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Commodity-Backed Currencies? China Buys Huge Copper Mine; Russia Onshores Largest Gold Miner

Tyler Durden's picture


The last few days have seen Western anti-Russian rhetoric and red lines escalate dramatically as the military and economic issues come to light in any push back against Putin's pressure. From NatGas export fallacies to "boomerang"-ing sanctions, the west seems stuck (for now).. which brings up the question - why is China and Russia making huge investments in commodity-miners? Russia's largest gold miner Polyus Gold is considering a complete onshoring of its activities and China is buying a huge Peruvian copper mine from Glencore. The outcome would appear to enable both firms to do away with USD but not having to buy this resource in the market... just mine it?


Russia is onshoring its commodity miners...

Polyus Gold, Russia's biggest gold miner, is considering state proposals to encourage the rebasing of Russian firms currently owned by offshore entities and intends to explore these issues with the government, the company said on Friday.




Russian President Vladimir Putin has been pushing for the so-called "de-offshorisation" of the Russian economy, whereby companies with offshore entities re-register them in Russia and pay taxes in Russia.




Earlier this week First Deputy Prime Minister Igor Shuvalov urged companies listed on foreign stock exchanges to consider relisting in Moscow to protect themselves from sanctions imposed by the West over Russia's annexation of Crimea.


Polyus's biggest shareholder is Russian tycoon Suleiman Kerimov, who owns 40.22 percent.

and China is buying commodity miners...

A Chinese consortium is buying Glencore Xstrata's copper mine in Peru in a $6bn (£3.6bn) all-cash deal, marking one of China's largest mining acquisitions.


The consortium is led by MMG Limited and includes China's Citic Metal.


The acquisition is subject to regulatory approvals but all parties expect the deal to be done by the end of September.


Analysts expect Glencore to use the proceeds from the sale to reduce its debt.


The mine is expected to produce more than 450,000 tonnes of copper a year in its first five years.


China relies heavily on the metal, which is used in electronics production.

Another peg in the anti-USD hegemony board? Shift each nation's need to use USD to purchase critical resources and instead own them away from control by western states...?

Of course, in the case of China's copper mine acquisition, one can't help but wonder if - on theback of the collapse in commodity-finance deals - whether China simply bought the mine to shut it down and maintain artificially high copper prices and thus keep collateral chains from crumbling in the shadow banking system.


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Mon, 04/14/2014 - 08:25 | 4656292 achmachat
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sounds good to me.

last time I checked, you can't print commodities out of thin air.


Mon, 04/14/2014 - 08:28 | 4656302 Oh regional Indian
Oh regional Indian's picture

I guess we are coming in for an era of real-er fake money!

Wealth in the ground.

Countries will count un-mined reserves. More bullshit geology and statistics coming our way.

This is NOT the escape hatch!

Mon, 04/14/2014 - 08:32 | 4656307 astroloungers
astroloungers's picture

Doesn't all wealth come from the ground ?

Mon, 04/14/2014 - 08:37 | 4656319 Oh regional Indian
Oh regional Indian's picture

Yes, but we are used to counting "heavy" metals in hand/vault/mint, not projected mine deposits according to geo-physics. That is what I meant.

India for example has massive in-ground gold reserves and 2, tiny, functioning mines.


Mon, 04/14/2014 - 08:53 | 4656380 GetZeeGold
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why is China and Russia making huge investments in commodity-miners?

Eric Snowden informed them there is a bright future in it.  

Mon, 04/14/2014 - 09:15 | 4656446 Arius
Arius's picture

a little known fact is that the Governors of the major Central Banks (china of course included) meet every 2-3 months in Switzerland .... you think they need Snowden ... or whoever for that matter ... to tell them anything???

they get it directly from the source ... the rest is kabuki theater ... with all due respect to the stocky irishman who run the World Bank (prins newest book) and made all of those major decisions ...

