Sunday, March 17, 2013

Thoughts on Recent Events

The US is in full collapse.

You wouldn't know this though with the Dow reaching new highs day after day. Forget Friday, the down day was most likely allowed due to shame.

It should be clear by now that the Fed has chosen inflation rather than deflation. Being that debt is "money", deflation means money destruction and money destruction to a banker is like holy water to a vampire. The Fed is clearly trying to reflate all the assets that are leveraged. There is no other way to support all the money and debt that's in the world and the money is needed to service the debt.

The Fed can print money to buy bonds but the world doesn't have to accept them nor will they in perpetuity. Keep holding  bonds at your own risk.

With that in mind, let's discuss some recent events out of China. It appears they have changed their tune. Just recently we have the following statements out of China:

Jin Zhongxia recently stated, "The dollar’s global dominance will continue." And that "the world was moving to a “1+4” system, with the greenback serving as the anchor of global payments, supplemented by “four smaller reserve currencies” – the euro, sterling, yen and yuan." Link reports that, "A deputy governor with Chinese central bank, Yi Gang has said that China is likely to cap its gold holdings at 2 percent of its total foreign exchange reserves. Back in 2009, China had gold reserves to the tune of 1054 tons amounting to 1.8% of its forex reserves." 

Well this is a peculiar stance is it not? Let's look back at China's position over the years.

  • Nov, 19, 2008: Dow Jones reports that China is considering a target of four thousand metric tons for its official gold reserves to diversify against the risks of holding US dollars. Rickards, Currency Wars, 2011.
  • February 14, 2009: Mr. Luo, a senior Chinese banking regulator stated, “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”
  • March 30, 2009: Agence France Presse reports that Russia and China are cooperating on the creation of a new global currency. Rickards, Currency Wars, 2011.
  • April 26, 2009: Agence France Presse reports that China is calling for the reform of the world monetary system and replacement of the US dollar as the leading reserve currency. Rickards, Currency Wars, 2011.
  • June 16, 2009: Reuters reports that Brazil, Russia, India and for a more "diversified, stable and predictable currency system." Rickards, Currency Wars, 2011.
So since 2009, we are to believe that China is STILL in the process of adding only .2% of their forex reserves in gold? This doesn't pass the smell test. Consider this: Gold now accounts for about 9.2% of Russia’s total reserves and 16% of Kazakhstan’s, according to the World Gold Council. That compares with more than 70% for the U.S. and Germany, the biggest bullion holders and less than 2% for China. Link

Are we to believe this? Just like that China folds and throws their cards on the table. They just simply walk away in defeat and take the back seat on the bus?

A passage from, The Art of War, comes to mind, "And as water shapes its flow in accordance with the ground, so an army manages its victory in accordance with the situation of the enemy. And as water has no constant form, there are in war no constant conditions. Thus, one able to gain the victory by modifying his tactics in accordance with the enemy situation may be said to be divine." Samuel B. Griffith, 1963.

I'm inclined to believe that this is a ruse. It is a sleight of hand due to a few factors:

  • Temporary dollar strength due to the perceived success of the US "Shale Revolution" which is doomed to fail. I urge you to read, The Fracked-up USA Shale Gas Bubble where William Engdahl states, "In reality it is becoming increasingly clear that the shale revolution is a short-term flash in the energy pan, a new Ponzi fraud.."
  • China wishes to suppress the price of gold so they and other members of the SCO are able to acquire more. Gold Econ 101.
  •  A coming monetary conference in China in September where a new global reserve currency will be discussed.
 What I believe is happening here is that China is realizing that their rhetoric over the past few years, born out of anger and frustration, has not been helpful in managing expectations of what the future of money will look like. You would have thought they are seeking a primary role in being a reserve currency for the world given their diatribe over the years but that's not so easy after all.

China is riddled with corruption at the local level, they are many years away from having the depth of markets you find in the City and in New York, their is fear of fraud in their markets and they still have not allowed their currency to float freely on the forex exchanges. These issues are being addressed but it takes time to resolve these matters.

So what is this monetary conference in September all about that no one is speaking off? Let's look at the website and see. Here's a statement from the intro that gives us an idea:

Global Sustainable Currency Summit, as a satellite meeting of Euro-Asia Economic forum, will be held in Xi’an from 26-28 September, 2013. This conference aims to show solutions how to overcome losses because of currency speculations and currency wars, economic crises due to budgetary shortcomings and currency problems. And develop a harmonized currency system without injustices to developing countries allowing a level-playing trade field for all.
Interesting they mention currency wars, of which there are none according to the latest G20 Summit.

Let's look at some of the agenda items that are listed in this pdf that can be found online. No conspiracies folks, it's all right there for us to see if we just take the time.

  • Analyse the failures of actual and past currency systems
  • Discuss and resolve the international currency crisis/currency wars
  • Define a global solution with the possible global currency such as the "G"
  • Implementation procedure with all governments and stake holders
Now what in the world is the "G"? Are they referring to the Special Drawing Right? And will it include gold?

Take a look at the symbol from the website's front page. 

What do you make of that? Is that "G" for gold or "G" for global currency. And the chain? A golden link perhaps that binds all currencies together? "One ring to bind them all....."

Now let's look at some of the agenda items:

  • Analysis of the failures of national currencies used as world currencies
  • The problem of gold reserves vs. zero reserve currency risks
  • Transition from national and regional currencies to a world currency
  • Scenarios with the staged introduction of the global currency "G"
  • Implementation, mechanisms, legislation and interest policy
  • The election of a (UN) global currency control board
  • Administering the world currency system, implementation time schedule  
Wouldn't you just love to be there?

Now after considering all these things it is clear to me that China is still in the gold game but wants to encourage other countries to accumulate gold and participate in the new "G" global reserve currency (sorry, no Amero folks).

Why do I think that? Agenda item: The problem of gold reserves vs. zero reserve currency risks. Basically, if you have zero gold reserves, you have a problem.

What are your personal reserves looking like? Will you be a tourist on a boat witnessing the largesse and eerie songs of the whales maneuvering the seas of the "G"lobe?

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