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Guest Post: The Exter Pyramid And The Renminbi

Tyler Durden's picture




 

Submitted by Mao Money, Mao Problems

The Exter Pyramid and the Renminbi

The pyramid is the strongest structure known to Man. The weakest structure is the inverted pyramid. There is an economic theory called the Exter Pyramid to describe the financial system. It is an inverted pyramid ranking assets by risk. Gold, the safest asset, holds its place at the tip of the pyramid. Riskier assets, such as cash, deposits, bonds, stocks, real estate, non-monetary commodities, etc., take their respective place above gold.

When the pyramid gets top-heavy, it has to re-adjust itself by reducing the value of the riskier assets and increasing the value of gold and other less risky assets. Although finding the true value of the total Exter Pyramid for a country is extremely difficult, we can use readily available data from a few asset classes to understand a basic structure.



America's basic Exter Pyramid was worth USD 28.4 trillion (CNY 178.92 trillion), including gold. China's basic Exter Pyramid was worth CNY 126.1 trillion (USD 20.02 trillion) including gold. (In the charts above, gold was shown as a negative number for visual effect. The value of gold is based on the official holdings at that time multiplied by the current market price.) If you factor in GDP, the closeness of those numbers seems very odd.


The instability of the Exter Pyramid shows the relationship between the gold base and everything piled on top of it. The higher the ratio, the more upward pull there is on the value of the base, and the more downward pull there is on the value of the upper levels. After peaking out at 769.65 to one in July 2001, China's financial assets to gold reserves ratio has fallen to 353.34 to one in December 2011. America's ratio went up to 300 in the late 1990s, early 2000s before dropping down to 64.72 in December 2011. This would explain why gold has been in a bull market while stocks have been a bear market.

We can also look at cash to upper levels. China's ratio of financial assets to cash was 21.51 to one and America's was 25.59.

There is no correct ratio, we can only compare two or more economies and see which one is higher or lower. A higher number means eventually there will be an increase in value of the base (gold) and a decrease in the value of the upper levels (everything else). In this case, a re-adjustment (which is happening) will cause the revaluation of value to be highest in gold in China, then gold in the U.S., then cash in the U.S., and then cash in China. Since the price of gold is linked world-wide, that would mean a drastic change in the value of the rénmínbì. If the real value of each countries' stock markets and gold reserves were to not change, the CNY would have to devalue 90.01% to equilibrate. That would mean an exchange rate in the range of CNY 64.1386 to one U.S. dollar. If the Chinese stock market were to adjust to the same proportion of the Exter Pyramid as the U.S. stock market at the end of 2011, then the exchange rate value of the rénmínbì would have to be CNY 35.8691 to one U.S. dollar.

Although the Exter Pyramid is difficult to measure, we can easily compare basic asset classes across economies. There is no correct ratio, but if we compare the U.S. and China, we can see that China's basic pyramid is considerably more top-heavy than America's basic pyramid. The only way to bring them to equilibrium would be to drastically devalue the rénmínbì against the U.S. dollar.

 

 


P.S. from ZH

There is another explanation for what is going on that does not involved devaluating the CNY: it very well could be that just like in early 2009, China will any minute announce that it has built up a massive gold stockpile over the past 2 years which has gone on undisclosed.

Recall from April 2009 Reuters:

Shanghai/Beijing: China disclosed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

 

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

 

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing’s ability to buy secretly and its ambitions for spending its nearly $2 trillion (around Rs100 trillion) pile of savings. And not just in gold: copper and other metals markets are booming thanks to China’s barely visible hand.

 

Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China’s buying power—and give it yet more reason to diversify into gold, oil and metals.

 

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Sun, 03/04/2012 - 19:07 | 2222647 PolishHammer
PolishHammer's picture

Rory McIlroy new world number 1 nerds...

Sun, 03/04/2012 - 19:27 | 2222695 Silver Bug
Silver Bug's picture

I think we can all agree. China has been secreting, or not so secrectly hoarding massive amounts of gold. Their Exter pyramid is going to be much stronger than first assumed.

 

http://ericsprott.blogspot.com/

Sun, 03/04/2012 - 19:31 | 2222709 spiral_eyes
spiral_eyes's picture

Taking gold completely out of the equation America's EP looks like a batshit insane ultra-bloated head and shoulders top.

China's looks relatively sustainable, and fuelled by savings. 

Sun, 03/04/2012 - 21:05 | 2222852 trav7777
trav7777's picture

"strongest structure known to man"??  WTF kinda gobbledygook is this?

Sun, 03/04/2012 - 21:51 | 2222866 francis_sawyer
francis_sawyer's picture

Hey... I'll bite... What, IN FACT, kinda of gobbledygook is it?... (assuming there's STRONGER gobbledygook &/or, if the 'kung fu' of the PYRAMID 'gobbledygook' hasn't much strength... as the case may be)...

