Turks Hoard $640 Billion in Gold Outside Banks

Turkish households have stashed away an estimated $640 billion in gold and foreign currency outside of the formal banking system, a practice known as 'yastık altı altın,' or 'gold under the mattress.' This phenomenon is not only a reflection of the country's economic instability but also a response to a broader distrust in official institutions.

Economist Selva Demiralp notes that nearly four in 10 people surveyed rated their trust in commercial banks close to zero, while over half put their trust in the statistical agency in the same near-zero range. This mistrust is rooted in historical economic trauma, persistent inflation, and a credibility gap in institutions.

The preference for physical gold as a safe-haven asset has led to a severe headwind for the broader economy. As Demiralp points out, 'It's not being lent out to businesses,' and a significant portion of the gold must be imported annually, adding to the current account deficit.