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US Terrorizes China; China Pulls the Golden Trigger.

ek hornbeck's picture

For those of you who don't know her, Pluto is a writer I met through our interaction at the place so nice they banned me twice (sure I'd love to tell you about it, but it's not relevant to this piece).

She's a ForEx trader and we don't necessarily see eye to eye on economics since she still seems to think there is some connection between money and actual goods and services (particularly in terms of investor confidence) while I'm with the MMT types that find it totally fictional except for its use as a medium of exchange (which could be replaced in a pinch) and to pay taxes (in lieu of feudal servitude), and think confidence is a scam entirely unjustified by reality.

She is whip smart and has much more practical experience than I do, so it's probably better to listen to her.

And while I would argue that gold is simply another commodity that is useful industrially for its ductility, conductivity, and inertness, and that has a certain aesthetic appeal, it is psychologically true that many people attribute special economic value to it however unjustified by facts that attitude is.

Thus I think her bottom line conclusion, that China is preparing itself to take over as the world's reserve currency is probably true. China's reluctance to do so, according to MMT, stems from the fact that the reserve currency is condemmed by account balancing to run pretty serious trade deficits, otherwise nobody else has any money.

Money is a lubricant for transactions. It has no magical, mystical inherent value (of which it is a poor store and this is a good thing because it forces productive investment rather than unproductive hoarding). But feel free to disagree, never let it be said that at TMC's and my sites (The Stars Hollow Gazette and DocuDharma) we don't entertain ideas we don't completely endorse.- ek

Reprinted with permission from The Stars Hollow Gazette

All week I've been seeing references to this headline:

"China could announce that it holds 30,000 tons of gold to back the Yuan/Renminbi."

As a Forex trader, the story took me by surprise, even though China has been stockpiling for years, and is the world's largest gold producer. Also, it's not like China to pull this trigger so fast. However, in the South China Sea last week, the US started militarily terrorizing China with war ships and fighter jets — and China warned (in so many polite words) that the US planted the seeds of its own doom.

So, maybe that's what this is all about.

If it is true that China has 30,000 tonnes of gold, (which is almost more gold than the rest of the world's central banks, combined) then it is game over for the US Dollar.

Here's what would happen next:

All global banks would seek to trade in Yuan rather than Dollars. But, China does NOT want the Yuan to be used as the world's trading currency. They have absolutely no intention of redeeming Yuan for gold; they are not fools. Instead, China wants to be a major part of a global synthetic trading currency, in particular SDRs (Special Drawing Rights) issued by the IMF.

The dying US empire wants to block China as a major player at the IMF, but it fatally screwed itself by being the only IMF member nation to miss the IMF's December 31st, 2014 reform vote deadline. (I explained this rapidly-approaching, final stage of US monetary collapse in my essay, America's Mein Kamph.)

So, China will demand that — if the US wants to continue to participate as a global economic partner at the IMF — the Fed must show the world the existence of its gold for international audit, just as China will do.

The Fed either cannot or will not do this. Many believe it has very little gold left. Countries are currently demanding the return of their gold stored at the Federal Reserve in New York. The largest depositor, Germany is still waiting. Even the UK is standing in line for its gold because Switzerland just demanded the return of its gold from that other failed Anglo empire, Great Britain. As you can see, the world has lost all faith and trust in the US debt-based, fiat economy. Especially now that the Petrodollar is dead, thanks to the profoundly self-destructive US sanctions on Russia:

Show us the Money = Checkmate on the US.

Shameful. The US hoisted on its own IMF petard.

By the way, would this be a good time to buy gold?

Especially since the Chinese just eclipsed the century-old London daily gold-fix:

China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, three sources familiar with the matter said, in a sign the world's second-biggest bullion consumer was moving closer to creating a benchmark price.

The state-run Shanghai Gold Exchange (SGE), on whose international platform the fix will be launched, conducted the trial with major Chinese banks and a few foreign banks, the sources said this week.

China, also the top gold producer, feels its market weight should entitle it to be a price-setter for bullion and it is asserting itself at a time when the established benchmark, the century-old London fix, is under scrutiny because of alleged price-manipulation.

