I listened to an interview yesterday by Greg Hunter of Jim Willie. Of particular interest to me was what Willie said beginning at “38 minutes” into the interview. He claims that Russia and China will present “gold backed” currencies this year and that there will also be 2 other “blocks” that move in this direction. One block he claims will be Arab and the other a northern European block. I think he is correct in his thought process as I have said for years that once the dollar goes down the world will break into several currency “blocks.”
Taking them one by one starting with Russia, we are actually pushing Russia into this decision with the sanctions we are imposing. Don’t get me wrong, Russia would have loved to transact business in the past without using dollars but could not. They were still financially weak and had several defaults in their immediate past. They also had sold all of their gold as of 1990, we know this because gold bars with the “Czar’s stamp” were showing up on world markets in late 1989 and 1990. Russia purportedly now has just over 1,000 tons of gold. Is this real or do they have more? I don’t know but I do know that Vladimir Putin did a photo op back in 2004 holding a gold bar…if they don’t have more than they report, I am sure they would like to.
China is next. They say that they own 1,054 tons of gold. This amount is laughable at best. In my opinion and based on visible imports over the last 5 years, China has at LEAST 5,000 tons. This amount would make them the number 2 holder of gold reserves if… the U.S. has the 8,133 tons that is claimed. In reality, China knows (as does anyone who uses simple math and logic) that much of the gold that they have imported over the last 5 years+ has had to have been sourced from “official sources.” We know from total supply numbers that the gold imports to China were not supported by global production. I would also say that logically the higher China’s reserves are…the lower the reserves are in the U.S. This is simple “subtraction” if you will since the metal had to come from somewhere…and in the gold world there are very few “somewhere” able to support China’s appetite.
As for the Arab states joining together to for a “dinar block,” this also makes much sense. Do they have gold to back it? “Officially?” Maybe. “Unofficially?” Probably…with a caveat. The caveat being where is it? I believe that much of their gold is held in Switzerland, others believe that much of it has been held in London and has been pilfered. If this is the case and the Arabs decide not to accept dollars for oil, how quickly could they accumulate gold with their sales of oil? Or, what if they demanded gold for their oil, how quickly could they build tonnage? Several moving parts here but if the intent is to create a regional currency, they have the ability.
Lastly we have the Eurozone. It has been speculated that they may end up breaking into a “north and south” of sorts. The north led by Germany is exporters versus consumers, savers versus spenders or fiscal conservatives versus fiscal “drunken sailors.” This would also make sense but another caveat here. Where is Germany’s gold? Half is supposedly held in New York which “may” or most probably is not there so we can assume that they have only 1,500+ actual tons. Not huge but it still makes them a “player,” it also would release them from the fiscally bankrupts to their south.
Where would this leave the United States? First you have to ask the question: How much gold do we really have left? All? Half? 1,000 tons? A few tungsten covered bars? This is an important question and we will not find out the answer until the players at the table begin to show “their” cards. Once this happens, the other players will want to see our cards…with their own eyes! An audit from the 1950’s will not suffice. An audit may not have been done for the American populace owners in over 60 years but you can bet the ranch that foreigners will demand this as a condition to even enter the negotiating room.
Do you remember back in 2001 or 2002 when the Treasury changed the designation for our national gold to “deep storage?” This I believe will be at the center of our new currency which will be a union of Canada, Mexico and the U.S. These 3 nations combined do have gold and silver…in the ground as opposed to inside of vaults. It will be these in ground reserves that will allow us “in the room” (and the fact that we have nuclear weapons) but probably not at the table when decisions are made. The in ground reserves I believe are what will serve as “collateral” if you will for any “credit” that is extended to us. This is all speculation but I believe it to be logical speculation. “Something” has to give because the current system is past the point of unstable and untenable.
Before finishing I want to mention that Goldman Sachs has recently exited the HFT market, given up on the NYSE market making and now may be shutting down “Sigma X” which is their “dark pool” clearing house. I plan to write on this for tomorrow or Friday as it is very big news and mean that something huge will change or at least Goldman Sachs believes it will (or already has).