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Guest Post: Why The West Sells Gold And China Buys It

Tyler Durden's picture





 

Submitted by Alasdair Macleod via GoldMoney blog,

A number of readers have recently suggested there must be collusion between America and China over the transfer of physical gold from Western capital markets. They assume that governments know what they are doing, so there is a bigger game afoot of which we are unaware.

The truth is that China and Western capital markets view gold very differently. You will hardly find anyone in the London Bullion Market who regards gold as money; and for them if gold is no longer money Chinese demand for it is not a monetary issue. Instead it threatens the bullion banks' business that a useful financial asset, capable of earning many times its physical value in fees, commissions, turns and interest, is being leeched out of the market by Chinese aunties.

It is clear that nearly all Western central bankers share this view, believing that gold will never play a monetary role again. We also know that Marxist-educated government advisers in China have been sheltered from the Keynesians' antipathy against gold and instead have been brought up on Marx's belief that Western capitalism will eventually destroy itself. It therefore follows they believe that western paper currencies will probably be destroyed as well.

Otherwise we can only speculate, but the following conclusions about why the Chinese are accumulating gold seem to make most sense:

  • There is a fundamental view in China that gold is ultimately money, so it is always worth accumulating by selling potentially worthless foreign currency.
  • Encouraging her citizens to accumulate gold achieves two objectives: if they have real wealth to protect it makes them potentially less rebellious in difficult times; and secondly private buying of gold reduces the trade surplus, which in turn reduces the accumulation of foreign currency reserves.
  • Gold is generally accepted as superior money throughout Asia, which is China's long-term regional interest.
  • The Chinese Government (and/or the Communist Party) is buying gold for itself. Assumptions it will use gold to beef up the renminbi makes little practical sense, beyond perhaps some window-dressing for currency credibility. Instead she appears to be accumulating gold for unstated strategic reasons.
  • Keeping the West short of gold gives China huge leverage in today's cold currency war, and even more if the currency war heats up.

The idea that America is colluding with China in the gold market must therefore be nonsense. The truth has everything to do with different philosophies about gold.

Advanced western economies have survived without using gold as money for a considerable time. Currency and credit inflation have created a modern finance industry wholly dependent on fiat paper and everyone in mainstream finance is conditioned to believe in the profitable world of fiat currencies. They are therefore predisposed to dismiss gold as never being money again.

That is why the West is less worried about losing physical gold than it should be, and China is glad of the opportunity to buy it. And she can be expected to continue to do so whatever the price, because she knows that in the final analysis gold is the only true money.

 


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Tue, 01/21/2014 - 16:00 | Link to Comment Joebloinvestor
Joebloinvestor's picture

Pretty simple really,

 

The west convinces whoever that a fiat currency "works".

 

The east doesn't trust the west.

Tue, 01/21/2014 - 16:11 | Link to Comment Future Tense
Future Tense's picture

It's interesting to think that the gold bull market of the 1970's was driven by the United States alone. Even if the U.S. temporarily enters deflation, a hyperinflation in the more likely country of Japan would be enough to carry demand world wide. The following article walks through the coming Japan implosion in simple terms:

http://www.ftense.com/2014/01/2014-outlook-rogue-wave-1-japan-is.html

 

Tue, 01/21/2014 - 16:16 | Link to Comment negative rates
negative rates's picture

Everyone knows only clowns carry gold, but you didn't hear that from me, no sir re.

Tue, 01/21/2014 - 16:20 | Link to Comment Pinto Currency
Pinto Currency's picture

 

The West sells gold and the East buys gold because the West believes the falling paper price established in London where, each day, they trade 900x the daily global mine production of gold.

 

The East doesn't trust the government or the manipulated markets and they just want the gold in their hands.

 

http://www.safehaven.com/print/32394/for-prime-minister-cameron-re-lbma-gold-trading

Tue, 01/21/2014 - 16:26 | Link to Comment BaBaBouy
BaBaBouy's picture

The Song Remains The Same...

GOLD $50K...
It Will Happen And Most Will Be Caught Off Gaurd With
Their Keynsian FIAT PANTS Down...

Tue, 01/21/2014 - 16:32 | Link to Comment thtmnbhndthecrtn
thtmnbhndthecrtn's picture

.......and the Fed's wiener in their butts.

Tue, 01/21/2014 - 16:50 | Link to Comment Xibalba
Xibalba's picture

All of this action just to raid the GLD of 900+Tons 

Tue, 01/21/2014 - 19:25 | Link to Comment andrewp111
andrewp111's picture

The Chinese play a bigger game than that. Maybe they want to create a short squeeze that will force the Comex to default and allow the Chinese to set the USD price of gold anywherte they wish.

Wed, 01/22/2014 - 00:14 | Link to Comment SafelyGraze
SafelyGraze's picture

the big joke will be on the chinapeople when they discover that gold is not backed by anything!!!

and then we shall see who has the backing of the government and who is left holding worthless shiny yellow rocks!!!

Wed, 01/22/2014 - 01:17 | Link to Comment -NaN-
-NaN-'s picture

yep, history will show that it happens all the time.  Good thing we have fiat!  

Wed, 01/22/2014 - 04:38 | Link to Comment matrix2012
matrix2012's picture

SafelyGraze, i voted you UP believing you're playing humorous :-) a subtle joke typical of ZHers

for the /s tag will just be spoiling the fun part (the same goes for Nan's one)

Wed, 01/22/2014 - 07:55 | Link to Comment PP
PP's picture

In China:

Export silver / gold: forbbiden

Taken out of country: no more than 50g gold / person (citizen and foreigner), otherwise - go to jail, silver similar

Chinese government want citizen to buy gold and hold it within country as much as possible, means government want retail investors to accumulate gold, not by a single largest agency.

 

 


Wed, 01/22/2014 - 09:18 | Link to Comment SafelyGraze
SafelyGraze's picture

matrix2012 -

sometimes I think maybe I leave out the /s too much

Tue, 01/21/2014 - 22:45 | Link to Comment Drifter
Drifter's picture

China doesn't have an unbacked (and wildly printed) reserve currency to defend.  They don't have to bash and trash natural "competitors" to an unbacked (and wildly printed) reserve currency.

Fed has two options regarding gold.  (1) Back the currency with it, but it would be something like $500,000 / ounce (because Fed has no gold to speak of), and worthlessness of USD would be exposed for all to see. (2) Keep USD unbacked and keep manipulating gold price down to prevent it natually rising to $500,000 / ounce (because everyone knows Fed has no gold to speak of).

And the "wildly printed" aspect is exposed by bitcoin, very much like USD with one major exception, there's a hard cap on the quantity, it can't be wildly printed.