Even though gold is up $400 an ounce since 2007, at $1,200 an ounce, it looks really cheap to me, everything considered.

What do you think?

Very few Anglo investor-pundits have the ability to parse the following words: "China does NOT want the Yuan to be used as the world's reserve currency." Their brains simply cannot grasp the idea that China does not share their psychopathic need for global currency supremacy.

One commercial commodities trader did weigh in, astutely, on the possibility of China's coming gold bombshell.

Rob Kirby arranges deliveries of gold, measured by the ton, to his central bank clients. He contends that news that China may disclose it has 30,000 tons of gold — and that will be devastating for the United States.

Kirby contends, “I think the implied message is we are going to show you how much we have, and then you are going to have to show us how much you have. . . . America, very likely doesn’t have, in my view, doesn’t have the gold they claim to have. They also probably spent a lot of other people’s gold in safe keeping.”

What would happen to the U.S. dollar if China revealed a vast holding of physical gold?

"…it could cause a sudden drop in the U.S. dollar, which could signal a tsunami of dollars coming back to America and could set off a very, very ugly, ugly bout of inflation... in America.”

Kirby points out, “The problem is our global capital markets have become criminal cesspools. Our global capital markets right now are crime scenes. The regulatory regime installed by the leadership of America to prevent this all from happening has been vacant.”

“It started with the repeal of the Glass Steagall Act back in the late 1990’s. You got to look back to see the context of where this train left the tracks. But, this is not a derailment. The derailment occurred a long time ago. Right now, the engine of the train is in the middle of a corn field, and it’s still moving.”

On the timing of the next financial calamity, Kirby says, “It wouldn’t have shocked me if it happened last fall. It is going to happen. I don’t know what day that is going to happen, but that is a guaranteed outcome of the trajectory we are on right now. People who have their net worth solely in financial assets, paper instruments, are going to witness, at some point, an extreme reduction in their standard of living.”

The floor is open and I'm really interested in your opinion.

The Author hereby grants you permission to post any or all of this essay at your own blog or anywhere else you wish to on the Internet. There is no need to link back. Just add this notice and enjoy.

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Submitted by lambert on

... to fiat being brought down by a lie. Lies within lies, too, since if the Fed argues (correctly) that money isn't "backed by" gold, or in fact anything, they'd have to account for their use of fiat after the 2008 crash.

And I wonder if the gold audit is connected with "Audit the Fed," at all. (I think Jesse's Café Americaine has been big on shenanigains with precious metals for some time.)

V. Arnold's picture
Submitted by V. Arnold on

Yes. It should be noted that even gold is fiat, as you seem to acknowledge.
But when all is said and done; historically, it will always have more value than paper.
Interesting times these....

jo6pac's picture
Submitted by jo6pac on

writing this it's very interesting. If China has that type of gold reserves and called Amerika out I'm sure they could come up with any large amount of gold. Then with every country calling for the return of gold held in the us it would be interesting to see how they are doing on the shipping end. Some one pointed out after MH-17 was shot down Denmark quietly received all of their gold a few months later. Strange but Denmark is not talking on what happened to the flight. Libya gold held in NY disappeared. Hugo got V. gold back before he died. The story goes on.

Then with China and Russia becoming close friends and with Russia large holding and production well just about anything could happen to Amerika as the neo-conns keep screwing other nations that refused to be the lackey.

I bought 2oz of gold at $647 and would buy now if I had extra $$$$$ laying around. Lately I've bought a little silver.

Question does Pluto have her own site? Found it

As Lambert points out may be you should send this to Jesse's Americaine it would be interesting to get his view on the subject.

ek hornbeck's picture
Submitted by ek hornbeck on

Repeat after me-

"Gold is simply another commodity that is useful industrially for its ductility, conductivity, and inertness, and that has a certain aesthetic appeal, it is psychologically true that many people attribute special economic value to it however unjustified by facts that attitude is."

I'd give you a wink, but I don't do emoticons.