Caveat: I'm not the brightest engineer in the toolbox...

 

Sun, 03/04/2012 - 22:49 | 2223047 flacon
flacon's picture

I think Trav is thinking of a sphere, as depicted hin his avatar. 

Sun, 03/04/2012 - 23:47 | 2223165 UP Forester
UP Forester's picture

Yeah, 'cuz them Egyptian Spheres are still there.

Maybe he's thinking of bubbles.  But I don't even want to know....

Sun, 03/04/2012 - 19:29 | 2222697 markmotive
markmotive's picture

A gold backed Yuan is the next phase of the global monetary regime.

 

So says Doug Casey.

Sun, 03/04/2012 - 21:09 | 2222859 trav7777
trav7777's picture

total horseshit...more "Rising Sun" nonsense.

The chinese are concealing FAR more bad loans than they ever could be gold reserves

Sun, 03/04/2012 - 21:21 | 2222894 francis_sawyer
francis_sawyer's picture

so why do you bash physical PM ownership (in numerous threads)?

Sun, 03/04/2012 - 21:40 | 2222912 Bay of Pigs
Bay of Pigs's picture

Because he's an asshole?

Sun, 03/04/2012 - 21:45 | 2222925 trav7777
trav7777's picture

you need to learn to read, seriously

Sun, 03/04/2012 - 22:02 | 2222958 francis_sawyer
francis_sawyer's picture

I apologize... I guess I just must be one of those mathematical probability monkeys (named 'francis_sawyer' no doubt), that possesses some sort of extant capability of randomly typing THE BIBLE [or internet response to a ZH thread]) on a mechanical keyboard... You're right... I can't really read... Ignore all my comments, as they are randomly generated...

Sun, 03/04/2012 - 21:25 | 2222899 Hugo Chavez
Hugo Chavez's picture

I am confident you are right.

Sun, 03/04/2012 - 22:21 | 2222991 rqb1
rqb1's picture

China has made so many bad loans they would make countrywide blush

Sun, 03/04/2012 - 21:17 | 2222885 Barmaher
Barmaher's picture

Why would you post that here you fucking moron?  

Sun, 03/04/2012 - 22:03 | 2222960 PolishHammer
PolishHammer's picture

He also won a million dollars.

Sun, 03/04/2012 - 19:10 | 2222650 BigJim
BigJim's picture

Er....

Sun, 03/04/2012 - 21:14 | 2222876 bank guy in Brussels
bank guy in Brussels's picture

Right off the bat, the thing that seems odd about these 'asset pyramid' estimates, is the general rule-of-thumb that the total assets of a nation tend to be about 4x GDP, this includes everything, land and buildings, silver, fine whisky etc.

So with global GDP at USD 75 trillion or so, total global assets of all types are about 300 trillion.

With China's GDP being perhaps 55 or 60 % of US GDP, so total Chinese assets are maybe proportionately in line with that?

Of course many of these numbers are just too fudged and vague and unreliable ... I remember once some Chinese official was quoted as saying, the Chinese learned about how to lie about 'official statistics' as one more thing they copied from America.

Sun, 03/04/2012 - 19:11 | 2222652 CompassionateFascist
CompassionateFascist's picture

All this assumes, of course, that there is X tons of gold in Ft. Knox. Since the vaults haven't been inspected in decades, one suspects otherwise. The US inverted pyramid has no base. It will topple in the the next stiff breeze.

Sun, 03/04/2012 - 19:31 | 2222708 arby63
arby63's picture

You are probably quite correct; however, China isn't exactly a breeze of sunshine disclosure either. I suspect we're in this downward spiral together no matter how it plays out. From a layman's perspective, it appears to me that China is far more dependent upon the U.S. consumer than the U.S. consumer is on Chinese crap.

Sun, 03/04/2012 - 20:54 | 2222831 luna_man
luna_man's picture

 

 

"it appears to me that China is far more dependent upon the U.S. consumer than the U.S. consumer is on Chinese crap."

 

Oh, yeah?...Aside from food and few other items, what have you purchased lately, that didn't have "made in China" on it?

Sun, 03/04/2012 - 21:10 | 2222861 trav7777
trav7777's picture

very little I buy comes from China.  I don't shop at walmart like you proles.

Sun, 03/04/2012 - 21:14 | 2222875 francis_sawyer
francis_sawyer's picture

pray... TELL...

Sun, 03/04/2012 - 21:46 | 2222926 trav7777
trav7777's picture

what was the part that had you so confused?

Mon, 03/05/2012 - 04:42 | 2222945 francis_sawyer
francis_sawyer's picture

let's start with this... "you proles"... pray tell (me where I shop)... &/or IF I do...

