Gold based trade between Turkey and Iran: potential implications

One thing is pretty clear. If we ever return to a gold based monetary system it won't a negotiated top-down grand bargain à la Bretton Woods. The financial system is too vested to current for change to come from within. If a return to gold is to ever come, it seems it must come from forces outside the financial system, either from the grass-roots or from outside.

Grass-roots efforts to bring about honest money have for the most part crashed and burned for one reason or another but mostly because there is a heavy and deliberate legal bias against any sort of gold based money. Ron Paul's Free Competition in Currency Act of 2011 was designed to address these legal road blocks.

The other possible route for re-establishing the gold standard is from outside the system, from forces that have no stake in our current system. That's what makes the following story so fascinating:

http://gata.org/node/11958

It's almost (but not quite!) enough to make one wonder: which is Iran's greater threat to our system: its nuclear weapons program or their opting to accept payment in gold in order to get around the sanctions?

There are systems in place internationally that allow you to send and receive payment with foreign countries. One thinks of the systems that allow you to go to an ATM in Amsterdam, draw on your bank account in the United States and receive euros in your hand. It's an amazing thing. It's one of the marvels of our world.

But those systems do not work in Iran. The international sanctions have shut those systems down which prevents them from receiving payment in dollars or euros.

Apparently, Turkey gets much of the natural gas it uses from Iran. Normally, prior to sanctions, a retail purchaser of natural gas in Turkey would pay for it in Lira, Turkey's currency. The natural gas distributor in Turkey would then pay Iran, not in Lira, but in dollars, using the financial mechanisms set up to facilitate international trade. Iran's central bank would take those dollars and issue local currency to the seller of the natural gas. The seller of natural gas in Iran would use that local currency to pay his workers and local suppliers.

But this does not happen today, The banking link between Turkey and Iran is broken because of the sanctions.

So to evade the sanctions, Iran is now accepting payment in gold for the natural gas it sells to Turkey. So the distributors of natural gas in Turkey take the Lira they receive from their customers and buy gold with it and ship that gold to Iran. This system would be a bit cumbersome to to us who are used to electronic transactions. Plus there are the risks of shipping gold. Thieves, graft, high mountain passes, anything could happen.

So here is my point. Wouldn't it be easier if someone offered a service to hold onto the gold say in Ankara or wherever and credit the accounts of the different parties involved? This was how London got its start as a banking center back in the days of the gold standard. Rather than ship gold around, they offered the service of tracking of the transactions and who had rights to how much gold, reducing the amount of gold that actually got shipped around.

Necessity being the mother of invention, wouldn't it be interesting if these sanctions on Iran resulted in the creation of a new system of settling international transations but based on gold, a system that once established would continue even after the sanctions are lifted?

WWSD (What Would Switzerland Do)

What bugs me about politics is that it so often boils down to these stupid binary either or type questions. This past election the question was essentially do you want fries or rice pilaff with your free sandwich?

And the thing that greatly frustrates me as a Republican is having to defend Bush. I am not a Republican in the same way that some are say Canadiens fans or Maple Leafs fans. I do not even try to draw co-relations between trends and events and whether a D or R was in the White House. That is just way too simplistic. The fact is both parties have been the party of Keynesian economics since the Hoover administration. And by Keynesian economics I mean activist government intervention in the workings of the economy. Hoover was the prototype for Roosevelt in terms government intervention in the economy much as Bush was the prototype for Obama for deficit spending.

Like I said, do you want fries or rice pilaff with your free lunch?

But I want to focus on foreign policy. This is another area where I differ from many Republicans.

The question we should ask ourselves when we confront issues overseas is analogous to WWJD (What Would Jesus Do) and that is WWSD, What Would Switzerland Do?

When was the last time Switzerland attacked anybody? The 1600s? I dont even know though I am sure I could find out. But I am sure if they wanted to they could if someone pissed them off enough. They have a strong military. They are a clever people. If they made it their national ambition to hit back at somebody, even on the other side of the world, I am sure they could pull it off.