Mon, 04/14/2014 - 12:28 | 4657230 DoChenRollingBearing
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The link in the article re CHINA buying Xstrata's Peruvian copper mine mentioned that China was concerned that an over-concentration of copper producers might adversely affect them.

BS.  The Xstrata mine in Peru is Peru's 4th largest.  Peru is the world's 3rd largest copper producer.  CHINA it self is No. 2.  And Chile is No. 1 by a huge margin.

The Xstrata mine affects China very little.  But, it is a smart hard asset investment.


And Peru would not likely be happy if the Chinese shut in production (as the end of the article suggests), less revenue for Peru.

Mon, 04/14/2014 - 08:38 | 4656320 Ghordius
Ghordius's picture

no, that's just metal. from a financial point of view, real wealth accumulation happens after it's out of the ground. particularly when it's transformed into tools, machines, etc.

though from a human point of view, your real ultimate wealth is... your children

note that the latter point is not a reason not to own some gold, in case you are puzzling

Mon, 04/14/2014 - 08:41 | 4656338 Fix-ItSilly
Fix-ItSilly's picture

Govt programs like Social Security minimizes the historical "wealth from children" mantra.  China seems to have exorcised the mantra as well.  Places like Egypt should modernize. 

Mon, 04/14/2014 - 09:02 | 4656370 y3maxx
y3maxx's picture

...Canadians have a big worry that the USSA will soon swallow Canada..."In the name of Security vs Russian and Chinese aggression."

...and exacerbated by California's drought


Mon, 04/14/2014 - 09:03 | 4656413 sleigher
sleigher's picture

Only if the Crown Corp. or The City of London allows it.

Mon, 04/14/2014 - 09:05 | 4656424 Bindar Dundat
Bindar Dundat's picture

I suggest a merger, a big merger, between Canada and the U.S. ;  Resources, health care  good manners from Canada,  and the miitary and  technology from the U.S.   We could close our borders and tell the rest of the world to go fuck itself.

Mon, 04/14/2014 - 09:11 | 4656445 y3maxx
y3maxx's picture


...America needs Canada to save its own Ass.

This is bad for Canada.

Mon, 04/14/2014 - 09:43 | 4656538 caShOnlY
caShOnlY's picture

America needs Canada to save its own Ass

Really? Canada save America?  FUCK ME!!  you have to be Canadian, aren't you?  Without America the 85% of Canadian exports would have NO WHERE TO GO!! 

I once had to oversee QC in a Canadian company, work is the last thing Canadians want to do!!!!  The sick calls and time off blew my mind!!  I have talked with other US businessmen that oversee operations in Canadian factories and I get the same stories!!  Warren Buffett just closed the Heinz plant in Ontario.  John Deere shut down a few years back because of "PRODUCTIVITY".  Canadian and US companies alike have been moving into the US. 

The best kept secret: Canada devaluing it's currency to keep its exports flowing south.  Canada cannot ever use a "same currency" as the US or they would be decimated!!  They need about 10% to 15% to cover the lost productivity.    Based on the totality of all the factors the Canadian dollar SHOULD NOT BE 10% lower that the USD.  It's "steroidal" economy should prove the CAD 15% more!!   Canada purposely hold interest rates too low even while watching a massive bubble get blown.  

There is a reason the guidelines for a Canadian bank bail in was written into the Federal budget of Canada in 2013.    

Mon, 04/14/2014 - 15:02 | 4657743 known unknown
known unknown's picture

I like Americans but frankly the place is a shithole with a few exceptions. It wasn't always that way but they let it get that way. Sorry the truth hurts. I can see them invading Canada as things get more desperate for them.

Mon, 04/14/2014 - 09:34 | 4656498 caShOnlY
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We could close our borders and tell the rest of the world to go fuck itself

too late for that, jimbo!! think the US consumer can support those huge US corps all by themselves?  That ship sailed away back in the early 1990s.  It's all "globalization" now.  Even when the collapse comes to America it will matter little as Ford and GM sell more cars overseas!! 