We can move on from there if you wish...

Actually, I was at Wal-Mart last week... I bought a box of plinking ammo, some lettuce, a wedge of parmesean cheese, a couple of goldfish for the acquarium, and some Yuengling Beer, (all made by the Chinks I suppose ~ especially the Yuengling, that sounds Chinese, right?)...

Mon, 03/05/2012 - 09:18 | 2223576 t_kAyk
t_kAyk's picture

Yeungling is made in Pennsylvania, Americas oldest brewery

Mon, 03/05/2012 - 09:34 | 2223610 turtle777
turtle777's picture

It's spelled Yuengling. The root is German, Jüngling ("Young Man").

Mon, 03/05/2012 - 01:51 | 2223322 dark pools of soros
dark pools of soros's picture

Trav must be one of those IKEA budget hipsters - wants to feel like he is a Crate & Barrel man but needs those Target single mom friendly prices 

Mon, 03/05/2012 - 03:25 | 2223369 ffart
ffart's picture

How do I find clothes that aren't made in china. This is a serious problem. I bought a goretex ski jacket last year and the zipper already fell off. This is the third time this has happened, HELP.

Mon, 03/05/2012 - 07:03 | 2223440 Coke and Hookers
Coke and Hookers's picture

Browse through this. You'll discover surprising stuff, like laptops assembled in America and American made jeans!

http://www.howtobuyamerican.com/index.php

http://americansworking.com/

http://www.madeinusa.com/

http://www.madeinamericasc.com/

Mon, 03/05/2012 - 06:17 | 2223417 RafterManFMJ
RafterManFMJ's picture

 

 

I'm with you trav7777; you should see the Ipad I hand made with gravel and bits of wire.  I can even get on the internet with it, if I balance it on my cable modem.

Sun, 03/04/2012 - 21:29 | 2222901 Hugo Chavez
Hugo Chavez's picture

Anything from china is easily substitutable within a few years from africa bangladesh, or vietnam.

We americans can put our sweatshops and find slave labor anywhere. China has no monopoly on that. China is in the weak position, not the usa.

Sun, 03/04/2012 - 22:01 | 2222957 SilverDOG
SilverDOG's picture

Hugo Chavez

 

C'mon Hugo, 

 

OIL will be the difficulty. Shipping cost and worthless petrodollar. Mexico is far more fathomable. Neither will be chasing USD however.

Sun, 03/04/2012 - 22:15 | 2222983 Hugo Chavez
Hugo Chavez's picture

We can have the amero for all i care, and open borders with mexico. It matters not in the long run which currency we or the mexicans use.

Wave propulsion systems and wind are slow, but doable.

Sun, 03/04/2012 - 21:29 | 2222902 arby63
arby63's picture

Unless I have no alternative, not much. I avoid Chinese made goods. I'd say I am pretty correct about the dependency. We can always revert back to some type of manufacturing (even if it's small scale) but China--in no way that I can see--can ever (within our general lifetimes) break its ties with the American consumer. Tell me how. Europe? They will be importing rice just to prevent starvation within 20 years.

Sun, 03/04/2012 - 22:20 | 2222969 deflator
deflator's picture

I do not see the U.S. generally reversing the trend of manufacturing away from China and Asia , be it Veitnam or elsewhere in Asia. The typical American worker has to drive to work and just those inputs be it gasoline costs, insurance, taxes, etc. put him at a permanent disadvantage.

 I have been discussing this very thing with my co-workers and I doubt any of them would agree with your "leverage" theory. Not all of the real 8% yoy inflation is attributable to money printing. A good bit of it is do to the ascention of Asian workers.

Mon, 03/05/2012 - 01:10 | 2223280 superflyguy
superflyguy's picture

Problem is that if you never travel you cannot understand other markets. If you travelled, you'd realize that others purchase chinese goods too but there are a lot more of them than Americans.

300mil people in the US, half of which are on food stamps don't really purchase many of the chinese toys anymore. And it won't get any better as price of oil and value of dollar goes down. Thailand, Malaysia and Vietnam on the other hand may be poor right now but are on the way up. If only a tiny percentage of their population becomes wealthy, it will be a significantly bigger market than the US.

Mon, 03/05/2012 - 03:06 | 2223357 zipfish
zipfish's picture

This is bullshit, those 3 countries have a total population of under 200m.  How would a tiny percentage of them be a bigger market than the US (pop 300+mil)?  Especially when even the poorest American on welfare and food stamps would be considered to be a decent earner in say Vietnam.