For the many who would immediately scoff at this I say game it out. Think dynamicly, not staticly. Pretend you are Switzerland and you want to attack Afganistan. How would you do it? I will save that mind experiment for a future post.

My point is Switzerland does not attack other countries. And the question we should ask ourselves is if Switzerland wouldn't attack a country in a given situation, why should we?

I ask this question to a lot of my fellow Replicans and the answers I get are interesting. They basically assume that it's still World War ii and that we are saving the world and, heck, the world should be greatful.

Recall Romney's own words: we do not "dictate to other countries, we liberate them!" Those words may have cost Romney the election. How about leaving countries alone for a change?

The fact is for four long years Switzerland stood alone surrounded on all sides by armies threatening invasion before a single American soldier appeared on their border.


I exaggerate only a little but the reaction of some conservative when a crowd burns our flag in say Pakistan is not much different from how muslums in Pakistan react when someone somehow disrespects their prophet.

Get over it. It's not their flag and he is not our prophet!

The fact is, even if the U.S. did not have a single soldier stationed beyond our borders (something that was for the most part true right up till World War II), the other countries of the world would still find ways to confront threats. Small countries unite in alliance to confront threats from large countries. That's the way it's been for centuries. While Georgia alone can't defend itself against Russia, an alliance of countries along Russia's periphery can. The U.S does not need to pledge itself to war on behalf of any of those countries. How would we feel if Russia made such pledges with Mexico? The USSR was so pledged to Cuba and guess what, we didn't like that and justifiably so.

This is essentially Ron Paul's position. He does not say we should never attack another country. Only for good reason. And Ron Paul's position is that we are far too quick to drop the gloves and start pounding.

I have often said the Ron Paul would take us back to the 1890s, buy in a good way. We didnt attack other countries much in 1890. And we were a more powerful country because of it.

Why Romney Lost

Needless to say last week's election was disappointing but in a way not surprising. I have to admit, I did drink the cool-aide that Romney was for sure going to win, that the polls were wrong, that the intensity was going to carry Romney to victory. But now, as I ponder the fact the America has chosen to ignore economic reality and to in effect vote itself bread and circuses, I remember back to some of my own statements during the primary and in the runup to the convention that if Romney didn't get the Ron Paul folks on board he'd lose.

For a long time the party grass roots was doing everything it could to avoid Romney as the nominee. That was why candidate after candidate besides Romney rose to over-take Romney in the polls only to be carpet bombed and fall back to earth. It was leadership of the party forced Romney on the rank and file by destroying every alternative leaving the rank and file no choice but to go with Romney.

I remember at the Alaska State convention conversations where Ron Paul supporters were told they HAD to support Romney. And the irony is that in this the most important election of our lifetimes Romney, last time I looked, received fewer votes than McCain in 2008!

This was an election that we had to win. This was an election that we could not lose. And yet we lost seats in both houses and the White House! Over the years, the Republican have so shot themselves in the foot. I hate having to defend Bush. There many people who view the Republican Party as the party of borrow and spend (with the Democrats being the party of tax and spend!) Where is the party that defends free markets, sound money and fiscal responsibility? The Republican brand is so bad that I find it easiest when I identify myself as a Ron Paul Republican when I identify myself as a Republican at all.

What I would like to see in the coming years is a thorough purging of the Republican Party of its leadereship. I would like to see Ron Paul type ideas take over. We need to be the party that speaks the truth to the American people even when it's not what the American people wants to hear. We need to be willing to lose elections.

I like the example of Winston Churchill. In the 1930s when many young men in the universities of Britain were making pledges never to fight for their country, Churchill was warning about the growing danger in Germany and the need to be ready. He was not popular. He was viewed as a nut, an anachronism. It was more fashionable to give Hitler a country or two to buy him off. So when the Germans broke through in the west and the British Army was retreating towards Dunkirk, there was no doubt in anyone's mind to whom the country must turn for leadership: Winston Churchill.

The Republican Party needs to be the party of fiscal responsibility, sound money, and free markets. The American people needs to know to whom it must turn when it finally becomes clear that there is no such thing as a free lunch.