That's the only reason bitcoin trades at $1,000.  Limited quantity. 

It's becoming a major embarrassment to the Fed now.  Every day more people ask why bitcoin trades at $1,000 when it's a fantasy currency just like USD, and there's one obvious answer, the quantity is limited, unlike USD that can be printed to infinity (and will be).

 

Tue, 01/21/2014 - 17:39 | Link to Comment funthea
funthea's picture

$50k gold only happens in a hyperinflationary senario. Its much the same case as with bitcoin... if it rises too much on its own, the masses without it will simply use another, if even inferior form, simply based on the obsticals of entry.

Gold only goes so high on its own before an alternitive is more attractive, like silver. I could see gold at as high as maybe $3k and silver to $100. Of course, hyperinflation would change these numbers.

Tue, 01/21/2014 - 20:10 | Link to Comment boogerbently
boogerbently's picture

The USA has a 200+ year history of being "trustworthy".

And as long as we've used fiat (noon gold backed) we have proven we've "been good for it".

When all the LIARS are exposed, gold is the only true measure left.

As fart as bitcoin (I left the Freudian/typo in) there is NO history, and NOTHING to "back it up".

What stands behind it? The "full faith and credit of"......who?

Besides, do you really want a "currency" that can gain or lose 30% in a day?

Wed, 01/22/2014 - 04:50 | Link to Comment matrix2012
matrix2012's picture

@ boogerbently

"The USA has a 200+ year history of being "trustworthy".

And as long as we've used fiat (noon gold backed) we have proven we've "been good for it".

When all the LIARS are exposed, gold is the only true measure left.

As fart as bitcoin (I left the Freudian/typo in) there is NO history, and NOTHING to "back it up".

What stands behind it? The "full faith and credit of"......who?

Besides, do you really want a "currency" that can gain or lose 30% in a day?"

 

DONT YOU KNOW that it's SATOSHI-SAN's ALGO who provide the FULL FAITH and credit of BITCOIN. Or one may simply say it's electron that backs up the BTC.

Just place you faith in it and remain faithful, you will all go well and prosperous, the BITCOIN will go skyrocket-high eventually... :-)

must say that i luv yr simple short lines ;)

Tue, 01/21/2014 - 16:29 | Link to Comment Harbanger
Harbanger's picture

No Surprise here.  Anyone who knows fundamental economics, knows that Gold always moves from Nations with trade deficits to Nations with trade surpluses.  Hence the flow from west to east.

Tue, 01/21/2014 - 16:34 | Link to Comment SovietCong
SovietCong's picture

That pretty much sums it up. Also, the key piece missing is the fact that the Chinese are on a long-term plan to diversify away from the dollar into hard assets that would establish Yuan's international status in the future, after the dollar collapses and loses its fuction as the reserve currency. Altogether, I found the post quite disappointing in its obviousness.

Tue, 01/21/2014 - 16:55 | Link to Comment wee-weed up
wee-weed up's picture

 

 

Yep, the ChiComs play gold for the long term...  (years, decades)

The West only plays it for the short term.  (weeks, months)

Tue, 01/21/2014 - 19:22 | Link to Comment andrewp111
andrewp111's picture

The ChiComs have only been sucking up the gold supply for 2 years. That doesn't sound long term to me. Something is going on. Maybe they are trying to create a short squeeze in order to make big profits???

Tue, 01/21/2014 - 19:39 | Link to Comment RabbitChow
RabbitChow's picture

And the ameri coms have been selling it, for years if not decades.

Tue, 01/21/2014 - 20:10 | Link to Comment boogerbently
boogerbently's picture

....with HFT's, nano seconds.

Wed, 01/22/2014 - 05:02 | Link to Comment matrix2012
matrix2012's picture

SovietCong

 

Welcome to Your Very FIRST posting at ZH after staying here for 2 years 34 weeks

amazing feat...may I ask you what's the urgency that lures you into registering yr very 1st comment here today??

somewhat feel blessed with luck to be able to notice this rarity....

 

seeing more and more new nicks with 2 to 3 year-long membership here :-) amazing ZH!

 

 

Tue, 01/21/2014 - 16:17 | Link to Comment jbvtme
jbvtme's picture

anyone who doubts that gold is wealth, you might want to ask the aztecs and incas how their day is going.

Tue, 01/21/2014 - 16:28 | Link to Comment Loucleve
Loucleve's picture

it was wealth, and the spaniards stole it.

and it still is wealth.

Tue, 01/21/2014 - 16:33 | Link to Comment Harbanger
Harbanger's picture

Someone must have later stolen it from the Spaniards, cause now they're worse off than Mexico.

Tue, 01/21/2014 - 16:59 | Link to Comment wee-weed up
wee-weed up's picture

 

 

How much you wanna bet...

Much of that Aztec and Inca gold...

That has passed through many hands over the years...

Now resides in China?

Tue, 01/21/2014 - 17:09 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Vatican.

Tue, 01/21/2014 - 17:40 | Link to Comment wee-weed up
wee-weed up's picture

The Vatican's gold stocks are being slowly sold off to pay for the pedophile priests scandals.

Tue, 01/21/2014 - 19:56 | Link to Comment tradebot
tradebot's picture

They can afford the pervert pay offs  The Vatican has wealth beyond belief.  The artifacts hidden away there are priceless...like un-obtainium.  They let queers in and that was mistake,but they can afford to take care of who ever gets busted playing hide the weenie.

Tue, 01/21/2014 - 17:36 | Link to Comment Nassim
Nassim's picture

The "Spanish" gold moved East. The Spanish empire had massive trade deficits and was running expensive wars far from home.

Tue, 01/21/2014 - 19:43 | Link to Comment RabbitChow
RabbitChow's picture

Nah, they put it on their boat and went to sea. The boat turned over and it all went to the bottom. Familiar atory if you think about it.

Wed, 01/22/2014 - 01:45 | Link to Comment Muc Metals
Muc Metals's picture

What are the US doing just now? ;)

Tue, 01/21/2014 - 17:24 | Link to Comment negative rates
negative rates's picture

Just do some history, the Spanish fleet found a South American volcano spewing silver and harvested that for quite some time. The same time at which they were the reserve currency, some PM's were diverted from the return to Spain but if they were yours, it would have been your job to hire guards to look over them and then of course, remember where they were stashed. 

Tue, 01/21/2014 - 16:17 | Link to Comment Ignatius
Ignatius's picture

Gold is wealth.  The storage of wealth is the key issue.