Tue, 03/06/2012 - 00:39 | 2226936 matrix2012
matrix2012's picture

 

There's a bigger region so-called ASEAN there with much bigger number than superflyguy's one :)

ASEAN (Association of Southeast Asian Nations) has 10 member states: Indonesia (237.6 millions), Philippines (101.8), Vietnam (90.5), Thailand (66.7), Myanmar (58.8), Malaysia (27.6), Cambodia (13.4), Laos (6.5), Singapore (5.1), Brunei (0.4) with combined population of 608.4 millions, and their rapidly growing economies have a combined gross domestic product — the total value of all goods and services produced — approaching $1.5 trillion.

 

Sun, 03/04/2012 - 19:31 | 2222710 Unprepared
Unprepared's picture

This Inverted Pyramid theory would have been more helpful if it compared core equity to leveraged debt including the derivatives King Kong swinging on top of it.

Mon, 03/05/2012 - 13:42 | 2224374 matrix2012
matrix2012's picture

Unprepared, i like much your swinging KING KONG....

it's very humorous to find the KING KONG creature comes down playing here, yet it's aptly said!  It's strange that the theory just didn't see the elephant in the room :D 

Sun, 03/04/2012 - 19:34 | 2222711 Oracle of Kypseli
Oracle of Kypseli's picture

There are two schools of thought on Fort Knox:

It's either empty, hence collapse.

Or, it's actually full to the brim plus other peoples' and other ECBS' gold, hence world domination at some point.

Either way, not a good thing.

Get your own while available for purchace.

Sun, 03/04/2012 - 19:58 | 2222748 francis_sawyer
francis_sawyer's picture

The world hinges upon what Pussy Galore & her flying circus were able to accomplish...

Sun, 03/04/2012 - 23:50 | 2223169 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Yes, get it while you can.

Mon, 03/05/2012 - 03:05 | 2223355 LowProfile
LowProfile's picture

Pfft.

80% of the world's gold is privately held.

Mon, 03/05/2012 - 08:21 | 2223499 Crisismode
Crisismode's picture

Ft. Knox looks pretty private to me.

 

If you think it is owned by the American People, think again.

 

 

Sun, 03/04/2012 - 19:12 | 2222661 non_anon
non_anon's picture

the Sunday hits keep on coming!

Sun, 03/04/2012 - 19:14 | 2222665 Manthong
Manthong's picture

Mao Money..

Isn't that Cramer's program?

Sun, 03/04/2012 - 19:24 | 2222688 Unprepared
Unprepared's picture

Cramer's program is Mao Money ... Yao Pwablem

Sun, 03/04/2012 - 19:18 | 2222674 Schmuck Raker
Schmuck Raker's picture

AnAnymouse isn't going to like this article.

We are not supposed to talk about China...

Sun, 03/04/2012 - 20:26 | 2222790 Jendrzejczyk
Jendrzejczyk's picture

The weekend is almost over, keep blobing you American citizen.

Sun, 03/04/2012 - 21:33 | 2222906 Hugo Chavez
Hugo Chavez's picture

Ananonimouse is a one trick pony isnt he?

Desperately waiting to see america get its comeuppance.

Lol. Gonna be a long wait.
Japan was the last asian giant about to dominate the world. Chinas piss poor demographics are right there up wirh japan, just a few decades behind.

Sun, 03/04/2012 - 19:23 | 2222685 Atomizer
Atomizer's picture

A (Crumbling) Wall of Money Financial Bricolage, Derivatives and Power

http://www.thecornerhouse.org.uk/resource/crumbling-wall-money

Tue, 03/06/2012 - 00:46 | 2226972 matrix2012
matrix2012's picture

thanks, nice read Atomizer!

an excerpt

"Financial entrepreneurs created a 'shadow banking system' over the past 30 years to circumvent regulation and to offload risk onto others, relying on 'derivatives' and 'securitisation'. They generated easy credit that fuelled a boom in corporate mergers and acquisitions across the United States and Europe, and that enabled companies involved in mining, biofuels, private health care, water supply, infrastructure and forestry to expand their activities signficantly. When the pyramid of deals came tumbling down, however, the public had to bear the costs.

 

As world stock markets plunge and even the most neoliberal governments reluctantly move to nationalise banks and mortgages lenders that have collapsed in the wake of the international credit crunch, there is a widespread view that the US and Europe -- so willing in the past to dictate to developing countries on how best to run their economies -- are on the brink of a major slump. Millions are already threatened by job losses or repossession of their homes. Uncertainty abounds."

Sun, 03/04/2012 - 19:24 | 2222691 PaperBear
PaperBear's picture

The cartel is sure as hell trying to whack silver out of the open. 23 minutes in and according to netdania.com there has been 25,000 contracts already. That's 125 million ounces - HOLY S**T !!