You really think the oil tar sands of Canada can support the wild thirst of oil of the US daily?  If you believe that shit then you really believe the US will be the number 1 exporter of oil by 2020.  Assholenomics runs wild in the well educated US.  

Here is a finely "Edjumacated American" showing the world why the US immigrates so many educated immigrants

Grab a new GM pickup while you can still borrow for 8 years

Mon, 04/14/2014 - 10:39 | 4656736 Omen IV
Omen IV's picture


the Canadians dont need the warmongers in the USA - anywhere in the world they can get technology for hire including the USA - there are only 26 million people in Canada and millions of sq miles of resources very similiar to Russia in terms of per capita resources - high  vs debt - low

the Scots in Canada will never ever do a 51st state -insane  


Mon, 04/14/2014 - 10:39 | 4656737 Omen IV
Omen IV's picture


the Canadians dont need the warmongers in the USA - anywhere in the world they can get technology for hire including the USA - there are only 26 million people in Canada and millions of sq miles of resources very similiar to Russia in terms of per capita resources - high  vs debt - low

the Scots in Canada will never ever do a 51st state -insane  


Mon, 04/14/2014 - 11:20 | 4656926 CrabNuggetOne
CrabNuggetOne's picture

What a great idea! Yanks just disappear up their own collective arse-hole! Maybe then the world would be worth living in, go for it!

Mon, 04/14/2014 - 08:38 | 4656322 Fix-ItSilly
Fix-ItSilly's picture

No, from the sun and the human mind.

Mon, 04/14/2014 - 08:45 | 4656351 TheFutureReset
TheFutureReset's picture

No. Who is John Galt? Wealth is made. The saying, 'to make money' is accurate because people must add something to raw resources to produce wealth. 

Mon, 04/14/2014 - 09:28 | 4656480 LawsofPhysics
LawsofPhysics's picture

Money is not capital.  Real capital requires additional work.  All work requires energy available for consumption.

Hedge accordingly.

Mon, 04/14/2014 - 09:10 | 4656440 quasimodo
quasimodo's picture

Obviously, it seems that trees as well are as good as gold.


Mon, 04/14/2014 - 09:27 | 4656475 LawsofPhysics
LawsofPhysics's picture

"Doesn't all wealth come from the ground ?" -

No, ultimately it comes from the sun (the only functioning fusion reactor that I am aware of).

Mon, 04/14/2014 - 09:49 | 4656555 Latitude25
Latitude25's picture

Real wealth is in the culture of prosperity of a civilization.  Just look at the Japanese in the past.  They had NO wealth in the ground yet were wildly successful.  Also so many countries with incredible wealth in the ground are distinctly uunsuccessful.

Mon, 04/14/2014 - 09:10 | 4656432 jefferson32
jefferson32's picture

Does anyone have an opinion on why neocons now openly talk about a new international "gold-backed" currency, a challenged US dollar, etc.?

From Kristol himself (2011):

Hu goes on to discuss [...] that "the current international currency system is the product of the past." China hawks and American hegemonists (I'm both) will be tempted to jump on this statement as a challenge to the U.S., which in a way it is. But it's worth overcoming for a minute our (justified) distaste for the Chinese regime, and pausing to ask this: Isn't Hu in this one respect right? And does the current international currency system of fiat money, with the U.S. as the reserve currency, serve U.S. or world interests?



Mon, 04/14/2014 - 09:36 | 4656507 tradewithdave
tradewithdave's picture

They call me "Vector Gold" Mister Tibbs.... A Glen Corezine production.

Mon, 04/14/2014 - 20:13 | 4658896 Buck Johnson
Buck Johnson's picture

Whats going to happen is that eventually a new type of currency will be issued for a reserve over the dollar and it will be based on a basket of natural resource (gold, copper, silver etc.).  So that it would be hard for any one country to print this without having it backed by 20 million dollars worth of that basket of resources.

Mon, 04/14/2014 - 08:33 | 4656306 Dr. Engali
Dr. Engali's picture

Since we can no longer afford copper plumbing we can always back our currency with Pex pipe.