Example:  Owning a rare painting is also a store of wealth, but it loses value if cut into smaller pieces.  Yet, offer a large enough stack of coins and one will own the whole painting.  An economy can run on simple currency (like our debt based currency), but it has a hard time efficiently storing wealth.  When one stores wealth in debt promises the wealth evaporates the moment the debt can't be paid. Bail-outs, QE and bail-ins are examples of debt-based currency failure to store wealth.

Tue, 01/21/2014 - 21:48 | Link to Comment acetinker
acetinker's picture

Maybe you're smarter than me, maybe not.  That's actually not important because it's the things we can share that make us all smarter.

Anyways- Why shouldn't a nations' currency be based on headcount alone?  I don't mean that each newborn is issued an amount of cash at birth.

To the contrary, the treasury (or the fed if you can come up with a valid reason why private cartels should be allowed to exist) simply expands/contracts the amount of money in the system based on population?

Yes, in the current paradigm, gold is wealth.  Is that smart, really?  If you need more "wealth", you must continue to dig ever deeper holes?

Maybe I'm stupid, but the whole concept of "resources as a medium of exchange" and "dig shit up and call it wealth" seems unviable in the long run.

Tue, 01/21/2014 - 21:58 | Link to Comment Ignatius
Ignatius's picture

Gold is a wealth reserve asset.  Savings.  It DOES NOT have to be the medium of exchange and it's probably best that it isn't.  Some 'goldbugs' will disagree (downvotes incoming).

If you produce above your daily needs then how do you save for future needs?  If you save a promise (eg, bonds) and the promise is broken then you're shit outa luck.  Gold is not a promise, but represents payment in full.

Tue, 01/21/2014 - 22:09 | Link to Comment acetinker
acetinker's picture

Cool, so we agree, at least a little bit.  Stlll, I think the amount of currency in circulation should be based on headcount and not on what the individual "heads" are willing to borrow into circulation.  Doesn't have anything to do with actual "wealth",  That's a whole 'nother question.  The more we perforate the surface of our home, the less she is worth to all of us.

Tue, 01/21/2014 - 22:23 | Link to Comment Ignatius
Ignatius's picture

Well, yes, I think currency should be created by the treasury as a public utilty and issued/spent as an asset.  Lincoln did this with his greenbacks.  After the civil war the banks lobbied and worked to have them withdrawn from circulation.  A big recession/depression ensued.  The financial class will fight this at every turn (and have in the past).  The banking class kills to maintain their money cartel.  So it's not so much an intellectual battle as it is a war or revolutionary power struggle.

Check this out:  https://www.youtube.com/watch?v=5iBSBVew-3Y

Tue, 01/21/2014 - 23:29 | Link to Comment acetinker
acetinker's picture

I have now been full-circle.  Damon Vrabel is in my humble opinion, one of a very few who fully comprehends, and can articulate the fatal flaw in fractional reserve banking.  You do realize, of course that he voluntarily stopped his crusade, right?

He said that if he were to have his way, that he would then, become the tyrant he wished to extinguish.

I am sad that Damon uses his considerable intellect to write editorials for Canada Free Press now, but I recognize that he actually is much smarter than me.

That he is relegated by his own volition to his current role, is sadder still.

Wed, 01/22/2014 - 02:24 | Link to Comment Ignatius
Ignatius's picture

"You do realize, of course that he voluntarily stopped his crusade, right?"

Yes.

Tue, 01/21/2014 - 16:32 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

Yeah that's some of it Joebloinvestor

But you conveniently left out the part about using excessive force with a conventional and nuclear arsenal that is one of the largest in the world when the East buys up the rest of that useless relic and the West asks for it back at a time and date of it's choosing!

Unfortunately you have to think like a psychopath in order for any of it to make sense.

Tue, 01/21/2014 - 17:09 | Link to Comment Joebloinvestor
Joebloinvestor's picture

I don't see where anyone was forced to abandon the gold standard at the point of a gun, let alone a nuke threat.

What is really scary is the Nixon argument at the time made sense to the ones that had the power to pull it off.

Tue, 01/21/2014 - 18:32 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

I don't see where anyone was forced to abandon the gold standard at the point of a gun, let alone a nuke threat.

Not yet at least.  When the "Anglo-American Israeli" banking alliance loses everything that's embedded they will use all the force dominance they have because that's why the military budgets have been so enormous for so long! Just ask Saddam Hussein and Muammar Gadaffi what happens when you attempt to throw out Western imperialist banks from your Country for making deals in currencies other than there own?

Again Joeblo. If you think like a psychopath then anything is possible and can become both sensible and "normal" in a warped mind. 

Tue, 01/21/2014 - 18:33 | Link to Comment BigJim
BigJim's picture

 I don't see where anyone was forced to abandon the gold standard at the point of a gun, let alone a nuke threat.

I'm pretty sure if the French had turned up and tried to prise their gold out of the hands of the NYFRB in exchange for the dollars that had been promised to be 'as good as gold' they would have been met with force.

Tue, 01/21/2014 - 19:24 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

Are we talking after Richard Nixon made his big announcement following Bretton Woods?... er....

Since I wasn't in Manhattan in 1971, I'll have to go with the narratives I've heard that Prime Minister Pompidou sent the French Navy to  "do just that"...

Besides.  Didn't you know their was an "R" in France as well as in England!... 

They don't call them wanderin for nothin!!!

Tue, 01/21/2014 - 16:03 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

OK, so idiocy, not collusion?  I feel better now.

Tue, 01/21/2014 - 16:10 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

I think it suits the needs of the respective parties, and when it doesn't we'll have a war.

 

China owes the west and Japan and I expect we'll get paid in full at some point.

Tue, 01/21/2014 - 16:14 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Excellent choice of language.  From were I sit, I see many current accounts that need to be "balanced".  We should probably start by giving all those bankers and financial paper-pushers who got us here exactly what they are "owed"... 

Clear out some of the riff-raff and have plenty of space for WWIII in earnest (although one wonders what would be left after destroying the earth a few times over with nuclear weapons).  Is there an ETF on radiation tolerant bacteria?

Tue, 01/21/2014 - 16:29 | Link to Comment Loucleve
Loucleve's picture

thats the most ridiculous thing i've ever heard.

china owns 1.2 TT in t bonds.  that means we owe them.

Tue, 01/21/2014 - 16:46 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

He means China owes the West payback.  What is the 'payback period'?  Don't know.

Tue, 01/21/2014 - 19:44 | Link to Comment aminorex
aminorex's picture

"The idea that America is colluding with China in the gold market must therefore be nonsense."

Utterly non sequitur.  "Therefore"  does not belong in that sentence.  It is precisely the differences in philosophy which make the collusion possible.  It is win-win because they are competing over different things.

