The world sits at a key inflection point; as never have the economic fortunes of so many nations been so intimately entangled, and never have all currencies been unbacked. Bankers and politicians desperately hope economic laws will be somehow broken this time around, while new-age techies wish with all their might that virtual currencies will develop intrinsic value. In both cases, they’ll be tragically wrong; and regarding the latter, I highly recommend this video, titled “Gold vs. Bitcoin.”
Never has such a combination of market manipulation and propaganda been attempted on such a global scale; and while the near-term “result” of rising stocks gives the impression of success, the underlying reality tells an entirely different story. By my estimate, the list of “horrible headlines” I report on is longer than at any time in the past two years; which not coincidentally, is when the Fed commenced its maniacal “Operation Twist,” “QE3,” and “QE4” money printing campaigns. Europe has now joined the U.S. and Japan at zero bound interest rates – never to return – and most Central banks not employing overt QE programs are actively discussing them. Global debt has dramatically surged, exported inflation has caused devastating currency declines, and global unemployment has risen to levels not seen since the Great Depression. Sadly, such trends are bound to worsen as the global fiat Ponzi expands toward its natural conclusion – i.e., collapse; and when it does; a “new world order” will emerge, based on real money.
Care of such historic intervention, 2013 will go down in history as record-setting in the context of dislocations with reality; particularly since April, as exemplified by the chart below. It was at this point that global economic activity really turned downward, whilst stock markets launched and PAPER PM prices plunged. This anomaly will of course correct itself in time – either in nominal or real terms; but rest assured, it will. And when it does, such dislocations – of both financial markets and perception – will be banished to the dustbin of history.
For some, it’s difficult to ascertain which lie tops the “dislocation list.” Is it gold and silver proving they are “barbarous relics?” Deficits don’t matter? QE is “good?” Or the economy is “recovering?” All should be given consideration, but in my mind, the answer is obvious. That is, the reality that China is taking the mantle of global superpower; thus, guaranteed to be the driving force behind the inevitable, perhaps imminent, global gold standard.
As readers of the Miles Franklin Blog and Newsletter are well aware, China has been accumulating gold at a truly historic pace. In 2011, 2010’s record imports were nearly quadrupled; followed by nearly 50% growth in 2012, with this year’s pace indicating another 100% increase. And this chart not only omits imports at other Chinese ports, but sovereign wealth purchases; not to mention, that all Chinese gold production is purchased by the state. Thus, for those purporting gold is no longer relevant – or better yet, to be replaced by Bitcoins (i.e., “Gold 2.0”), this should be a sobering reality check. Currently, Chinese and Indian demand accounts for roughly three-quarters of global gold demand; and thus, it should be crystal clear that the market for real, physical gold couldn’t be tighter.
The reasons China is buying gold, of course, are fear of collapsing fiat currencies, and desire to control the next reserve currency. No one is more aware that the end of the fiat regime is in its twilight, as given China’s horde of $3.6 trillion of currency reserves – up nearly $200 billion last quarter alone – their exposure to the inevitable fiat crash is astronomic. Given that an entire year’s global gold production is worth just over $100 billion at today’s prices, it should be quite clear that China could buy ever ounce produced – ad infinitum – without even denting their currency reserves. And thus, their appetite for gold, silver, and other items of real value are likely to not only increase, but surge in the coming years; particularly as they know Western central banks have been suppressing prices.
Back to said dislocations, I am astounded as to how many dire headlines are being ignored by both the MSM and the masses alike; a dangerous trend, of course, that will abruptly end when TPTB lose control of financial markets – with my guess as to which they’ll lose first being U.S. Treasuries. To wit, just one month ago, China’s state-owned press agency, Xinhua, flat out stated its goal of creating a new, “De-Americanized” world.
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.
–NYtimes.com, October 15, 2013
Simultaneously, Xinhua dealt an equally lethal “head shot” to America, stating the dollar’s days as reserve currency should be numbered; which in freely-traded markets, would catalyze exploding gold and silver prices, plunging Treasury bonds, and a plummeting U.S. dollar. And when I say a “plummeting dollar,” I’m not talking about its exchange rate with the Euro, but items of real value.
The world should consider a new reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.
–Zero Hedge, October 13, 2013
I mean, these are fighting words from the world’s most powerful economic force, holding more wealth (net of debt) than the rest of the world combined. And yet, “crickets” from the MSM and Western leaders, dismissing the entity holding all the cards.
However, the fun was just getting started when those quotes were published; as just last week, China made two additional announcements suggesting dire ramifications for the current “powers that be.” First, the Chairman of the Shanghai Futures Exchange unveiled a proposal to price its benchmark crude oil contract not in dollars, but Yuan. If this occurs, it will be another major blow to a “petrodollar” regime clearly on its last legs. In other words, America’s ability to “make the economic rules” is in its twilight; as inevitably, the (gold-backed) Yuan will supersede the dollar’s dominance. And when it does, the plunge in the average American’s cost of living will truly be a sight to behold.
China is the only country in the world that is a major crude producer, consumer and a big importer. It has all the necessary conditions to establish a successful crude oil futures contract.
–Reuters, November 21, 2013
And finally, the People’s Bank of China delivered the coup de grace, indicating its days of acquiring foreign exchange reserves are essentially OVER, per this quote from Governor Yi Gang…
It’s no longer in China’s favor to accumulate foreign-exchange reserves.
–Bloomberg, November 20, 2013
So let’s summarize. China has $3.6 trillion of currency reserves, growing at a rate of nearly $200 billion per month – care of last month’s record surplus with the U.S. Meanwhile, global gold production totals just $100 billion, and silver production a piddling $15 billion – of which three-quarters is consumed by industrial demand. Meanwhile, it is overtly stating its intention to stop acquiring dollar reserves and paying for crude oil in dollars; while advocating a “de-Americanized world” in which the dollar is stripped of its reserve status. Gee, I wonder if they’ll be buying any more Precious Metals.
This brings me to the point of today’s article. That is, the Chinese couldn’t scream their intentions any louder; nor could the Miles Franklin Blog, whose job is to apprise you of the truths of the global economy. At some point, the game of “musical chairs” for the world’s last available gold and silver supply will end; at which point, you’ll either have protected yourself, or subjected yourself to the ramifications of a “de-Americanized” world.
plunge in STANDARD of living.
well said andy absolutely spot on with your comments.