This Is What Gold Does In A Currency Crisis, China Edition
Submitted by John Rubino via DollarCollapse.com,
As China’s leaders figure out that pegging the yuan to the dollar while quintupling their debt in five years was a colossal mistake, they are, apparently, concluding that the only way out is a sudden, sharp currency devaluation. As Reuters reports...
China's central bank is under increasing pressure from policy advisers to let the yuan currency fall quickly and sharply, by as much as 10-15 percent, as its recent gradual softening is thought to be doing more harm than good.
The People's Bank of China (PBOC) has spent billions of dollars buying yuan over recent months to defend the exchange rate, but has failed to stabilize market sentiment. The currency has steadily lost another 2.6 percent against the U.S. dollar even after the bank sprung a surprise devaluation of nearly 2 percent in August.
That gradual, managed depreciation makes the yuan a one-way bet for investors who see the currency weaken even as the central bank intervenes to prop it up.
Policy insiders are now calling for a quick and sharp yuan depreciation, backed by tighter capital controls to curb speculation and the flight of money out of the country.
"We should let the yuan have a considerable depreciation, but we should have a bottom line; it cannot create a big impact on the economy and the financial system, and big panic in the capital market," an influential government economist told Reuters, suggesting the yuan be allowed to depreciate by 10-15 percent over an unspecified timeframe.
Letting the yuan fall sharply and quickly could help cushion many of China's debt-laden companies as the government pursues far-reaching structural reforms. Beijing is keen to restructure industry through "supply side" reform, especially reducing industrial over-capacity, but fears the corporate sector is too weak to handle that.
[ZH:However, one needs to ask whether that is the goal for China... after all - Exports have been rising with a stronger Yuan?
Or maybe it is as we previously noted - policy...
Finally, the real purpose of the PBOC's exercise in FX management today was, just like in August, to fire a warning shot at the Fed's rate-hiking plans. Only this time the warning shot is far, far louder.
In September the Fed postponed its rate hike as a result of China's devaluation. Will it do the same again next week? Because if China is about to unleash a 15% deval of the CNY against the entire world, expect a flood of Chinese FX reserves as the PBOC tries to control the glidepath of its currency, and avoid an all out collapse driven by soaring capital outflows.
In other words, we are now right back where we were in mid-August, just before the bottom fell out of the market.]
"The biggest risk in China is not really the economy," said Qian Wang, senior Asia economist for Vanguard Investments Hong Kong. "The real risk is, number one; the policy uncertainty, and number two; the currency. China is walking on eggshells."
* * *
Chinese citizens, meanwhile, are anxiously awaiting tomorrow’s market open while mentally repeating the same three lines:
- Sure am glad I bought that gold last year.
- Wish I’d bought more gold last year.
- Wonder what I’ll have to pay for gold next week…
Here’s what that looks like in graphical form:
If China does spring a 15% devaluation on the already-wound-too-tight leveraged speculating community, the impact should be, well, amusing for sure, but otherwise a little hard to predict. About the only thing that can be said with near-certainty is that the above chart will have to be updated with much higher left and right axes.
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Edit: Downvoted for..?
Probably asking waaaaaaay too much here but care to have a spine and present your argument?
Edit2: Yeah, that's what I thought. No spine, big surprise...
I was busy all day...I gave my reasons up above in another reply to Anopheles
Count me in as 1 in 1000 that buys gold.
Told some guys last week they should buy. It's so fucking obvious, what with the issues in China and now the BOC contemplating another rate reduction this month, why the fuck wouldn't you buy.
This Canadian has been saying that to several people, in the last couple of years.
As has this one, and an eastcoaster no less
You would have been much further ahead buying US Dollars.
Gold doesn't burn as good as paper does.
"Paper" earns interest and doesn't cost you a premium every time you try and use it.
Besides, everone who bought gold 2 years ago with Canadian dollars, they HAVE have LOST 30-40% compared to buying US dollars at the same time.