Tue, 01/21/2014 - 16:03 | Link to Comment Stuck on Zero
Stuck on Zero's picture

There is another reason China wants gold instead of Western money.  With Western money you can purchase products.  Those products would come out of Western factories or farms.  The Chinese want to produce all the products and don't want competitors.It's a strategic thing.  They will end up with all the gold and all the factories.

 

Tue, 01/21/2014 - 16:10 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Unless they end up with all the other resources (including energy), it won't matter much.  Germany tried to accomplish the same thing.  So, if what you are saying is that China will initiate WWIII, then perhaps you are correct.

Tue, 01/21/2014 - 16:59 | Link to Comment NoTTD
NoTTD's picture

But will they invade Poland?

Tue, 01/21/2014 - 16:05 | Link to Comment Racer
Racer's picture

The Chinese have read Sun Tzu.

The West ignores it and thinks they themselves are the more knowledgeable and powerful

The Chinese are very happy to go along with this, for now.

Tue, 01/21/2014 - 16:10 | Link to Comment maskone909
maskone909's picture

Not only did they read it, they wrote it ;-)

Tue, 01/21/2014 - 16:31 | Link to Comment SilverRhino
SilverRhino's picture

The ONLY reason that I can think that the banksters in the West don't value gold is if there is a HUGE amount of gold tucked away aside from publicly known amounts of gold.   That could be anything from Yamashita's gold horde to something as outlandish as a secret society in the asteroid belt mining gold from the asteroids and having it readily available in case China pulls some serious currency shenannigans.   

The Rothchilds and those other evil fucks are not fools.   

 

 

Tue, 01/21/2014 - 16:36 | Link to Comment maskone909
maskone909's picture

Banksters dont value gold? .... Oh thats right. Its just ummm tradition!
There is a jp morgan quote floating around somewhere

Tue, 01/21/2014 - 18:09 | Link to Comment Freegold
Freegold's picture

And especially centralbankers. When all that non-performing debt vanish, gold will fill the void. Oh! and the trust void as well. 50K/ ounce easy :-)

Tue, 01/21/2014 - 17:11 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

OR, some of the gold buyers are not all Chinese, maybe IN China or routing via Hong Kong or Switzerland... and intending to take over the depleted West using oil+gold+military+influence/alliances in any balance needed for whatever type of day is coming.

Tue, 01/21/2014 - 17:45 | Link to Comment BandGap
BandGap's picture

Here's a thought - China has not been a wrld power since, well, never. The Mongolians kicked their asses and after that the Dynasties couldn't hold themselves together for long stretches of time.

So, China hasn't done dick as a military power for quite awhile, if ever. Realize that 100 years ago China had the second largest economy on earth (after Great Britain) and still got their asses handed to them militarily by the Japanese.

I could give a shit what they have read (what is the literacy rate in China, overall?), they have never been able to coalesce their country into a single minded military power. And they still can't. Chinese leaders know this, and they have probably read Sun Tzu. It doesn't matter dick.

Tue, 01/21/2014 - 19:13 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Chinese attitude: Why be a military power when you buy your enemies?

 

Tue, 01/21/2014 - 16:03 | Link to Comment Spungo
Spungo's picture

Metals are shiny and I don't want to look gay so I carry paper

Tue, 01/21/2014 - 16:13 | Link to Comment maskone909
maskone909's picture

Why not tarnished silver bars? You can both preserve your wealth and maintain your hatred of the gays. Booyah

Tue, 01/21/2014 - 16:24 | Link to Comment jbvtme
jbvtme's picture

the fear of looking gay could just mean a person wants to attract girls.  no?

Tue, 01/21/2014 - 16:30 | Link to Comment maskone909
maskone909's picture

Everyone looks gay nowadays. I cant tell anymore. But if you ask me, paper currency makes you a fag.

Tue, 01/21/2014 - 17:41 | Link to Comment RafterManFMJ
RafterManFMJ's picture

I smoked a fag in London last year.

My buddy smoked a fag in San Francisco last year as well.

Let me tell you, the experience was dissimilar.

Tue, 01/21/2014 - 16:39 | Link to Comment Papasmurf
Papasmurf's picture

It's remarkable that we can't stay on topic for more than three or four posts from the top.

Tue, 01/21/2014 - 17:00 | Link to Comment frankTHE COIN
frankTHE COIN's picture

" Only Gold is Money. Everything else is Credit "

JP Morgan

Tue, 01/21/2014 - 17:09 | Link to Comment maskone909
maskone909's picture

Thats the one!

Tue, 01/21/2014 - 17:43 | Link to Comment RafterManFMJ
RafterManFMJ's picture

I agree! Now, how will this affect BitCoin?

Tue, 01/21/2014 - 16:04 | Link to Comment Saucy-Jack
Saucy-Jack's picture

The BIS and Western Central Banks know the value of gold. They also know what is coming...Freegold.

To say they are ignorant is stupid. This is a stupid article.

Tue, 01/21/2014 - 16:32 | Link to Comment Urban Redneck
Urban Redneck's picture

The BIS and Western Central Banks (both collectively and individually) are neither monolithic nor homogeneous. Each is made up of both insiders and outsiders; both the brilliant and the dimwitted; hard workers, hacks, and professional purloiners of porn masquerading as life time desk jockeys.

The same as the private banks that own the central banks.

Furthermore, it is often neither the best nor the brightest who rise to the top of a large organization- shit floats.

Tue, 01/21/2014 - 16:04 | Link to Comment El Diablo Rojo
El Diablo Rojo's picture

I have a philosophy about YOUR  philosophy about their differing philosophies.......

It rhymes with bullshitt, and is spelled nearly the same.

Tue, 01/21/2014 - 16:05 | Link to Comment slotmouth
slotmouth's picture

I think they are trying to reduce their current account surplus.  The Chinese are well aware of Keynes.

Tue, 01/21/2014 - 16:06 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Not quite.  Simply put, the asian peasants have been manipulated and repressed by paper money for a very long time, much longer than the merican sheep.  They know where this leads.  Their view of money and wealth is indeed very different, so much so that most still prefer physical fiat over numbers in a bank account.

Tue, 01/21/2014 - 16:19 | Link to Comment Leaf of Tree
Leaf of Tree's picture

There is a reason why many Budda statues and statuettes are made of gold.

Tue, 01/21/2014 - 16:08 | Link to Comment silverserfer
silverserfer's picture

if you really think about it all countries revere gold more than the US. Its odd that we supposedly have the largest reserves.

