Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Why the U.S. is Letting China Accumulate Gold

admin by admin
May 6, 2015
in Uncategorized
0
0
SHARES
9
VIEWS
Share on FacebookShare on Twitter

by James Rickards, Daily Reckoning

A lot of people think about gold as a percentage of a country’s total reserves. They are surprised to learn that the United States has 70 percent of its reserves in gold. Meanwhile, China only has about 1 percent of its reserves in gold. People look at that and think that’s an imbalance. But those are not very meaningful figures in my view.

The reason is that a country’s reserves are a mixture of gold and hard currencies, and the currencies can be in bonds or other assets. The United States doesn’t need other currencies. We print dollars, so why would we hold euros and yen?

The U.S. doesn’t need them, so it makes sense that the country would have a very large percentage of its reserves in gold. China, on the other hand, has greater need for other currencies.

A better metric, in my opinion, is to look at a country’s gold holdings as a percentage of GDP. GDP is a representation of how big a country’s economy is. It’s the gross value of all the goods and services.

There are different measures of money supply – M3, M2, M1, and M0. In a money economy, however, you can say that the country’s gold holdings are the real money. I call a country’s gold reserves gold “M-subzero”.

The IMF officially demonetized gold in 1975. The U.S. ended the convertibility of gold in 1971. Gold disappeared “officially” in stages in the mid-1970s. But the physical gold never went away.

Today, the US has about 8,000 tons. We haven’t sold a significant amount of gold since 1980. We dumped a lot of gold in the late 1970s to suppress the price, but none after that. So one of my questions for central bankers is, if gold is such a ridiculous thing to have, why are we hanging onto it? But that’s a separate question.

Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.

What do want in a poker game? You want a big pile of chips.

Gold serves as political chips on the world’s financial stage. It doesn’t mean that you automatically have a gold standard, but that the gold you have will give you a voice among major national players sitting at the table.

For example, Russia has one-eighth the gold of the United States. It sounds like they’re a small gold power – but their economy’s only one-eighth as big. So, they have about the right amount of gold for the size of their economy.

The U.S. gold reserve at the market rate is about 2.7 percent of GDP. That number varies because the price of gold varies – but it’s around 2.7 percent. For Russia, it’s about 2.7 percent. For Europe, it’s even higher – over 4 percent.

In China, that number is 0.7 percent officially. Unofficially, if you give them credit for having, let’s say, 4,000 tons, it raises them up to the US and Russian level, but they want to actually get higher than that because their economy is growing.

Here’s the problem: If you took the lid off of gold, ended the price manipulation and let gold find its level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because their economy’s growing faster and because the price of gold would be skyrocketing, they could never acquire it fast enough. They could never catch up. All the other countries would be on the bus while the Chinese would be off.

When you have this reset, and when everyone sits down around the table, China’s the second largest economy in the world. They have to be on the bus. That’s why the global effort has been to keep the lid on the price of gold through manipulation. I tell people, if I were running the manipulation, I’d be embarrassed because it’s so obvious at this point.


What is the Income Play Rich Investors Love? (Hint: It’s Tax-Free)


The price is being suppressed until China gets the gold that they need. Once China gets the right amount of gold, then the cap on gold’s price can come off. At that point, it doesn’t matter where gold goes because all the major countries will be in the same boat. As of right now, however, they’re not, so China has though to catch-up.

There is statistical, anecdotal and forensic evidence piling up for this. All of it is very clear. I’ve also spoken to members of Congress, the intelligence community, the defense community and very senior people at the IMF about it.

China is our largest trading partner. It’s the second largest economy in the world. The US would like to maintain the dollar standard.

I’ve described some catastrophic scenarios where the world switches to SDRs or goes to a gold scenario, but at least for the time being, the US would like to maintain a dollar standard. Meanwhile, China feels extremely vulnerable to the dollar. If we devalue the dollar, that’s an enormous loss to them.

That’s why, behind the scenes, the U.S. needs to keep China happy. One way to do that is to let China get the gold. That way, China feels comfortable.

If China has all paper and no gold, and we inflate the paper, they lose. But if they have a mix of paper and gold, and we inflate the paper, they’ll make it up on the gold. So they have to get to that hedged position.

Gold is liquid, but it’s a fairly thin market. If I call JP Morgan and say, “Hey, I want to buy 500 tons of gold,” I can’t do it. That would be a huge order. An order like that has to be worked between countries and central banks behind the scenes.

It’s done at the BIS, the Bank for International Settlements, in Basel, Switzerland. They’re the acknowledged intermediary for gold transactions among major central banks and private commercial banks.

That’s not speculation. It’s in the footnotes of the annual BIS report. I understand it’s geeky, but it’s there. They have to acknowledge that because they actually get audited. Unlike the Fed and unlike Fort Knox, the BIS gets audited, and they have to disclose those kinds of things.

The evidence is there. China is saying, in effect

“We’re not comfortable holding all these dollars unless we can have gold. But if we are transparent about the gold acquisition, the price will go up too quickly. So we need the western powers to keep the lid on the price and help us get the gold, until we reach a hedged position. At that point, maybe we’ll still have a stable dollar.”

The point is that is that there is so much instability in the system with derivatives and leverage that we’re not going to get from here to there. We’re not going to have a happy ending. The system’s going to collapse before we get from here to there. At that point, it’s going to be a mad scramble to get gold.

[Editor’s Note: Jim Rickards has published a third book entitled “The Big Drop: How to Grow Your Wealth During the Coming Collapse.” It’s available exclusively for readers of his monthly investment letter called Strategic Intelligence. Before you read today’s essay, please click here to see why it’s the resource every investor should have if they’re concerned about the future of the dollar.]

Previous Post

06May2015 Pre-Market Commentary: U.S. Futures Fractionally Higher, Bad U.S. Employment Change, European Stocks Teeter Over Greece’s Future

Next Post

The Next UK Government will need to Heed Housing, If We’re to Avoid Another Financial Crisis

Related Posts

Tax Benefits For Bitcoin Firms In Belarus Extended Up To 2025
Economics

Tax Benefits For Bitcoin Firms In Belarus Extended Up To 2025

by John Wanguba
April 1, 2023
China Loans $240B As Bailout 'Belt And Road' Nations – Study
Economics

China Loans $240B As Bailout ‘Belt And Road’ Nations – Study

by John Wanguba
April 1, 2023
Will Ripple And SEC Settle?
Econ Intersect News

Will Ripple And SEC Settle?

by John Wanguba
April 1, 2023
Is The Biden Administration Politicizing Crypto?
Business

Is The Biden Administration Politicizing Crypto?

by John Wanguba
March 31, 2023
How First Republic's Befriending Of The Wealthy Led To A Crisis
Business

How First Republic’s Befriending Of The Wealthy Led To A Crisis

by John Wanguba
March 31, 2023
Next Post

The Next UK Government will need to Heed Housing, If We're to Avoid Another Financial Crisis

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Tax Benefits For Bitcoin Firms In Belarus Extended Up To 2025
  • China Loans $240B As Bailout ‘Belt And Road’ Nations – Study
  • Will Ripple And SEC Settle?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish