Xinhua, China’s official press agency on Sunday
ran an op-ed article which kicked off as follows:
“As
U.S. politicians of both political parties are still shuffling back and
forth between the White House and the Capitol Hill without striking a
viable deal to bring normality to the body politic they brag about, it
is perhaps a good time for the befuddled world to start considering
building a de-Americanized world.”
China does have a broad strategy to prepare for this event. She is
encouraging the creation of an international market in her own currency
through the twin centres of Hong Kong and London, side-lining New York,
and she is actively promoting through the
Shanghai Cooperation Organisation
(SCO) non-dollar trade settlement across the whole of Asia. She has
also been covertly building her gold reserves while overtly encouraging
her citizens to accumulate gold as well.
There can be little doubt from these actions that China is
preparing herself for the demise of the dollar, at least as the world’s
reserve currency. Central to insuring herself and her citizens against
this outcome is gold. China has invested heavily in domestic
mine production and is now the largest producer at an estimated 440
tonnes annually, and she is also looking to buy up gold mines elsewhere.
Little or none of the domestically mined gold is seen in the market, so
it is a reasonable assumption the Government is quietly accumulating
all her own production without it becoming publicly available.
Recorded demand for gold from China’s private sector has escalated to
the point where their demand now accounts for significantly more than
the rest of the world’s mine production. The Shanghai Gold Exchange is
the mainland monopoly for physical delivery, and Hong Kong acts as a
separate interacting hub. Between them in the first eight months of 2013
they have delivered 1,730 tonnes into private hands, or an annualised
rate of 2,600 tonnes.
The world ex-China mines an estimated 2,260 tonnes, leaving a supply
deficit for not only the rest of gold-hungry South-east Asia and India,
but the rest of the world as well. It is this fact that gives meat to
the suspicion that Western central bank monetary gold is being supplied
keep the price down, because ETF sales and diminishing supplies of
non-Asian scrap have been wholly insufficient to satisfy this surge in
demand.
So why is the Chinese Government so keen on gold? The
answer most likely involves geo-politics. And here it is worth noting
that through the SCO, China and Russia with the support of most of the
countries in between them are building an economic bloc with a common
feature: gold. It is noticeable that while the West’s financial system
has been bad-mouthing gold, all the members of the SCO, including most
of its prospective members, have been accumulating it. The result is a
strong vein of gold throughout Asia while the West has left itself
dangerously exposed.
The West selling its stocks of gold has become the biggest strategic gamble in financial history.
We are committing ourselves entirely to fiat currencies, which our
central banks are now having to issue in accelerating quantities. In the
process China and Russia have been handed ultimate economic power on a
plate.
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