Tue, 01/21/2014 - 16:08 | Link to Comment Silverhog
Silverhog's picture

This is a great deal. But the few of us in the west who "get it" are not sure they will want to stay here when the TSHTF.

Tue, 01/21/2014 - 16:14 | Link to Comment ConManipulation
ConManipulation's picture

Most excellent, Smithers!

Tue, 01/21/2014 - 16:14 | Link to Comment madcows
madcows's picture

Whatever the reasons, I think they're buying it on the cheap, which is a better long term investment than, say, US BONDs.

Tue, 01/21/2014 - 16:16 | Link to Comment 0b1knob
0b1knob's picture

< West is stupid and short sighted.

< China is smart and takes the long view.

Tue, 01/21/2014 - 16:46 | Link to Comment qqqqtrader
qqqqtrader's picture

< logically Illogical

< Illogically logical

Tue, 01/21/2014 - 19:20 | Link to Comment 0b1knob
0b1knob's picture

< Tastes great.

< Less filling.

Tue, 01/21/2014 - 16:15 | Link to Comment giggler321
giggler321's picture

What's the point in gold if it's either so valuable no around can buy it from you or trade it without you making a loss OR if you're the only one left?  It's only valuable because for some odd reason, someone else desires it

Tue, 01/21/2014 - 16:25 | Link to Comment Dr. Engali
Dr. Engali's picture

I buy gold because I'm saving up for my new grill:

 

http://goo.gl/RffN3A

Tue, 01/21/2014 - 16:56 | Link to Comment NoTTD
NoTTD's picture

I put 'douchebags' in the search line and got the same results.

Tue, 01/21/2014 - 16:20 | Link to Comment the show
the show's picture

Alastair, I think you're missing the top capstone of the pyramid.  Sure, the boys at LBMA may not see gold as anything else but a shiny trinket, but the top folks at the banks that own LBMA certainly know what's up.  And perhaps they're working to lower the COMEX and LBMA fix to pay back a loan, or default, or whatever those in the top levels play.  Either way we're losing de gold man, and that ain't good.

Tue, 01/21/2014 - 16:20 | Link to Comment rvremi
rvremi's picture

A considerable time ? 40 years !

Tue, 01/21/2014 - 16:27 | Link to Comment ebworthen
ebworthen's picture

This deserves re-posting.

http://www.youtube.com/watch?v=p0rGaWcRiNo

Dr. Paul Craig Roberts, former Assistant Treasury Secretary.

FED selling futures contracts (naked shorts) while sending U.S. Gold to China.

That is why we can't give Germany their gold back, because it is GONE.

Hat tip to GOSPLAN HERO.

Tue, 01/21/2014 - 17:26 | Link to Comment DYS
DYS's picture

Thanks for the re-post.   Good video.

Tue, 01/21/2014 - 16:22 | Link to Comment Missiondweller
Missiondweller's picture

"Assumptions it will use gold to beef up the renminbi makes little practical sense"

 

I'm surprised by how overly simplistic this is. A gold backed currency will ensure China gets the resources it needs if the dollar fails. They may not pay Africans in gold but it sure will make their currency credible.

Tue, 01/21/2014 - 16:25 | Link to Comment delivered
delivered's picture

Let's face it. With a monopoly, nobody wants competition. So for the so called Western based economies, the governments do not want any type of domestic competition with their currencies. Not so in the East in countries such as China, India, and throughout Southeast Asia. Gold has been a competing form of currency for centuries as the citizens understand just how dangerous it can be to have all of your eggs in one basket. In the end, having competing forms of currency will be a benefit to the general population as it forces a certain amount of responsiblity and dicipline on the governments (over the long-term). 

There is no doubt that the cultural differences related to gold are very significant between the West and East. The West has been conditioned to believe that the foundation of their economy, built on fiat, credit, trust, and faith, is the more efficient system. The East is not so easily convinced and has burned over the decades with currency crisis's with recent turmoil in India and now the Lira in Turkey. 

But three trends are clearly evident. First, the culture importance of gold in the East is not going to change anytime soon. Second, the growing middle class and wealth accumulation taking place in the East is really just getting started and will provide further support for gold accumulation. Third, people in the West tend to think very short-term (the next election, next quarter's earnings, my next car purchase to impress the neighbors). People in the East tend to have a much longer-term thought process.

Whatever your school of thought on this subject, one thing should really standout. The beta/pilot program the world central banks and Western governments have launched us into with record levels of soverign debt and CB money printing is extremely speculative and has no real precedent. So to not own some type of alternative currency, if nothing more than to act as an insurance policy, is difficult to understand. Today, gold fills this role about as effectively as possible given its global status and historical importance. 

Tue, 01/21/2014 - 16:36 | Link to Comment Leaf of Tree
Leaf of Tree's picture

No.

Actually it's easy to understand.

How many westerners after one year, do you think, have 10,000 USD/EUR in their bank account to convert to in-your-hand-store-it-in-your-house gold??

The rich in the West sure do own gold. They are not stupid. They have fiat. Land in South America. Own private rivers (water). Own stocks. Own buildings. Own patents to technology. The rich are very diversified.

The rest are just busy surviving their "American middle-class  dream life": pay expensive overrated mortgage, pay car loan, pay energy, pay food, pay kids education, maybe have a 2 week vacation in Florida/Greece/Ibiza at 3star hotel.

Tue, 01/21/2014 - 17:54 | Link to Comment RafterManFMJ
RafterManFMJ's picture

3 star?! 3 Apple!? A gibbet awaits you, you rich ****

Tue, 01/21/2014 - 16:24 | Link to Comment Leaf of Tree
Leaf of Tree's picture

Real money is energy.

Which ever nation develops fusion reactors will have one strong currency.

Gold is limited in supply to cover the whole global trade. And with infinite amounts of energy due to fusion reactors, well.you could actually produce gold if you wanted it.

Tue, 01/21/2014 - 16:46 | Link to Comment Leaf of Tree
Leaf of Tree's picture

Not that I have something against gold.

I have a watercooling PC fetish.

I would love to be Arab-style-filthy-rich to buy 10kg of gold to contract my favourite Slovenian firm to produce for me waterblocks for my CPU, GPU, radiators for my cooling loop. Gold is not corrosive, looks well, is less heavy than copper.

As money gold used to work in the past on this Planet when the world population was not more than 500 millions.

But at 7 billions there just isn't that much gold to cover the trade and economic activity.

I hate fiat money. Because is just like religion. You have to believe it. And when those at the top start printing money like crazy (Fed) / start fucking kids (masonic Vatican) ... faith evaporates.

But I don't think gold can replace now fiat money.

Fiat money can only be replaced by energy.