The guys with paper will have their interest...but after inflation and taxes they are actually going backwards. There is no realistic reason for a currency to go up when the fed is printing trillions.
And pms bought two years ago, have actually saved my wealth. I can sell the gold and silver and get my dollar value back from 2014. This is exactly what the article was talking about...saving your wealth in a fiat that is dropping in value. Not that I am going to sell it for paper at this point of the game.
You've lost money on gold you bought in 2014 with CDN$.
Taxes? You think taxes don't apply to purchaces with gold? And with gold you always lose in the long run. it never keeps up with inflation.
You and all the other bugs keep comparing gold to fiat. Wrong. Fiat is a medium of exchange only, you don't "save" it. Income producing assets will outperform gold every time.
"Fiat is a medium of exchange only, you don't save it."
Yet you say I should have bought $US....I would need to have spent them on an asset or it would have been considered "saving" a fiat.
I did buy assets...in $US...I bought a tractor and gold in $US that are now stored in $CAN. They have appreciated in value...perhaps not as well as if I had bought $US and left them in a bank...but hindsight is 20-20. The US$ could have become worthless, or may still. Next year the $C may go back up, who knows. I believe in having many different investments. You sir have trouble wrapping your head around investments outside of your own border. You don't see the price of gold except as from within the US borders. I also have not paid capital gains tax on gold because I have not sold it. I can leave it to another generation, but try that with a T-bill. I heard the story of my grandfather in pre, and post war Europe losing his fiat wealth three times...but the gold he buried saved his family. I like listening to history.
EVery time I use paper money their is a premium called tax.
I bought some at $1300 in late 2013 and now it is $1550. That's a 20% gain....not perfect but not bad.
I also bought a used John Deere 8100 two years ago...I was offered 25% more than I paid for it, last week to a dealer trucking them south to the states...I'm not selling it either.
My point...there's all kinds of things to buy that protect wealth, and paper just doen't excite me.
The problem with any paper is Counterparty Risk.
Gold, Bitches!
Sooo close. Let me give a helping edit.
Gold, Bitchez!
Silver Bitchez. when TSHTF, those of you overweight in gold will buy a tankful of gas with a 1/10 oz gold piece. Junk Silver or rounds where it at. Just ask those people now ashes, fleeing (fill in the blank) with diamonds in their jackets. Paid a diamond for a loaf of bread. Assuming it doesn't get that bad here, nothing beats a silver dime or even a real copper penny....just say'n. If you can GOOD and wanna carry lots of value then but 10 oz gold bars, but I'm stacking my rounds....pieces of eight, pieces of right, or as we say in the Swamp, 2 bits, 4 bits, 6 bits, a dollah, all for the Gators, stand up and hollah
PS and how long do Marlboros stay good for? Trading onesides probably works well too..
Looking at the future market and it seems promissing for tomorrow.
from the soon to be released "Uncovering Roosevelt - Silver, Gold & The New Deal" by Kaiser Sousa...
"With Britain finally abandoning the Sterlings’ convertibility and link to Gold in 1931, and global currency’s and economy’s in chaos, on June 12th, 1933, delegates from 66 countries gathered in Great Britain at the London Monetary and Economic Conference in efforts to reach an international agreement on policies aimed at reviving the world economy in the midst of the Great Depression.
Organized by the League of Nations and slated to conclude on July 27th of the same year, the most paramount of objectives were the revitalization of global trade, the stabilization of currency exchange rates and commodity prices, and the restoration of the global monetary construct once again resting upon the Gold standard."
As China’s leaders figure out that pegging the yuan to the dollar while quintupling their debt in five years was a colossal mistake, they are, apparently, concluding that the only way out is a sudden, sharp currency devaluation.
Am I missing something? Isn't that going to worsen their "colossal mistake"?
Nah, no mistake. Devaluation worked last time.
So that's why they keep doing it. I get it.
Looking forward to the day when all currencies are for free.
So that's why they keep doing it. I get it.
Looking forward to the day when all currencies are for free.