Sun, 03/04/2012 - 19:37 | 2222723 Doña K
Doña K's picture

And yet it's stable

Sun, 03/04/2012 - 19:59 | 2222750 PaperBear
PaperBear's picture

Is this volume typical for an early Monday ?

Sun, 03/04/2012 - 20:11 | 2222766 PaperBear
PaperBear's picture

77,000 contracts in the first 30 minutes since the open. That's 385 million ounces - F**KING HOLY S**T !!

Sun, 03/04/2012 - 20:58 | 2222811 JustObserving
JustObserving's picture

The world supply of silver bullion is only 1000 million ounces.  On a Sunday evening in 30 minutes, we have 38.5% of the world's silver supply traded in 30 minutes.  Something does not compute here.

Sun, 03/04/2012 - 21:04 | 2222851 bank guy in Brussels
bank guy in Brussels's picture

Actually much higher than 1 billion ... many estimates are about 40 billion ounces of silver produced in human history, some lost of course but most of it floating around somewhere ... about 10 times as much silver as gold.

Sun, 03/04/2012 - 21:23 | 2222889 JustObserving
JustObserving's picture


According to the Silver Institute and GMS, there are only 671 million ounces left of 
identifiable silver bullion left in the world http://www.silverinstitute.
org/publications/index.php (World Silver Survey 2004).  

 

http://www.silverinscripture.com/moreRAREthanGold.html

 

 

The world's largest holders of silver bullion account for roughly half (500 million ounces) of the available 1 billion ounces of worldwide silver.

http://www.wealthdaily.com/articles/silver-headed-to-50-an-ounce-in-2011...

 

Sun, 03/04/2012 - 21:11 | 2222865 trav7777
trav7777's picture

Huh?  Are you people really this dumb?

Sun, 03/04/2012 - 22:05 | 2222967 SilverDOG
SilverDOG's picture

As you... not at all finger licker.

Mon, 03/05/2012 - 08:55 | 2223534 silvermaister
silvermaister's picture

porr RETARD

Sun, 03/04/2012 - 19:30 | 2222707 AUD
AUD's picture

This article ignores, as usual, the quality of credit & focuses entirely on quantity, measured in $ & CNY terms.

China has a massive trade surplus, they produce the stuff that others consume. Looking at credit quality instead of quantity might give a different picture.

Sun, 03/04/2012 - 21:13 | 2222871 trav7777
trav7777's picture

the entirety of China is "bad debt"...everything is artificial.

Sun, 03/04/2012 - 21:15 | 2222880 francis_sawyer
francis_sawyer's picture

...and that DIFFERS from....?

Sun, 03/04/2012 - 21:20 | 2222890 JohnKozac
JohnKozac's picture

 

Analysis: China's housing slowdown to cut a big hole in GDP(Reuters)

 

http://www.reuters.com/article/2012/01/18/us-china-property-idUSTRE80H0G...

Sun, 03/04/2012 - 19:35 | 2222713 q99x2
q99x2's picture

( .  . ) Top Heavy

Sun, 03/04/2012 - 19:47 | 2222734 kill switch
Sun, 03/04/2012 - 19:50 | 2222738 mt paul
mt paul's picture

golden chop styx...

Sun, 03/04/2012 - 19:51 | 2222739 rsnoble
rsnoble's picture

I prefer the pile of dog shit theory. You invert it you still have dog shit. In the beginning it was white and hard and not too bad to handle. Not it's massive amounts of diareah. On carpet.

Sun, 03/04/2012 - 19:51 | 2222740 rsnoble
rsnoble's picture

"now". Think im going blind from all the shit.

Sun, 03/04/2012 - 21:13 | 2222873 trav7777
trav7777's picture

there's a fucking EDIT button, dude

Sun, 03/04/2012 - 21:16 | 2222883 francis_sawyer
francis_sawyer's picture

If the EDIT button is 'fucking'... Why disturb it?

Mon, 03/05/2012 - 06:22 | 2223418 RafterManFMJ
RafterManFMJ's picture

If the EDIT button is 'fucking'... Why disturb it?

 

Yep, that's how my sister lost her thumb.

Sun, 03/04/2012 - 19:53 | 2222741 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

I am not that clear on the inverted/upside down pyramid, but I get what it means to be upside down on your home/mortgage, and there's a whole lotta inverted mortgages, commercial and residential, dragging on the economy...

Sun, 03/04/2012 - 19:53 | 2222742 Pretorian
Pretorian's picture

OMG  China is so much worst off right know. Forget US ponzy. They need to print gold right away lol

Sun, 03/04/2012 - 21:44 | 2222921 Doña K
Doña K's picture

If there will be a revolt anywhere, it will be in China first.