Fusion reactors would work on deuterium. Deuterium is so plentiful on our Planet, it could provide humanity with energy for millions of years.

Tue, 01/21/2014 - 21:43 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

the number of people has NOT in fact changed the ratio of gold vs economic trading activity it would cover.
What's covered with dollars matches gold: you simply have some wrong-headed imaginary size in mind of the UNIT size of gold.
It could be 0.001 gram coins but it would work.
Any size.
The market demands the units to trade, the market then sets the SIZE of the gold coin /  bar to trade.
It can be anything from an atom to a giant bar.
All those sizes cover every possible outcome forever.

Tue, 01/21/2014 - 21:41 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

incorrect. Energy is very risky to store, convert & transport.
Money must be virtually risk-free to transfer in terms of HANDLING SAFETY.
That is to say your transaction should not carry a risk of explosion, burning, corrosion, dumping hazardous chemicals, etc.
What is not safe to handle makes poor money.
Money is a unit of trade. Energy is a unit of CONSUMPTION.
Not the same.

And there are no fusion reactors coming. IF any did they also would never be infinite.

Tue, 01/21/2014 - 16:26 | Link to Comment semperfi
semperfi's picture

1.  US basically stole China's gold that they leased to us around 15 years ago

2.  China demanded it back - so they are driving the plan that returns it, at the threat of dumping our treasuries

 

Tue, 01/21/2014 - 16:38 | Link to Comment lunaticfringe
lunaticfringe's picture

There I cleaned it up. GFY's.

Tue, 01/21/2014 - 16:30 | Link to Comment Madcow
Madcow's picture

Obama should pass a law forbidding Asians from thinking of gold as money - 

 

Tue, 01/21/2014 - 16:36 | Link to Comment lunaticfringe
lunaticfringe's picture

A lot of folks think that the FED RESERVE and USG pressured India into gold tariffs. I believe it. And btw, what dumb fuck down arrowed my comment on PVG? Pussy. If you were a real man you'd short it or buy puts.

Tue, 01/21/2014 - 16:37 | Link to Comment Conax
Conax's picture

The Empire requires your obedience.  Your confidence in our spiritual, financial and political leadership would put these doubts to rest.

I find your lack of faith disturbing..

~Darth Vader

Tue, 01/21/2014 - 16:37 | Link to Comment Joenobody12
Joenobody12's picture

If the west do not value gold why does Germany want her gold shipped back from the US ?

Tue, 01/21/2014 - 19:23 | Link to Comment NEKO
NEKO's picture

...because just like the Chinese, the Germans no longer trust the US.

Tue, 01/21/2014 - 16:44 | Link to Comment Calculus99
Calculus99's picture

Excellent article. I think he's right when saying the West-East collusion is nonsense. West are short term, East long, the  two don't mix.

Tue, 01/21/2014 - 19:14 | Link to Comment gwar5
gwar5's picture

Except the Asian gold exchange, which was supposed to open 2 years ago and was to settle only in physical PMs for market pricing for physical, was nixed with a long  phone call from Wall Street to China.  Instead, another exchange is now being created in Singapore. 

 

 

Tue, 01/21/2014 - 16:49 | Link to Comment mr.n3utr0n
mr.n3utr0n's picture

Interesting article:

This guy (Koos Jansen) is suggesting that It's being planed this way in order to make room for the eventual end of the dollar as a reserve currency, to be replaced by a world reserve currency (SDRs) issued by the IMF.

http://www.ingoldwetrust.ch/the-big-reset-part-1

Tue, 01/21/2014 - 16:52 | Link to Comment ATG
Tue, 01/21/2014 - 17:04 | Link to Comment realWhiteNight123129
realWhiteNight123129's picture

Marx had a lot of things wrong, 

The few things he had right:

1. Financial Capitalism (wall street) should never dominate INdustrial Capitalism (industrial capitalism).

Today what do we have? Karl Ichan asking Apple not to invest but to do share buy-backs, same thing with LOeb etc....etc... Share buy-backs achieve nothign except pumping fictitious capital (stocks). The companies would be better off investing.

2. Marx used the monetary views of the Banking School rooted into redeemable currencies for precious metals. He inherited his views from Fullarton and Thomas Tooke.

Thomas Tooke had a statistical chair in Oxford was the best historian of commodities prices and came up with the stock-to-use ratio.

Fullarton is abundantly cited by the new Austrian School.

 

As for the remedy and teh prescriptions, Marx was completely off but that we already knew....

 

 

Tue, 01/21/2014 - 17:03 | Link to Comment NoTTD
NoTTD's picture

The Chinese, as a world power, have always worried me more than the bungling Soviets ever did.    Combining industriousness with singlemindedness and farsightedness makes them a formidable force.  If you are acting for the Seventh Generation, what will you not do? 

Tue, 01/21/2014 - 17:10 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

This makes the assumption the seller that is fueling the gold buying frenzy is one of the Central Banks.

Tue, 01/21/2014 - 17:14 | Link to Comment game theory
game theory's picture

1. gold production in China is at record levels;

2. the yuan is heavily manipulated.

 

Maybe the Chinese have a different philosophical view about the yellow metal...or maybe they don't.  It doesn't really matter.

Tue, 01/21/2014 - 17:20 | Link to Comment Sufiy
Sufiy's picture


Jim Rickards: "The Fed Is Insolvent And Wants Gold To Rise Orderly" 


  Jim Rickards discusses QE and FED 4 Trillion balance Sheet and its implications for the economy, US dollar and Gold. FED is insolvent if they mark to market their assets now. If economy is not so strong as they want us to believe FED will be tapering into the weakness with coming recession in 2014 as the result of it. It is possible that in this case FED will have to play down the Taper or ever increase QE again.   Today's action in the market is very interesting: Gold was Smashed-down from the all-important levels $1250 - $1270 after which Shorts will be burned, but Gold Stocks are not biting into this new attack and are holding well to the upside so far. It is the very important sign of the strength of the Gold market break out to the upside. http://sufiy.blogspot.co.uk/2014/01/jim-rickards-fed-is-insolvent-and-wa...

Tue, 01/21/2014 - 19:06 | Link to Comment gwar5
gwar5's picture

Rickards always has something interesting to say. 

I think the longer TPTB suppress gold, the less orderly will be the rise. Gotta believe gold will stay suppressed as long as China can keep getting it cheap. Both the FED and China could really rock the price of gold if/when they wanted it to go high. For now it seems like they have found an accomodation to run down the clock. 

 

 

 

Tue, 01/21/2014 - 17:24 | Link to Comment GIABO
GIABO's picture

"Get gold”. "Humanely if possible, but at all costs, get gold."