The Tylers mentioned how the BoJ was buying gold last summer, to hide yen inflation.
The BoJ was hedging commodities. The reason I'm mentioning this, is because any sane currency trader knows the BoJ is going to monetize more fictional debt.
The usd/jpy is trading the 117 handle, and MSM is dismissing that as an " safe haven" trade?
What's Japan's debt to GDP ratio?
The BDI is too easy. I'm doing some additional research.
I have the North Sea indexes, for some MOAR fun.
Live Ships Map - AIS - Vessel Traffic and Positions
Yen, I too wonder at the stupidity of people who consider the Yen as a "safe haven" currency. I think the only people dumber are the ones buying long dated Japanese bonds.
As I said in a previous article yesterday, get your hands on as much physical bullion as you can. We have plenty ready for delivery and I'm personally buying as much as I can.
www.teamramgold.com/about-us go for the 5g bar for best value. Free delivery over 100g
Y'all got any govt. confiscated bling? I figure one link, one loaf of bread. Or am I discounting the price of a loaf of bread to much?
Why would anyone in China invest in anything besides gold?
I can sort of understand why people in the US buy into the fiat/stock market illusion, but over there?
To get rich, everybodies doing it, even the facemask street vendors.
Since they printed twice what the US printed, does that mean their stockmarket should be twice as valuable as our stock market?
Repeat : A country can't Centrally control :
Currency rate
Interest rate
Capital flows
China is now caught between its internal needs (malinvestment model as over-fast capital spend since 2008) and its external needs to protect a competitive Yuan in order to EXPORT to USA...The China Factory model.
SOmething HAS to give...
So either they protect the exports via Yuan devaluation and capital flows out or they defend currency to keep capital for internal needs...
China now has clay feet. And its the CB/Central committee who is responsible for it; along with the panicky Oligarchs seeking shelter for their external Yuans in offshore banks.
A classical example of "thieves" falling out and Oligarchs and Statist Moguls now having to shoot at each other, where they were in cahoots during the halcyon days of growth.
WHat will this do to the NWO of WS Scions where all the digital money strings and commodity roads lead to?
ROME...
But,but, now what's going to happen to the US dollar alternative put together by the chicoms, the ruskicoms, the indiawhonoswhatcoms and the brics?
Monday morning pundits: good time to buy TIPS.
Gold had soared to + $3 but has since corrected to + $1.80 in this latest crisis du jour.
In pundit speak: plunged to +$1.80.
More conterfeited paper gold hitting the markets to try to keep thinking folks from leaving their casinos. One look at a gold vs debt tells you when TPTB decided they would get away with the conterfeiting, and the CFTC would turn into Mr. Magoo.
You mean people actually prefer a tangible asset in yet another centrally planned currency crisis?
Never saw that one comin...lol.
show us canada's chart
http://www.goldpriceoz.com/gold-price-canada/
The Chinese must believe that Trump is going to be President and just getting their retaliation in early.
'pegging the yuan to the dollar'
That was the greatest mistake
Fine , China is now waking up
Its the time to have a parallel economy &
make yuan gold based
Why not start BRICS currency earlier
junk the dollar
asap
I had some friends call me last week and I would not answer my phone. I knew what they wanted to know. Should I buy the dip? I do not know. I finally called them back and said something like the following. "DO NOT WATCH THE PM MARKETS BY THE MINUTE OR YOU WILL GO INSANE!" Hello? Come on folks. Once it is stacked that is it. I have never sold gold...ever. That is 17 years now. I have accumulated moar and moar.
I am just sitting around here. I do not care.
You are just sitting around because it is colder than shit up there :)
I will be honest with all of you. None of you have any reason to react here. I have been buying physical gold fo late. I am not saying any of you should follow suit. I can afford to take that risk because I was in early. If I fuck up then I fuck up. I have never told anyone when the best time to buy was. That is all I can tell you.
The best time to buy PM's is "Now".
Same as it ever was/ will be.