Sun, 03/04/2012 - 19:59 | 2222749 PonziBeaver
PonziBeaver's picture

I'm standing on one of these pyramids right now (see my pic). Below gold is oil and below that is food. It's getting pretty tippy!

Sun, 03/04/2012 - 20:27 | 2222792 kito
kito's picture

Buy physical renminbi. Its a bargain. In
10 years it will be the worlds dominant currency

Sun, 03/04/2012 - 20:38 | 2222806 Jendrzejczyk
Jendrzejczyk's picture

What do you believe is the asset that is the bottom of the pyramid?

Sun, 03/04/2012 - 21:10 | 2222863 Jendrzejczyk
Jendrzejczyk's picture

Not trying to be an ass (this time), Kito.

Tyler's view on this question would be valuable too, n'est-ce pas?

Sun, 03/04/2012 - 22:25 | 2223011 kito
kito's picture

i can tell you whats under the pyramid.... as in crushed...flattened....and thats the u.s. reserve status. chinas future domestic market will be double the size of the u.s. and european market combined..... 1.4 billion people.... a country still with growing pains......china will need NOTHING from this country in a decade or so. NOTHING....as it is, they do their best to keep american corporations from gaining a foothold in their domestic market. they know they need that market for their own companies......while the u.s. and europe are busy dicking around over iran, china is busy locking up deals with iran, southa america and africa for the only thing they do need.....raw materials.......

its common sense...chinas world influence will be reflected in their currency.

Mon, 03/05/2012 - 02:53 | 2223352 dognamedabu
dognamedabu's picture

In 10 years, I see there being a world currency. Best way for all governments to get rid of this pesky idea called sovereignty and democracy. 

Mon, 03/05/2012 - 07:38 | 2223461 Jendrzejczyk
Jendrzejczyk's picture

It will be interesting to watch your scenario play out over the coming years. China will be ground zero when the gale force winds of change collide.

Thanks for the reply.

Tue, 03/06/2012 - 01:19 | 2227036 matrix2012
matrix2012's picture

In foreseeable future America can still supply NUTS, WHEAT, CORN and some other GRAINS to China. With the huge population, they may still welcome the backup food supply in addition to own core food adequacy.

In their grand development projects underway, they put in great emphasis in farming sector among others.

 

 

There's an old Chinese saying that goes: “If you want to be rich, you must first build roads.”


Learn more about China's giant projects in embracing the 21st Century!

 

Sun, 03/04/2012 - 21:14 | 2222877 trav7777
trav7777's picture

rat's ass chance

Sun, 03/04/2012 - 21:19 | 2222888 francis_sawyer
francis_sawyer's picture

I don't know about you... But given the state of things... I'll put my money on a 'RAT'S ASS' chance (of surviving) just about as much as anything else...

Sun, 03/04/2012 - 21:43 | 2222913 Hugo Chavez
Hugo Chavez's picture

China cant afford to become the preferred currency. Have you all forgotten Triffin's dilemma? Know what happened to japan after the plaza accord? I could only hope china is stupid enough to aspire to be the dominant currency.

It would go completely against their mercantilist core, their identity as a people and a nation to be forced to run deficits. If they didnt their currency would make them uncompetitive.

Sorry china. Too late. You lose no matter what you do now. O course the usa does too, but he who loses least wins in a retrenchment.

Sun, 03/04/2012 - 22:06 | 2222970 francis_sawyer
francis_sawyer's picture

+1 for identifying China as having a 'Mercantilist core'...

Time will tell the rest...

Sun, 03/04/2012 - 22:21 | 2222995 Hugo Chavez
Hugo Chavez's picture

Yes indeed.
I cant help but look at chinas one child policy and lack of internal consumer demand. They must export, and at very thin margins, sometimes negative if loans and subsidies were accounted rationally, and i see a nation very dependent on external demand.

Sun, 03/04/2012 - 23:44 | 2223131 deflator
deflator's picture

What do you mean by lack of internal consumer demand? How many new cars and trucks do they have to put on newly constructed roads to constitute "internal demand" in your minds eye?

 

 The trolls here are now legion.

Mon, 03/05/2012 - 01:53 | 2223325 jimmyjames
jimmyjames's picture

How many new cars and trucks do they have to put on newly constructed roads to constitute "internal demand" in your minds eye?

 The trolls here are now legion.

************

What constitutes a troll in your minds eye-someone who disagrees with you?

China built airports that sit unused--Ghost cities that no one lives in-and hundreds of malls that sit vacant-farmland that cannot produce because of chemical pollution-

China is an overheated/credit hyper-inflated wreck and if they un-pegged the Yaun it would probably go to zero- 

Tue, 03/06/2012 - 00:03 | 2226886 matrix2012
matrix2012's picture

WAIT... too many private cars on the street will jam the traffic in whole, and more seriously those private cars are consuming a lot of barbaric fossil energy!