It's all good. I'm sure the garden hose flavor is mostly gone.

Mon, 04/14/2014 - 09:22 | 4656468 astoriajoe
astoriajoe's picture

Was I the only one who imagined PEZ?

Mon, 04/14/2014 - 08:36 | 4656317 yogibear
yogibear's picture

LOL, Federal Reserve banksters are you feeling the heat yet?

Your fiat burns well.

Mon, 04/14/2014 - 08:40 | 4656330 agent default
agent default's picture

They will take us to war before their fiat burns.  This  a fight for survival for the central banks.

Mon, 04/14/2014 - 08:54 | 4656388 TheFutureReset
TheFutureReset's picture

That is easier said than done. Bunkerville NV is an example of that. This country will tear apart before we start a major war. More likely is a turning inward in the coming decades, losing reserve status with a whimper, and a violent restructuring of the union. 

The USG has spent so much time and effort into creating boogy men to defend us against they have become the boogy man. And the people know it now. 

Mon, 04/14/2014 - 08:39 | 4656324 AdvancingTime
AdvancingTime's picture

While I don't think any government wants to go to the effort to back their currency with anything I do see how they would like to knock the dollar off its perch. Below is an article about how many people will use anything they can to put in place a new world currency.

The leaders in Russia have been talking about this for years. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place.


Mon, 04/14/2014 - 08:38 | 4656326 ...out of space
...out of space's picture

Looks to me that SDR (imf money) will be the next reserve money back by basket of commodites and nacional money will be peg on.

Mon, 04/14/2014 - 08:57 | 4656397 TheFutureReset
TheFutureReset's picture

Wouldn't that still put the US in the driver's seat? I don't think China would buy that solution. They will create a new BRIC SDR before they use the IMF. 

Mon, 04/14/2014 - 09:10 | 4656437 ...out of space
...out of space's picture

depending of how much commody each cuntry got. But in this case people will have cuntry and bankers will have a world. no naciona law for them. and no cuntry will be favourite in the game. so people will have to accepted, a peacefull kumbaya solution.

Mon, 04/14/2014 - 09:09 | 4656434 Quinvarius
Quinvarius's picture

No the SDR won't be the next reserve currency and no it won't be backed by a basket of commodities.  The SDR already exists and has existed for decades.  No one uses it.  It is garbage promises to deliver a basket of fiat that the issuer does not own.  At best it is a FOREX futures contract in practical terms.

There is gold and there is fantasy fiat.  There is absolutely nothing different this time.  Same liars.  Same lies.  Same endgame. 

Mon, 04/14/2014 - 09:14 | 4656450 ...out of space
...out of space's picture

SDR existe from 60. and yes, you or me cant uses it but gov. can and they do. 

Mon, 04/14/2014 - 10:06 | 4656603 Arius
Arius's picture

i dont think Jamie Dimon would go for SDR ... dollar is here to stay!

Mon, 04/14/2014 - 08:40 | 4656331 medium giraffe
medium giraffe's picture

Wow, sooperdooper retail figures.  Bullshit relief rally on bullshit figure in 10... 9...

Mon, 04/14/2014 - 08:41 | 4656335 Seasmoke
Seasmoke's picture

Good Health, is Wealth. 

Mon, 04/14/2014 - 12:19 | 4657208 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, that is very true.

Mon, 04/14/2014 - 08:45 | 4656350 Rodders75
Rodders75's picture


All part of a grander plan to repudiate the USD which will lead to the US' economic and geopolitical castration.

So saith Paul Craig Roberts

Mon, 04/14/2014 - 09:27 | 4656477 jefferson32
Mon, 04/14/2014 - 08:46 | 4656352 A_Nejad
A_Nejad's picture

Scary thought crossed my: what happens if Vlad gets the nasty thought of nationalizing any privately held industry/corp and cancel the whole current JV shenanigans? He could do that, you know, and by the time it gets to take the case to international courts....Let me assure you that specific thought has crossed "some" European Execs. minds, some industries more than other, of course.

