What is the true essence of currency? Is it the cash you hold in your hand, the savings in a bank account, or the balance in a digital wallet like WeChat Pay?

When the price of a liter of gasoline jumps to tumultuous highs or when, as seen with Russia facing financial sanctions, foreign reserves get frozen, can we still trust that the currency we value retains its worth?

This inquiry is profoundly important, not just for individuals but for nations as wellFollowing the United States deploying its 'financial nuclear option' against Russia, the world is grappling with a vital question: when the US can impose sanctions on any state, including a nuclear power like Russia, and seize its foreign reserves, what constitutes stable currency and actual wealth in such an environment?

How can countries construct a monetary system and settlement methods that break free from the hegemony of the dollar and ensure the preservation of national wealth and stability in international trade?

Turkey has stepped forward with a potentially groundbreaking answer to these questions

On March 6, local time, President Erdogan of Turkey announced that to counter the financial sanctions imposed on Russia, transactions between Turkey and Russia could be conducted using rubles, gold, and the Chinese yuan, aiming to dismantle the dollar’s monopoly over international trade

The choice of rubles, renminbi, and gold stems from the significant oil and gas resources backing the Russian ruble, coupled with the 9.04 million tons of wheat that Russia exports to Turkey each year

The renminbi represents not only a robust industrial system but also an unprecedented capability for product supply on a global scale

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Gold, being universally recognized as the most stable and effective reserve currency, serves as a special commodity that acts as a general equivalent for all goods

In a world where the original rules are being challenged, the true nature of currency is becoming increasingly clearThe irreplaceable role of gold as a natural currency in maintaining financial and trade stability has resurfaced prominently

While the forms of currency may vary greatly, at its core, it remains a "special commodity that consistently acts as a general equivalent." Currency serves merely as a receipt of wealth.

Currency can take many forms—be it salt, shells, grains, or precious metal like gold and silver

As long as people believe that a certain item can facilitate equal-value exchanges unimpeded, that item possesses some currency attributes

Through the countless iterations of commerce over millennia, the global consensus has ultimately settled on gold as the preferred intermediary of exchange

As Marx once articulated, "Gold and silver are not naturally money, but money is naturally gold and silver." The true wealth behind gold as a currency ultimately resides in energy, resources, food, and various industrial and service products

Historically, gold has repeatedly acted as the keystone for global finance and trade

During economic crises or instability in the global financial system, gold alongside commodities has emerged as a mechanism for nations and regions to maintain economic functionality and financial stability

Take World War II, for example, as various European nations became embroiled in conflict, they experienced severe inflationThe Pound sterling in the UK and the Mark in Germany plummeted in valueAt this juncture, only gold functioned as hard currency, enabling nations to procure essential resources and weaponry on the international stage

Even among allies, no currency was as trusted as gold

The cost of an American P-40 fighter jet sold to Britain was equivalent to over 1,400 ounces of gold, amounting to $50,000 at that timeWhile the U.Sprovided assistance and loans under the Lend-Lease Act, Britain distinctly paid hundreds of tons of gold to the United States to sustain its war efforts

Post World War II, the dollar became directly linked to gold, with a rate of $35 per ounce, establishing a dollar-centric global monetary frameworkDuring this era, the dollar effectively represented a bookkeeping mechanism for gold paymentsInternational transactions no longer required physical gold to be conveyed or transported; instead, wealth could be transferred via the dollar's accounting

Despite President Nixon’s decision in 1971 to sever the dollar from its gold backing, the previous 27 years had allowed the dollar-gold connection to foster stability in a ravaged world economy

Gold bridged trust among nations, facilitating the swift establishment of global trade norms and a revitalized financial system

Beyond the Western nations, the socialist bloc led by the Soviet Union also forged a transnational trading model based on gold in the post-war backdrop

In 1949, the “CMEA” (Council for Mutual Economic Assistance) was established among the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania, underpinned by a trade system based on gold with the ruble as the accounting unitOne ruble was defined to be worth 0.987412 grams of gold, calculated without the actual transfer of gold but through periodic accounting and settlement performed in rubles

By 1985, trade under this framework neared 200 billion rubles and encompassed ten countries

Although the CMEA and the gold-ruble system eventually disintegrated due to various political and economic missteps in the Soviet Union, the establishment of this system greatly alleviated economic distress for the Soviet Union and its Eastern European allies after World War II

China, too, mirrored such strategiesDuring the Korean War, the Soviet aid and loans extended to China frequently employed both rubles and gold as dual accounting methodsSubsequently, many of the projects and loans from the Soviet Union to China were valued in rubles with respect to gold

It is clear that gold held a critical position in New China’s economic and foreign trade developmentNotably, in the year 1960, amid a severe three-year hardship, during a time when foreign exchange was in short supply, there was a suggestion to liquidate part of the gold reserves to import food

This proposal, however, was met with staunch opposition from Premier Zhou Enlai, who declared, “Gold cannot be sold! We must stand firm with our gold.”

The leaders of China's first generation understood the intrinsic importance of gold to national economies and trade, adhering to a firm non-sale stance unless absolutely necessary

Subsequently, rather than divesting gold, China seized the opportunity from declining gold prices internationally to amass a considerable amount, transporting it back home via dedicated aircraft

Faced with international financial embargoes and potential economic sanctions, gold emerged as both the ballast of the national monetary system and the ultimate means for acquiring essential goods, equipment, and weapons

In contexts similar to Russia's current plight under financial sanctions where dollar and euro reserves are frozen, rendering the ruble non-viable for international trade, gold becomes the last resort for payments

The physical gold in Russia's possession cannot be subjected to US sanctions effectivelyRussia retains the capability to engage in trade with countries like India, Turkey, China, and even some European nations using gold

Establishing a bookkeeping-style gold payment system, while grounded in historical precedents, presents an effective avenue for Russia to circumvent American financial sanctions

Implementing a bookkeeping system for gold payments doesn’t necessitate the physical transport of gold reserves between central banks

Instead, it suffices to record transactions: if I sell you a set amount of oil, and you sell me equipment equivalent to a certain weight in gold, we can conduct trade through accounting and periodic settlementsEven if physical gold needs to be delivered eventually, it wouldn’t require vast amounts that can't be transported by a few aircraft

While the US is preparing to enact legislation to prohibit any organization or individual from engaging in gold transactions involving the Russian central bank, enforcing such a statute proves quite challenging

Unlike digital currency dependent on transfer systems, or paper money, which are uniquely numbered, each ingot of gold comprises the same substance