It may serve the interests of automotive industry and some individuals who can afford the cars but it may have bigger negative effects on the nation as a whole!

If I were the decision maker, i'd be very careful in promoting the private car usage... just see the example of Uncle Sam, how much energy the private cars are consuming, a really bad example to follow!

What supposed to be pushed on is good, reliable and affordable public transportation!

Mon, 03/05/2012 - 00:23 | 2223233 Milestones
Milestones's picture

I visited China about 10 years ago. Then the one child rule applied only to the overwhelming major group in China. There are 58 minorities in China that this one child rule does not apply to them.             Milestones

Tue, 03/06/2012 - 02:20 | 2227149 matrix2012
matrix2012's picture

China has 56 ethnic groups, that is 55 minorities plus the dominant Han people.  The 55 ethnic minorities make up about 8% of China’s total population.

 

There are numerous exceptions to the China's One Child Policy. Contrary to popular myth, the policy isn’t a uniform, nationwide prohibition on multiple children.

In fact, today the policy doesn’t even apply to the majority of Chinese citizens. In 2007, the National Population and Family Planning Commission estimated that the policy applies to only about 36% of China’s population.

The exact rules and enforcement vary by province and local area, however, the main exceptions include:

-Ethnic minorities

-Rural residents. Local officials in rural areas will typically permit a second child, especially if the first one is female (this revision came after massive protests in the early years by farmers who rely on children to help work the land).

-When both parents are only children (neither has any siblings), an allowance is typically made to have two children.

A notable exception was made after the devastating 8.0 magnitude earthquake in Sichuan province in May 2008. Of the nearly 70,000 people killed, an estimated 10,000 were children. Parents who lost their only child were legally allowed to have another child (similar exceptions are made in the case of deceased or seriously disabled children).

Though not technically “exceptions,” there are other ways of circumventing the policy. For instance, wealthy parents can simply pay a hefty fine to legally register and raise their second or third child. Many other parents simply lie—secretly giving birth to multiple children and then sending them to live with relatives in the country (usually passing them off as nieces and nephews).

The current One Child Policy would remain unchanged until at least 2015.

 

What does the average Chinese person think?

A surprising number of Chinese people today actually support the One Child Policy. It’s safe to say that it was not well received in the beginning (in accordance to the Chinese tradition of having large families).

But according to a 2008 Pew Research poll (Global Attitudes Survey in China), today about three-in-four (76%) approve of the policy. China’s increasing wealth and urbanization has contributed greatly to the “natural” societal tendency towards smaller families. The poll support this, showing that approval of the policy is highest among those with higher incomes (85%) and those living in cities (84%).

Today, China’s current fertility rate (1.54 in 2010) is not far off compared to Hong Kong (1.04) and its wealthier Asian neighbors: Japan (1.20), South Korea (1.22), Taiwan (1.15), Singapore (1.10) [Source: CIA 2010 World Factbook].

 

Sun, 03/04/2012 - 20:34 | 2222800 oldman
oldman's picture

Alas, alas, where will it all end?

Sun, 03/04/2012 - 21:47 | 2222930 Hugo Chavez
Hugo Chavez's picture

It took a hundred years for atlas to shrug on the western roman empire.

But eventually enough people found subsistence farming, subsistence living, and fleeing their workplace to be preferrable to the onerous taxation.

Sun, 03/04/2012 - 20:58 | 2222836 Atomizer
Atomizer's picture

Let the games begin!

 

1 USD = SDR 0.647343

http://www.imf.org/external/np/fin/data/param_rms_mth.aspx

Sun, 03/04/2012 - 21:06 | 2222853 Atomizer
Atomizer's picture

 

 

Brazil, Russia, India And China - BRIC

http://www.investopedia.com/terms/b/bric.asp#axzz1oCSO6QEO

Non/peripheral states attacking the core states.

Sun, 03/04/2012 - 21:12 | 2222869 fourchan
fourchan's picture

repete after me gold and silver are not money. <-- bens mantra

Sun, 03/04/2012 - 22:32 | 2223024 Tom Green Swedish
Tom Green Swedish's picture

Its just another scam to cash in on more cash nobody who invests in gold really cares about gold they just care about money and the security of their money.

Sun, 03/04/2012 - 21:14 | 2222874 JohnKozac
JohnKozac's picture

 

Beware of China's housing bubble

The housing frenzy has driven prices so high, so fast, that a crash on the scale of the real estate collapse in Japan in the 1990s is a virtual certainty in China

http://www.csmonitor.com/Business/Mises-Economics/2012/0129/Beware-of-Ch...

Sun, 03/04/2012 - 22:14 | 2222981 JohnKozac
JohnKozac's picture

gimli, thanks...good interview.