 

-King Ferdinand of Spain-

Tue, 01/21/2014 - 17:38 | Link to Comment NoWayJose
NoWayJose's picture

I prefer the words of a Chinese governmant official, who stated that one of their fears is that they will wake up one morning, and the Fed will say "Your old US dollars are no longer any good, but you can exchange them on a 10-for-1 basis for the 'new' US dollars."  Don't laugh, because overnight the National Debt shrinks from $17 trillion to $1.7 trillion!  As cavalier as Congress, the President, and the Fed are about debt - it makes you wonder if this might be the plan.

Tue, 01/21/2014 - 17:48 | Link to Comment semperfi
semperfi's picture

and it will come in steps - first step is between 10 to 20 % devaluation - followed by a few more after the dust settles each step

Tue, 01/21/2014 - 20:08 | Link to Comment RabbitChow
RabbitChow's picture

Just like argentina!

Tue, 01/21/2014 - 17:42 | Link to Comment alentia
alentia's picture

It is about products and services and method of payment accepted for them. Let see balance of powers:

Here are the loosers and winners of shift to gold from fiat.

Major producers of Minerals, Goods and Energy:

1. BRIC - (would shift to gold)

2. Gulf States - (undecided)

3. Canada - (whater bigger brother will say, currently no gold reserves, but lots under ground)

4. Australia - (undecided)

5. Germany - (would shift to gold)

6. Chile - (undecided)

7. Japan - (will defend fiat to the end)

 

Major producers of Services including Financial and Legal:

1. US - (will defend fiat to the end)

2. UK - (will defend fiat to the end)

3. Some the rest of Europe - (will defend fiat to the end)

 

 

Neutrals:

Switzerland

 

Basically we have G8 excluding Russia and Germany who will defend fiat to the end. While Germany will try to play with the rest of G6 until fat lady sings and than they will bail out.

It will be about power shift from west to east. US and Europe (G7) have to get into major economic crisis when money printing will not help, for this to happen.

Tue, 01/21/2014 - 19:26 | Link to Comment TheFutureReset
TheFutureReset's picture

Germany is the bellwether. If they cozy up to Russia, game over. Then again, there is always war. 

Tue, 01/21/2014 - 17:44 | Link to Comment bh2
bh2's picture

So now we know why the US cannot repatriate gold to Germany: it's been remelted and stacked deep in Chinese vaults. No doubt the Germans will be grateful to learn where it went. But not to learn it's not theirs anymore.

Tue, 01/21/2014 - 17:52 | Link to Comment edwardo1
edwardo1's picture

Alisdair wrote:

"The truth has everything to do with different philosophies about gold."

Well, no. You see, contrary to the ravings of certain parties-though not necessarily you- The U.S. Treasury posseses 8,000 tons of gold.

As near as we can tell, China, with a larger GDP than the U.S., has substantially less than 8,000 tons of gold. Understandably, they have a desire to add to their hoard. The fact is that the monetary authorities of both nations have the same high regard for physical gold. However, because U.S. debt has been acting as the "official" global wealth reserve asset since the Nixon shock, gold, as the official past  (and official future) wealth reserve asset par excellence-it never stopped being the unofficial one- is an asset whose name dare not be spoken by officialdom. And officialdom's organs of (mis) and (dis)information, namely the MSM follow suit. But, if, by some unfortunate chance, physical gold is raised as a topic of discussion, it must be disparaged, its vital importance denied, its very meaning obfuscated into a state of absolute confusion. See the last Chairman of The Federal Reserve's insipid use of the word "tradition" in response to the question, "Why do Central Banks hold gold?

Tue, 01/21/2014 - 20:16 | Link to Comment RabbitChow
RabbitChow's picture

Well, no. You see, contrary to the ravings of certain parties-though not necessarily you- The U.S. Treasury posseses 8,000 tons of gold.

If thats true, Germany got stiffed! I think the US may have 8000 tons in their vaults, BUT it all really belongs to someone else. This is the stuff that wars are made of.

Tue, 01/21/2014 - 21:21 | Link to Comment edwardo1
edwardo1's picture

The Buba's not worried about their gold, but they have responded to a certain amount of public outcry-though not that much, really, and so they are engaged in this dog and pony show to repatriate their physical from the U.S.

Tue, 01/21/2014 - 18:15 | Link to Comment perelmanfan
perelmanfan's picture

Simpler way to state it. China is a very old country with a very long memory. The U.S. is not.

Tue, 01/21/2014 - 18:42 | Link to Comment The Next Millen...
The Next Millennium is Now's picture

Contrary to popular belief China will not back the RNB with gold. They will overinflate the yawn er excuse me, the Yuan and default on it's debts to create a financial Tsunami that will flood the US derivitives market. Once the fuse is lit on the volatile derivitives, it will just be a matter of time before the entire worlds fiat monetary system comes crashing down. Looks like China and its citizens will be sitting pretty after all the dust settles as they redesign a new world gold back currency.

Tue, 01/21/2014 - 18:57 | Link to Comment gwar5
gwar5's picture

Love me some Alasdair Macleod (of the clan Macleod) who is always spot on.  But methinks there is also an under the table deal with China to send gold from West to East now to compensate for Western soveriegn bonds that will be no good.  Also buys Chi-Coms time to get their alternative currency accepted internationally.

 

 

Tue, 01/21/2014 - 19:05 | Link to Comment jharry
jharry's picture

From my inside source who is never wrong, they now have the philosopher's stone, so they don't need to worry about gold anymore. They just change bull hockey into precious metals.

Tue, 01/21/2014 - 19:14 | Link to Comment NEKO
NEKO's picture

Intersting to note that China bought the largest gold vault and that its on US soil. That seems a bit strange to go and store a your gold on a current/potential/future adversary's territory.  I mean if WWIII starts then the Chinese will just have to hand over the keys, No? Or will it be used to just give the impression that there's lots of gold there.... like Fort Knock Knock.

And if I were Chinese, I think I would trust the US less today than even just a month ago, in part, thanks to the Snowden disclosures.

Tue, 01/21/2014 - 19:43 | Link to Comment The Next Millen...
The Next Millennium is Now's picture

China's new JPM building will be so convenient for them to transport gold bars from the Feds under ground tunnel to their new home.

Tue, 01/21/2014 - 19:20 | Link to Comment andrewp111
andrewp111's picture

It is NOT true that the Chinese view gold differently from the rest of us. If that were true they would have been importing masasive amounts for a long time. They didn't start loading up on gold until 2012, after the western gold bubble burst. Mauldin has a nice plot showing this.  Something changed in China in 2012. What is it?

http://www.mauldineconomics.com/ttmygh/that-was-the-weak-that-worked-part-3

look for the graph titled China imports of gold through Hong Kong.

