China in 2011, will make a powerful move to go an international currency gold standard. They are buying gold and silver. This is the main reason why JP is starting to cover.
I don't believe that an global gold standard will ever happen, but I do believe that China will use the idea as a tool to gain power in Asia.
Here is an interesting article:
Returning to a gold standard would be very difficult because of globalization and ten pages of other reasons. For those who would prefer a personal gold standard, that's possible. That is why we are here. Either own the solid stuff including silver or invest in it's cycle, like SLW.
and it's not to destroy the US Dollar.
He know, yes KNOWS, and proved, we must spend to avoid the precipice of the recession/depression.
Done. They won.
Now he must continue to spend, not cut but spend to keep rates low (better for business) and keep the dollar weak, not destroyed, to compete with our Cold War strange bedfellow, China.
In so doing, he also moves people out of bonds and into equities and commodities, helping avoid deflation and supports the financial infrustructure to a degree.
What he is lacking, is a Congree who understands this, and who will also support tax CUTS at the same time this spending is going on.
That's how you stimulate growth.
BUT, our Congress will either stop spending, raise taxes or Fluck it up some other way.
CM-Don't agree about the premise "He know, yes KNOWS, and proved, we must spend to avoid the precipice of the recession/depression." If there is a correlation between any act taken by the Fed since 2008 and positivity I'd like to read that if you have a link. Or, if no link, just an explanation is fine.
Query: does the Fed have the power to get the U.S. on a gold standard or would that take an executive order or Congressional act? Curious.
That's how you stimulate growth! Does that bring all the jobs back from China and other foreign countries like Mexico. I didn't think so. Flooding the market with dollars is an extremely dangerous bet. If it fails, we are in trouble.
The Chinese will do what suits them. They are control freaks. Don't try to figure out what they'll do. It'll be apparent. Like the Yuan,,,,,meanwhile, yes, they are buying commodities and we know why.
The groundwork is already laid and the treasure piled high. Look into the Shanghai Cooperation Organization. Russia and China are the primary entities and the rest of the countries located in that portion of the world are queuing up.
I understand Iran and India have recently purchased Gold. I believe they are associate members of that organization. Its the emergence of a new trading block. Control of manufacturing, outsourcing, oil, and other commodities including Gold. Not sure how Gold will play in the future as a true currency. I would not be surprised to see it as part of a commodity basket from which all other currencies are valued.
1) The Chinese have only a tiny fraction of their reserves in gold.
2) The Chinese government totally controls the value/exchange rate of their currency and has zero interest in giving up that control in the face of an international currency.
3) Most countries have little or no gold in reserve and have no interest in giving up their control of their own currencies.
4) Going on an international gold standard would mean all the central banks in the world would have to stop printing money in order to save their banks/economies/exports. Who exactly is going to vote for this again?
5) If an international gold backed currency were miraculously created odds are very high there would be a massive run on said currency as large numbers of people/companies/organizations/governments attempted to exchange the new paper currency for the physical gold.
The only way the gold standard is coming back in any serious form is after the major countries of the world are in absulutely dire straights and they have no alternative. That day could well come, but the chinese communist party isn't going to be pushing for it in 2011 (they may talk that game, but it won't be serious) because if they lose control of their currency they lose control of their economy, which ultimately means they lose control of the government and probably their lives.
"The only way the gold standard is coming back in any serious form is after the major countries of the world are in absulutely dire straights and they have no alternative."
Absolutely correct. There is no way China, of all countries, would lead the charge for a traditional gold standard when they have the fiat currency reserves they currently hold. The paper loss would be enormous and the value of the yuan would likely, although not certainly, skyrocket.
On the other hand, the discussion has begun and James Grant's recent op-ed piece in the NYT (I think ) would not have been printed 2 years ago. As a potential crisis brews and looms over us, there are at least a few souls out there making the case for a gold standard of some kind. When fiat currency finally causes the world to descend into financial , and perhaps social chaos, the initial spade will have been done and the alternative will be apparent. We will get a gold standard, of some type, but it may not be in my lifetime.
In economic terms, the world appears leaderless, and China is anxious to fill the vacuum. Although its economy is still but one-third the size of that of the United States, China's power is growing daily. It is clear that it will not bow to American pressure. However, as an ancient and experienced nation, China knows a thing or two about diplomacy. Publicly, at least, China withheld its closely held push to challenge the U.S. dollar's privileged role as the international reserve currency. There can be little doubt that China is carefully choosing its best moment to strike.
This strike at some time will be a move to an international gold standard with or without the USA. Europe and the rest of the world wants the USA to be more responsible. Just the notion by China will change how the world view's gold.
Explain. Because the increase in China's PM reserves may just be diversification of its CB assets. The Chinese are big currency manipulators. That they want to reset the game now and put the Renminbi or some other form of cross-border currency not-yet-developed seems counter to its policy history. But, hey, you may be right!