Mon, 04/14/2014 - 08:52 | 4656375 Rodders75
Rodders75's picture

Possible. But he's not stupid. Russia gets not a cent of FDI for many years, just like the Argentines. He will push things just far enough, but no further. 

Mon, 04/14/2014 - 08:49 | 4656367 eddiebe
eddiebe's picture

Seems like a good trade for US bonds and dollars, especially if you are fed up with dancing to the same old tune.

Mon, 04/14/2014 - 08:56 | 4656392 NoWayJose
NoWayJose's picture

Not too far in the future you will either be working for a company bought by the Chinese, working for the government, working for Walmart, or will be on the government dole,

Mon, 04/14/2014 - 08:57 | 4656399 elwind45
elwind45's picture

The world is my eminent domain

Mon, 04/14/2014 - 09:00 | 4656406 luckylongshot
luckylongshot's picture

Another way of looking at this move is that if the USD dies what dies along with it is faith in paper currencies. This means the IMF is unlikely to make any headway with unbacked SDRs. It also means that if Russia and China want their currencies to be healthy theyy need to back them with commodities and this is why they are doing this.

Mon, 04/14/2014 - 10:38 | 4656718 RaceToTheBottom
RaceToTheBottom's picture

China has printed three times as much as the US.  It may be buying commodities, but it will not peg to any of them as that would reduce their ability to print fiat. 

I think they have same central banksters with the same view as the US, just at a different point in the life cycle.

Mon, 04/14/2014 - 11:34 | 4656985 CrabNuggetOne
CrabNuggetOne's picture

I'd say it's more than likely just a case of, 'What's good for the goose is good for the gander'.

Why shouldn't the Chinese steal this way? The US has been doing it far longer.

Mon, 04/14/2014 - 17:34 | 4658381 RaceToTheBottom
RaceToTheBottom's picture

Either way, we get to the same place.

They certainly will not be backing their currency 100 % to GOLD.

Mon, 04/14/2014 - 09:10 | 4656442 Telemakhos
Telemakhos's picture

This is simple.  From the article:

why is [are] China and Russia making huge investments in commodity-miners?

Because they're cheap things to buy at the moment.  Prices are down for the commodities, so the miners are hurting and make good takeover targets.  It's the same thing that happens in any market that heads bearish.  Besides, China is addicted to copper (or now to a basket of durable goods) not only for production but also for shadow banking.

The news here is that Russia is considering taking control of its own metals, while Peru is still letting foreigners rape her land instead of employing strapping young Peruvian lads to do the same.  Well, I suppose in the end it's Peruvians doing the actual digging, but I mean running the mines.  If transnational ownership of resource production is the new Colonialism, then Russia is digging itself out from foreign colonization, while China is setting up shop in South America.

Mon, 04/14/2014 - 09:29 | 4656485 Iam_Silverman
Iam_Silverman's picture

" instead of employing strapping young Peruvian lads"


Hmmm, copper mines in South America.  Possibility of nationalized mines.  Financial turmoil on a global scale.  I sense a story line here.  I could make up a character for the role too - how about Francisco d'Anconia?

Oh wait, that one's taken - isn't it?

Mon, 04/14/2014 - 09:11 | 4656444 elwind45
elwind45's picture

Two seperate issues? Just think of the double billing and invoicing owning shiny hole and of course who would want to see Russian stocks crumble before the dollar?

Mon, 04/14/2014 - 09:25 | 4656472 Iam_Silverman
Iam_Silverman's picture

So what am I missing here?  Chinese copper stockpiles are at record levels with the price near the lows, and they go out and buy a mine?  What do they know that I don't?  Seems like they are telegraphing a message here, and we're not getting it.

Mon, 04/14/2014 - 09:50 | 4656563 oddjob
oddjob's picture

The message is people like hot water and cold food.

Mon, 04/14/2014 - 09:37 | 4656509 Rising Sun
Rising Sun's picture

Buy high, sell low - stupid fucking communists.