Tue, 01/21/2014 - 20:17 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Nothing changed in China. They most likely got wind of a new seller who was quietly trying offload onto the market without anyone knowing it so the FED could restock their vaults among other things. The price manipulation required to do this and paper shell game needed the major players like Deutsche Bank in on it. Bundesbank gets wind of what is going and was most likely kept in the dark and that is why the called out the FED publicly instead of in private by making the repatriation request. Chinese manage to hoover up more gold than can be put on the market to keep up with payment schedule. German's know they aren't going to get their gold back in this manner so they pull out of the whole price manipulation scheme which has everyone scrambling now because the Germans got the goods to blow the whole price manipulation scheme in general up. Now the Chinese are trying to take the rest from the source directly hence the increase in hostilities as of late because said scheme is up and the open market route has been closed off now (at least at a steep discount using worthless paper the banks have to accept because of that 1.3T insurance policy they hold in worthless paper).

But that is all tinfoil hat conspiracy theory stuff until proven otherwise.

Tue, 01/21/2014 - 19:41 | Link to Comment Againstthelie
Againstthelie's picture

Article does not convince me. If the West does not see Gold as money, why is the USA the world's No.1 Gold hoarder?

Despite the financial crisis no gold was sold, although they suggest it to be useless...

No, this is propaganda for the sheeple, but the central bankers know very well how important gold is. Because they also know how important TRUST is for a fiat money system.

And since the NSA knows everything, it is ridiculous to believe they would not know how much Gold was going to China. And because they know what is going on, the chances are very slim, that China could accumulate that Gold if Washington did not want that.

It probably was a simple quid pro quo.

You want to continue printing money and we need more Gold. How you manage to do that, is not our problem, it is your problem if you want us to keep buying US debt.

Therefore the banksters into the White House after Timmy Geithner had nailed the deal in China.

Thu, 01/23/2014 - 19:39 | Link to Comment bilejones
bilejones's picture

Why do you believe "the USA the world's No.1 Gold hoarder"?

Tue, 01/21/2014 - 19:40 | Link to Comment SharkBit
SharkBit's picture

US world hegemony is coming to an abrupt end.  Cannot see how this will end well?

Tue, 01/21/2014 - 20:01 | Link to Comment honestann
honestann's picture

It is clear that nearly all Western central bankers share this view, believing that gold will never play a monetary role again.

Not quite.  The western central bankers know perfectly well that gold is money (and valuable), while fiat is fake, fraud, fiction, fantasy, fractional-reserve debt-laden toilet-paper.  They fully understand..

However, the western central bankers, and governments, and everyone at the top of the fiat financial feeding cycle love fiat, because it gives them unlimited unearned wealth and power.

However, these western predators have a psychological time frame of perhaps 5 years, or at most 10 years in the most extreme cases.  They want to steal their riches, have their fun manipulating and defauding people, then retire to some tropical island or equivalent.

In contrast, Chinese predators (and regular folks too) think much longer term... at least one lifetime, and often several lifetimes.

The goal of western predators is steal wealth, and fiat is great way.

The goal of Chinese predators & regular folks is accumulate wealth.  Real wealth.  Which means gold, real-estate, or a factory and equipment that just keeps generating wealth like an energizer bunny.

No, the westerners aren't delusional.  They just don't care.  And the predators at the top of the fiat feeding cycle know they can trade their fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-paper for real physical wealth... until they can't.  At which point, they are quite correct to assume, they will have plenty of real, physical wealth to enjoy.  Probably even a fair quantity of gold.  They can afford it, because plenty of fools are still willing to trade gold for fiat.  Eventually that will change, but... not today.

Tue, 01/21/2014 - 21:17 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Advanced western economies have survived without using gold as money for a considerable time.

 

Nonsense....when Nixon ditched Bretton Woods, Jelle Zijlstra, Dutch banker said: When we lost the pound we could go to the dollar, now that we've lost the dollar where can we go? To the moon?

Gold has always been THE asset of choice. For 700,000,000 million in the USA and EZ this may have been momonetarily forgotten but the other 6+ billion folks on the planet never forgot. The problem of the West is the lack of recent monetary failure. We assume that the dollar is an essential part of the world's system, but this is true only because oil has agreed to it. In the writing of Another and FOA (USGold (1997 to  2001)) we are told that the Saudis were actually allowed to accumulate gold  in a away that did not drive up the price ( a reach arround through the mines of S Africa) after they tried to buy gold on the market and ran up the price to $850 in 1980).

Gold was NEVER forgotten, we have just been told that because the dollar has allowed the USA to become powerful. Now that our currency is in deep doo doo we shall soon see that gold and only gold can satisfy the desires of producers worldwide. No authority will accept another country's paper as their only savings vehicle for long. The advantages of the current system to the Chinese and Saudis in particular seem to have come to an end. We have limited gold and limited time.

Unless the Feds are willing to give up US gold the system can't last another 2 years.

Tue, 01/21/2014 - 21:18 | Link to Comment Herdee
Herdee's picture

The strangest part of all this is why would China still keep over 60 metric tonnes of gold with the Fed?

Wed, 01/22/2014 - 12:56 | Link to Comment WhyWait
WhyWait's picture

 

No one really picked up on this:

"We also know that Marxist-educated government advisers in China ... have been brought up on Marx's belief that Western capitalism will eventually destroy itself. It therefore follows they believe that western paper currencies will probably be destroyed as well."

Not just the government advisors, but the entire people - at least those over 40 - have been brought up on it - including the centrial economic contribution of Marx, his exposition of a dynamic at the heart of capitalism that inevitably genrates growing inequality and crises characterized by over-accumulation of capital and mass unemployment.  

This is a hard thing for anyone who makes their living as an investor to swallow, but hardest for those at the top.  

The question is, now that China is ruled by capitalist kleptocrats intent on preserving their position, wealth and necks, do they still believe this?  If so what use could they put this knowledge to?

It's hard to imagine China's new elite would tolerate their country shedding them and reverting to dominance of the layer of state-owned industries reportedly still in place. Perhaps once, long ago, perhaps in the time of Deng, they promised themselves and each other that they would remember what they then believed.  Perhaps they believed their story that China needed to go through a stage of capitalist development, and pledged to step aside when the time was ripe and support a restoration of "socialism".  

If so they have undoubtedly revised their views so as to justify holding on to what they've acquired.

The problem for them now will be the rest of China.

 

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