectors continues to rise in a nation that has well understood gold’s economic significance for centuries.

But China is not alone. Turkey has been increasing its gold supplies steadily for years now. Owning a rich heritage in precious metals, the country has never really bought into the fiat currency lies. Even while the central bank has attempted to lure the people into depositing their gold in banks, owning and holding their precious metals is more than merely tradition. They do so because of the freedom and protection they know is inherent in personal ownership. Banks want to hold it because it will give them greater leverage in world markets.

Turkey’s affair with precious metals goes back well over 2,500 years. The first known coin was minted in Lydia, part of what is now Turkey. However, historically people in the area have been more enamored with jewelry than with coins, as both an adornment and a store of wealth. In the past couple of years, the people of Turkey have become more focused on hoarding gold as an investment rather than jewelry though.

When it comes to gold jewelry, it’s long been recognized that India is at the front of the pack. Indians’ demand for gold for ceremonial adornment skyrockets during the spring wedding season. But it certainly doesn’t stop there.

With the Indian economy also struggling today, more of India’s wealth is moving from stocks to precious metals. Yesterday, gold priced in rupees hit an all-time high. These high prices are doing nothing to diminish demand, however, with dealers reporting increases in sales of up to 25%.

The peoples of these ancient cultures have a long tradition of understanding the importance of true monetary assets. Though they often become enamored with the manipulated fiat currencies established by central banks, as well as stocks, their understanding of the value of maintaining at least a substantial portion of their wealth in precious metals remains.

The U.S. has much to learn from these countries. Over the years, due to the strength of the dollar in world markets, we’ve become so enamored and dependent on our Federal Reserve Notes that we’ve failed to understand that this is perhaps the most manipulated market in history. And the only way to truly protect our wealth is to move our interests into true assets rather than empty promises. While that may include land, cattle, grains or a host of other possibilities, only gold, and silver to a lesser extent, has historically proven to be true money.

J. Keith Johnson’s Austrian and libertarian perspectives on current socioeconomic and geopolitical affairs are fueled by his insatiable desire to both discover and share the truth. A Goldco Direct affiliate, you’ll find his commentary on The Gold Informant website, as well as various Internet financial and news sites.