Mon, 04/14/2014 - 09:47 | 4656549 Canucklehead
Canucklehead's picture

It looks like Glencore made a good deal:

I realize there will be those that say China can throw it's weight around... The US wants that.

Mon, 04/14/2014 - 09:56 | 4656578 slightlyskeptical
slightlyskeptical's picture

Let them go to precious metal backed currencies. The US will just destroy the prices of such metals keeping the Dollar on top.

Mon, 04/14/2014 - 11:37 | 4657003 Seeking Aphids
Seeking Aphids's picture

And how, pray tell, would the US be able to do that? You are living in the past. Do you know what SGE stands for?

Mon, 04/14/2014 - 10:42 | 4656744 boeing747
boeing747's picture

Dr. Engali,

I just saw one guy installed this tube in 100+ years old house in redwood city, ca.

Red for hot water, blue for cold water, no insulation needed, you can see water coming in tubes.

Mon, 04/14/2014 - 11:10 | 4656881 Save_America1st
Save_America1st's picture

China needs to dump their 1 Trillion in U.S. treasuries, but they know the more they work with other countries like Russia on these trade deals excluding the U.S. dollar that it could start a dollar collapse too soon before they can dump the bonds, etc. 

They want to get the most value out of them early by cashing them in for gold and other assets like the mining, drilling, oil lands, and other commodities.  But at the same time they need the countries they're paying U.S. dollars to for those assets to believe in the U.S. dollar so that they can buy all that shit.

What a conundrum, ay?

They're best hedge is to continue scooping up as much gold, silver, mines, etc. as they can for when the dollar does finally collapse.  Then the U.S. will default on everything and the shit will have officially hit the fan for everyone all at once.

We need to do what China is doing:  divest in U.S. dollars and stack the phyzz like there's no fucking tomorrow. 

I sure hate to see things go down this way...but there's absolutely no fucking chance that this criminal crew of scumbags in D.C. are ever going to change course.  They're going to ram us right into that big fucking iceberg and sink us as sure as I'm writing this.  We have to save ourselves if we're going to try and rebuild this country after the collapse and global monetary reset.

And hopefully after the dust clears we'll have everyone single one of these criminals behind bars for life or waiting next in line to put their heads in the fucking guillotine for their treason.

Mon, 04/14/2014 - 11:22 | 4656938 ItsDanger
ItsDanger's picture

In many cases, its cheaper to buy the mines than to buy on the open market.

Mon, 04/14/2014 - 11:54 | 4657068 gcjohns1971
gcjohns1971's picture

The proposition that the Russian Government is the first government in the history of the world to be just, fair, honest, not corrupt, and respectful of the human rights  -  is ridiculous.   That is simply not what any government is and does.

However, if fortune is driving Russia to be more humanity-friendly and implement a commodity-based (which is to say more fair) currency - then that is all for the good!

Mon, 04/14/2014 - 12:06 | 4657138 Oreilly
Oreilly's picture

Buying a mine doesn't mean operating a mine.  The Japanese never got involved with purchasing mines because they knew the Canadians, Australians, South Africans and Americans operated them far better than they ever could.  Even when the South American or Indonesian  companies nationalize or change laws to take over 51% of the mines they aren't stupid enough to try and operate by themselves.  I've heard that the Chinese actually operate mines in Africa, and they do not follow UN, WB, IMF or MSHA labor laws.  I for one would never again work for a Chinese company directly as in the past when convenient they haven't paid their bills  (although we may all be working for the Chinese indirectly, right?), so I'd be curious to see how they intend on operating to produce 450KT per year.  Anyone have experience working onsite for a Chinese mining company?  If local workers are unhappy with ex-pats unfairly sharing the wealth just wait until they see mine that not only exports the profits but also imports the cheap labor.

As far as Russian gold companies, they'll list where ever they stand to turn the greatest profit for the shareholders (oligarchs probably being the greatest senior shareholders ...).  I could see them re-patriating, but are any of them really willing to stake their fortunes on the Russian markets over the London and Toronto markets (not that those are all that stable ... <cough> Bre-X <cough>? 

