That's a very old saw, a variation on the Biblical Golden Rule that doesn't exactly square with what Jesus taught. It seems China may now be in a position to do exactly that.
If you thought the West was unprepared for inflation – or indeed for Russia – wait and see just how unprepared it is for this bombshell.
This is the biggest story in world finance, and yet nobody, bar your intrepid blogger, is reporting on it.
For those without the attention spans to read all the way to the end, let’s cut to the chase and get the main point out upfront: China has more gold than the United States.
. . .
... my argument is that China has much more gold than it says it does ... Since 2000, China has mined roughly 6,830 tonnes. Over half of Chinese gold production is state-owned – the China National Gold Group Corporation alone accounts for 20%. And China keeps the gold it mines – the export of domestic mine production is not allowed.
I say that number again: 6,830 tonnes. Already that official 1,948 figure looks very dubious.
. . .
Second, there is the fact that, as well as being the biggest producer, China is the world’s biggest importer. Gold imports via Switzerland and Dubai are not always declared, but we do know that via Hong Kong alone, over 6,700 tonnes have entered the country since 2000.
. . .
Cobble it all together – cumulative production, imports and existing stock – and you arrive at a figure not far off 31,000 tonnes.
I’ve spoken to some of the world’s top analysts – Ross Norman, Bron Suchecki and Koos Jansen – and they all arrive at similar estimates. Alasdair McLeod of Goldmoney thinks it is higher still.
. . .
How much of this gold is state owned? Norman guesses 50%; Suchecki, formerly of the Perth Mint, says 55%.
At 50%, the implication is that China owns over 15,000 tonnes – closing in on double the US.
“Chinese Central Bank gold holdings have apparently been entirely unchanged since mid-2019 at 1,948 tonnes,” Ross Norman tells me. “But few of us believe that. Put an additional zero on the end (19,480 tonnes) and I should not be surprised if that is not much closer to their official holdings”.
Alasdair McLeod goes one stage further. “The PRC probably has as much as 30,000 tonnes hidden in various accounts, but not declared as official reserves”.
. . .
If China decides to weaponise money, as the US has done, all it has to do is declare its gold holdings, perhaps even partially back the yuan with them. Talk was, at one stage, its central bank digital currency (CBDC) would be partially gold backed.
Unbacked Western money risks losing a great deal of its purchasing power in such an event. To back Western fiat even partially with gold would mean a dramatic upwards revaluation of gold – into the tens of thousands.
But that is the card China now has with its 20 years of relentless accumulation. He who owns the gold, makes the rules.
There's more at the link.
The USA has been printing dollars - or, rather, electronically generating them through the Federal Reserve - like there's no tomorrow. 80% of all US dollars in existence have been printed in just the last two years. This has produced rampant inflation, despite official efforts to obfuscate the real rate of inflation through mathematical manipulation. There are no hard assets backing up those dollars - they're backed only by the "full faith and credit" of the United States. That faith and credit is looking increasingly threadbare these days.
China, on the other hand, may now be in a position where it could come out of the financial closet and declare that its currency, the renminbi, is now backed by gold, either fully or partially. That would instantly provide a solid foundation for its value on world markets. I daresay it would immediately become a de facto standard for international trade, because buyers and sellers would have at least some security that they weren't just dealing in binary zeros and ones in a computer, or pieces of paper that might be as worthless as the ashes they'd make in a fire. The only way the US dollar could compete would be to become hard-asset-backed itself - and there isn't enough gold production in the world to allow us to build up our reserves rapidly. It'd take decades, not years; and that's assuming that gold producers would be willing to accept dollars in exchange for their gold. If I were a gold producer, I wouldn't.
Nations can be defeated in many ways - not just militarily. If the report above is correct, China may already be far advanced down the road to economic victory in this day and age.
Peter
10 comments:
The one thing to remember about China is that fraud is everywhere in that culture.
There was a big scandal in 2020 that around 4% of their gold was gilded copper (look up Kingold Scandal). This 'gold' had been assayed multiple times, meaning multiple layers of fraud were involved (gold is over twice as dense as copper).
I would be surprised if that is the only fraud of its type. Anyone who buys gold from China needs to do a VERY thorough assay before purchase...
Airball.
Unless they're willing to directly exchange gold for yuan, fiatbux are fiatbux.
They may be able to induce somewhat more stability and inflation resistance, but again, unless they're trading one thing for the other, fiatbux are still fiatbux.
Gold-backed is meaningless unless they'll cough it up.
That ship sailed in 1934, and again in the 1970s.
It isn't coming back.
Also, the printing of the US dollar and the current war in Europe has knocked the hell out of many if not all 401K accounts.
Even if the Yuan is gold backed, to become a reserve currency it still has to be widely available and trusted, and at this point neither is true.
I suspect that if they do this, the West will make it harder to get and use than it already is.
And you are assuming that the gold in Fort Knox has not been removed over the years. I would not be a bit surprised that the vault has been mostly stripped - looted - of its gold by the thieves that have been - and are running - our government, and long gone offshore to people places we thought were our friends.
Prove me wrong.
Bob,
the fact that NO ONE in congress has been allowed to inspect FT Knox since Nixon's days indicates that the shelves are bare. Scuttlebutt was that Nixon took us off the gold standard to sell that gold to cover the expenses of the Vietnam War.
How much is still in the NY Depository? Look what happened when Germany decided to move their gold back home, that had been held since WW2. It wasn't there, some bank had sold it years before. Oops!
I would expect the Feral government to pull a Roosevelt, declare private gold ownership illegal, turn it in Mr. and Mrs. America.
This article is more than a few days old and has already been thoroughly debunked in
multiple professional mining forums. It is entirely reasonable to dispute China's
reported holdings of 1940 tonnes (62mOz), but it is fantastical for the author Dominic
Frisby to assert without source or backup that China has magically produced over
219mOz (6830 tonnes) of gold since the year 2000. I'm confident that is why he
selectively chose tonnes to report rather than millions of ounces more familiar to
investors and lay readers.
The two largest gold producers in the free world that are subject to relatively
rigorous reporting standards, Barrick and Newmont, together struggle to produce 9mOz
annually on a global basis. Yet Frisby would like you to believe China has managed to
somehow produce more than 10mOz annually since the year 2000 from a vast country of
which the majority area has the non-ferrous productive potential of Kansas. The entire
Tarim Basin would need to be as productive as Nevada for that to come close to being
true.
This sort of speculative nonsense is not new - for decades Western sources improperly
projected vast imaginary production of precious and strategic metals onto the blank
and inscrutable slate of the Soviet Union only to be proven wrong in the early 1990's.
That they did so without subsequent consequence or ridicule is why a formerly
reputable publication like MoneyWeek can get away with it now.
Mining isn't an area of knowledge everyone is required to be familiar with, but it is
important to be able to detect the overriding scent of barnyard excrement when it is
present. And this article was buried in it do a depth greater than I can accurately measure.
Gold is not magic. We have hard-currency wealth, in the form of the Strategic Resource Reserves. Just because it's black and liquid, rather than hard and shiny, doesn't negate that it is a non-inflatable form of wealth.
And, yes, I DO distrust the Chinese claims. They are unreliable.
The (mythical) Strategic Reserve would power America for about 30 hours of normal operations, or almost fuel one or two of our four naval fleets for one or two good cruises.
It's been an open joke for decades, on par with the president keeping a single gold Eagle coin at the bottom of his boot heel, to help out the country in tough economic times.
When we designate, say, North Dakota as the Strategic Reserve, make it a tank farm as far as the eye can see, and put five years' worth of oil in it, give a holler.
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