Interviewer Q: Are you hopeful?

David Stockman A: No.

Sun, 03/04/2012 - 22:34 | 2223027 SPAREPARTS
SPAREPARTS's picture

Good article, Stockman is legit thinker about our situation

Mon, 03/05/2012 - 01:43 | 2223317 slewie the pi-rat
slewie the pi-rat's picture

i was looking for this in rollingStone

hey, thxz! hard to tell when it was written, or first published, but this was "updated" 1d3h ago and the stock quotes on the side are from friday

quite a platform for him!  and a very personal interview, too!

Sun, 03/04/2012 - 22:30 | 2223019 allseo
allseo's picture

fhdfh

Sun, 03/04/2012 - 22:48 | 2223046 djsmps
djsmps's picture

The most totally bizarre article I've ever seen on CNBC.  LET'S ALL PARTY FOR HIGHER GAS PRICES!\http://www.cnbc.com/id/46621657

Sun, 03/04/2012 - 23:01 | 2223054 Dr. No
Dr. No's picture

Exter was  deflatioinist.  

Sun, 03/04/2012 - 23:15 | 2223107 ISEEIT
ISEEIT's picture

It's all a lie to big to see. We don't notice the bubble until after it pops. The inside seems real, and it kinda is.. Until it isn't anymore.

Cling to your guns, God, and religion.

They are closer to the truth than the alternative. Closer to something true than what they attempt to provide as substitutes.

Sun, 03/04/2012 - 23:42 | 2223154 Atomizer
Atomizer's picture

They are closer to the truth than the alternative. Closer to something true than what they attempt to provide as substitutes.

Cubic zirconia diamonds backed by Federal Reserve Notes.. Humor

Mon, 03/05/2012 - 01:06 | 2223259 slewie the pi-rat
slewie the pi-rat's picture

hey, A_zer!

i found it!  thxz!

 

Mon, 03/05/2012 - 00:19 | 2223222 slewie the pi-rat
slewie the pi-rat's picture

 

this is not "difficult to measure"!  just look at the charts!  jeeeez!

  • the us has what? $7 Tril in dollar-gold? [i hope they aren't including tyler's gold in that, BiCheZ!]
  • and china has a bit under 60 Tril yuan-god?
  • USD:CNY = 6.305

so they have us about 3-to-4 at current "rate of exchange", overall [i've done this 3 times and got 3 different "answers"!  pls be advised  L0L]

per capita, we are kickin their asses!  pyramid that!   Hahaha!

Mon, 03/05/2012 - 00:46 | 2223256 mess nonster
mess nonster's picture

Thank you Slewie for vaporizing the bullshit.

 

Mon, 03/05/2012 - 01:45 | 2223318 mark mchugh
mark mchugh's picture

Who's gonna tell Schumer that forcing the Yuan to float, might not work out like he figures?

Mon, 03/05/2012 - 01:45 | 2223319 billsykes
billsykes's picture

"China's basic Exter Pyramid was worth CNY 126.1 trillion (USD 20.02 trillion) including gold. (In the charts above, gold was shown as a negative number for visual effect."

 

That chart is totally wrong.

 

if the total is $20T as 1054 Tons- lets say they are Long tons (2000 lbs) or 37,775,360 oz at $1700= $64,218,112,000 or 64 billion. that is about 3.21% not at all like the chart.

and I dont buy that America has any gold. Also if you believe chanos or hendry China has not written off the '97 or '04 bad debts off their banks books.

 

 

 

 

 

Mon, 03/05/2012 - 01:53 | 2223327 Physicist
Physicist's picture

I disagree with the premise that the pyramid is the strongest structure known to Man.

Mon, 03/05/2012 - 06:31 | 2223421 toadold
toadold's picture

Hmmm, it looks like while the law and the governing elite say gold is not currency and only fiat money is, de jure, the actual market forces are saying a fiat currency is only as good as the amount of gold a government can bring to support it so that in reality fiat currencies as a concept are either dead or dying, de facto. 

Mon, 03/05/2012 - 07:17 | 2223425 Zero Govt
Zero Govt's picture

"The pyramid is the strongest structure known to Man. The weakest structure is the inverted pyramid."

Like that line (systemic observation) ..though not sure this 2D academic model has anything more than novelty value

"..the Exter Pyramid.. is an inverted pyramid ranking assets by risk. Gold, the safest asset.. cash, deposits, bonds, stocks, real estate, non-monetary commodities, etc., take their respective place above gold."

Unless you un-hinge the Feds monopoly money from the based/tipped pyramid (Gold standard) as Nixon/The Fed did in the 1970's and 'trade' it as a worthless stand-alone piece of fraudulent junk to dupe people and nations out of their wealth

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