Mon, 04/14/2014 - 12:06 | 4657139 toadold
toadold's picture

 China for a long time had a disparity between its populations need for coinage and the available metal in country.  For instance they used iron for low value coins in a lot of areas.  Japan on the other hand due to its geology had a lot of gold,silver, and copper in relation to the population.  Their lowest denomination coins were usually bronze.  The down side for Japan was a shortage of arable land for farming, a lot of the fighting during the warring states period was over food shortages.  In the early 17th century after the Shogun had tried to invade Korea and China, one of the Japanese money authorities said the could have bought off Korean and Chinese rulers directly with gold for less money than it took to mount the failed campaign.

During the late 19th century when Japan was being opened up to the outside world, American merchants traded for Japanese gold and silver and then used it to make purchases in China.  They made a killing over the difference between the metals values in the two countries.  The Japanese weren't to thrilled about this when they found out and the Chinese were exactly tickled either.

Mon, 04/14/2014 - 12:31 | 4657252 Alpha-Gama-Bullets
Alpha-Gama-Bullets's picture

sounds good to me i got a couple hundred metric tons of copper, lead, and brass sitting in warehousing, if all else fails i can unleash a shat storm!

Mon, 04/14/2014 - 13:14 | 4657404 lasvegaspersona
lasvegaspersona's picture

Currencies do not need to be backed. That idea died with the gold standard and will not return. Currencies just need to function as media of exchange. Wealth is best stored in real things....China and Russia understand. They secure wealth for their countries....not to 'Back' a currency.

Currencies come and go. They are used and abused and then let die. The dollar will go too. Don't be holding just paper when that happens.

Mon, 04/14/2014 - 16:42 | 4658195 TheFutureReset
TheFutureReset's picture

Currency doesn't need to be backed, but money does; money is the backing itself actually. Currency has no chance of a long existence if it doesn't at least start off backed to some degree by metal. After a period of acceptance it can then be debased and phase out the backing, but that then starts the currency's decline. 

China probably doesn't want to be the one to pull the trigger against the dollar, but they are going to be hedged up to the gills and slowly unwind their position. 

Mon, 04/14/2014 - 17:44 | 4658415 earleflorida
earleflorida's picture

FWIW Dept:       The  Government of Taiwan (Formosa) by the mid 70's into early 80's surpassed the United States in 'Gold Reserves'!

China's Chiang Kai-shek `Kuomintang/KMT'  was an ally of the BIG 3 [US, UK, and USSR] and was added to the BIG'3' now the BIG`4' *(Stalin went BS!!! Stalin was a communist backing Mao's communist).

Civil war broke out in china (just a continuation of China's civil war going back a decade, but... was put on hold in order to defeat the bigger threat-- the Japanese) in 1946 ending in victory for Mao communist party in 1949. In 1949 Chiang Kai-shek government fled to Formosa (Taiwan) with all of china's mainland, gold, silver, all-valuables, priceless artifacts, etc., etc., etc,.! They literally took with them China's wealth. Mao didn't care as long as their corruptness and unimanginable surpression of the 90% peasant population had a new start (from the frying pan into the fire)?

In 1952 Japan formally renounced all teritoral rights to Taiwan (Formosa) at the 1952`San Francisco Peace Treaty'!

Question is; why did the US brake-off relations with Taiwan and jump on the Chinese Communist band wagon in the 80's or late 1979-80? There have been many shades of opinions going back to Vietnam involving Kissinger and Nixon?!? But the fact remains where is the gold? If not in Taiwan then where,...?

Why is all this relevant so long ago in the 1975-79/ early 80's at most when Nixon abolished Bretton Woods with the Gold Shock in late 1971, and told the European's who were just getting their footings to get fucked--'It's your problem Now!' John Connally SofT

jmo    how'd we'd get here... and, where were goin?  

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