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It is impossible to know the exact date China will launch its final effort to strip America of its power and authority in the world but the current massive gold buying is clearly the main step necessary to do so. China is determined to take power, revenues and international leverage away from the USA. Meanwhile, hapless US policy makers appear to be blissfully unaware of what the Chinese are planning.
The above edited commentary, and that below, is taken from an article posted on SeekingApha.com which can be read in its entirety HERE.
Once China has enough gold, it will bid up the yuan-denominated price into the stratosphere. Once it does that, there are only three choices.
- maintain credibility and the reserve currency status by refusing to change the price of US dollar denominated gold. If it does that, domestic industries will be crippled by Chinese competition, because the yuan will become very cheap in relation to the dollar.
- allow the dollar denominated price of gold to skyrocket in synch with the yuan denominated price. That will end the US dollar’s reserve currency status.
- kow-tow to Beijing, seeking a seal of approval from China for any serious financial maneuvers.
None of America’s choices are good ones. At this point, no matter what the USA does, China wins. Making things worse is the fact that it will be nearly impossible to prove China is a “currency manipulator” based on the IMF rules. China will simply point to the SGE, explain how the price is set by supply and demand, and win any arbitration brought against it.
It is impossible to know the exact date China will launch its final effort to strip America of its power and authority in the world but the current massive gold buying is clearly the main step necessary to do so. China is determined to take power, revenues and international leverage away from the USA. Meanwhile, hapless U.S. policy makers appear to be blissfully unaware of what the Chinese are planning.
James Rickards also has interesting insights into Why Most Gold Bugs and Bloggers are Dead Wrong About China’s Gold
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“Once China has enough gold, it will bid up the yuan-denominated price into the stratosphere.” This is perhaps oversimplified.
The rational aim for China is to convert her present $3.7 trillion of fiat-denominated foreign reserves into the maximum possible quantity of gold. At the present price, this would amount to more than half the accessible gold in the world—clearly an impossible target.
It is inevitable that the accumulation programme will drive the marginal purchase price upwards, and so the buying will have to be done at a continually increasing price until the cash resources have been exhausted.
A too-hasty programme would drive the price to the stratosphere without much gold having been acquired. On the other hand, the programme managers would probably like to see a successful conclusion to the programme while they are still in power, or at least still around in an informal role as respected senior counsellors to the executive government.
Also calling for urgency is the continuing secular depreciation of fiat currency against gold: the political and monetary fundamentals do not point to any slackening in the historic depreciation rate of the fiat US dollar against gold of 6.2% per annum (a halving of purchasing power every 11 years).
Overall, these considerations suggest a steady upward forcing of the gold price over a period of the order of 10 years, perhaps similar to the periods 1971–80 or 2001–11 but this time the consequence may be different. Rather than the collapsing bubble tops of 1980 and 2011, we are more likely to see a steady plateau at the reset price.
“They who hold the gold make the rules”; and the first rule will be that the value of gold does not depreciate from that time on.”