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How Russia and China are attacking the dollar

OWoN: China and Russia are forming a Pact to attack the US by fiscal means as America did when it imploded the Rouble. They will just take down the Global Petro dollars.

"One should also add the promise to introduce yuan gold backing by the end of 2015 which was announced by the Shanghai gold exchange vice-president Shen Han."

Gold Rush 2.0: How Russia and China are attacking the dollar

Fort Russ
By Sarkis Tsaturyan
9 July 2015

Translated from Russian by J.Hawk


Ufa is hosting the Shanghai Organization and BRICS summits which are attracting the attention of analysts and international media. The US is not hiding its irritation, and is attempting to attract attention back to itself. For example, the Assistant Secretary of the Air Force Deborah Lee James stood out in a Reuters interview by calling Russia "the biggest threat to US national security." She was not exactly original: under the pretext of Moscow's "menacing actions" in Eastern Europe, James called on expanding US military presence in the Old World, forcing its allies in NATO to spend 2% of their GDP on maintaining the alliance. Only 4 out of 28 member states are at that level. Therefore the stories about "terrible Russians" still aren't working.

Russia can answer the West. And we are not talking about military affairs but the economy and finance. IA Regnum announced that the Russia expanded gold production in the first five months of 2015 by a factor of 6.5, and silver production by a factor of 7.7. 83.01 tons of gold were extracted (84.7 tons in all of 2014), and 411.78 tons of silver (542.32 tons in 2014). In addition to these worrisome to the US statistics, the BRICS development bank began operations with a founding capital of $100 billion. One should also add the promise to introduce yuan gold backing by the end of 2015 which was announced by the Shanghai gold exchange vice-president Shen Han. He was followed by the former head of the China National Bank Pan Hongshen who told Reuters about the bank's plans to grow and "internationalize" the gold market.

Keeping in mind that China and India represent half of the world's gold consumption, the CNB position is not a populist one. Beijing's power is expanding with enviable rapidity. Starting in mid-July, the oldest financial institution in China (founded in 1912), the Bank of China Ltd, will officially join the London gold fixing, the mechanism for establishing the daily price of gold which operates since 1919.

Beijing does not intend to stand still: the next to join the elite pool will be the Industrial and Commercial Bank of China Ltd. There are many reasons for the expansion: China is planning to enter the yuan into the IMF currency reserve pool, crowding the dollar, euro, pound, and yen. Therefore it intends to remain one of the biggest purchaser of gold bars. "The Chinese want to be at the top of all the branches of international trade. Therefore they want to be represented wherever prices are formed," Bloomberg cites Sharps Pixley Ltd director Ross Norman. The London gold exchange, the largest of its kind in the world (in April it traded $20.2 billion worth of gold) is becoming China's "trampoline" which would permit the yuan to weaken the dollar and exchange mechanism which depend on it. Naturally, the goal is yuan's "conservative" expansion, as a rapid drop of the dollar would unavoidably destroy China's economy which finances the US national debt. It is the tight interdependence which brought us the term "Chimerica."

The intrigue here lies in that without Moscow, which next to South Africa is the main producer of gold, Beijing cannot make the leap. The global order is experiencing the growing influence of a "gold rush". Its effect reminds of the Web 2.0 technology which makes systems become more effective with expanded use. The virus has been launched. It is stimulated by the growing demand for gold. According to the World Gold Council, China will increase its purchases of gold by 3% this year. Russia's gold reserves are also growing, having reached 1250.9 tons in June. This information was enough to lead Jim Rickards, the author of the book "The Death of Money: The Approaching Collapse of the International Currency System", predict Russia will soon transition to a gold-backed ruble. Peter Kraut, an analyst with Money Morning, expressed a similar position writing that Russia is rapidly expanding its gold reserves in spite of economic problems, and "that tendency may have a destructive influence on the US dollar." Rickards believes that the dollar's end will come as soon as China reveals its real gold reserves held by the CNB. So far that data is only in the realm of rumors. The reports, citing PRC Gold Association head Jian Bingnan, that China's gold reserves stand at 9816.03 tons. It's a huge figure which exceeds even the US gold reserves of 8134 tons. It's obvious that nobody will either confirm or deny that number in the near future. China is abstaining from official comments.

The "gold rush" is not limited to Russia and China. One should not forget Turkey which, according to Alister Hewitt, an expert with the World Gold Council, is the fourth largest consumer of gold (6%, or 181 tons per year). The country's houselholds alone account for 3500 tons. Neighboring Iran has also started to expand its reserves due to the burden of sanctions, and started to use gold as a means of exchange in its trade with Ankara, a procedure accompanied by many scandals. Hurriyet Daily News reports that Teheran recovered 13 tons of gold "frozen" in South Africa due to US and EU pressure. Now Washington is demonstrating its "generosity" by encouraging the eastern countries' passion fro the magic metal. Since the blocked Iranian assets are estimated at $100 billion, the chase after gold is only beginning.

The world order will collapse faster than it seems, and the cracks through the new balance of forces is visible are appearing with growing frequency. Russia and China are heading the rally. Who will reach the finish line first? We'll learn that in only a few years.

J.Hawk's Comment: One of the important points that Sarkisyan makes is that China does not want to see the dollar collapse, and neither does anyone else. Because the dollar is still a very effective and useful means of international exchange. However, the problem is that the US is using the dollar and other parts of the global commons which it controls (for example, the internet) not as a public good delivered for the benefit of the entire system, but as a weapon in the global hybrid preventive war aimed at preventing or at least delaying its decline. Which everyone, including the US, is seeing happen. So these and other gold measures are defensive, rather than offensive, in nature. I suspect the deadline everyone is racing against is the US Federal Reserve raising of its funds rate which will have the effect of making US dollars scarcer in the international capital flows, with destructive effects on international trade. Therefore it makes sense to come up with an alternative, be it a gold-backed yuan, gold-backed ruble, and any other gold-backed currency, with gold in effect taking over (wholly or in part) the role of the international reserve currency which, in effect, makes all other currencies mutually tradeable. Because if the dollar vanishes from circulation, how do you know how much euro, yen, ruble, yuan, etc., are worth relative to one another? And if you don't know that, any country that relies on trade will go into a steep depression. So gold is clearly intended as a backstop here, since no country's central bank has the credibility as a currency manager that the US Fed has established. But, make no mistake about it, in all likelihood we will see a severe international economic crisis next year (which is conveniently also a US presidential election year) triggered by the raising of the federal funds rate. Gold will be able to partially mitigate that impact, but not entirely.

Also, it is remarkable that the British are going along with China's plans. That also suggests that they are viewing China's actions not as an offensive measure against the dollar which would harm the entire financial system and as such would be opposed by London, but as an insurance against future Fed actions that will inevitably threaten said financial system.


1 comment :

  1. I was reading that today, IRAN officially was allowed into the SWIFT system. I would think their asset freeze will be lifted by morning, including 100 tonnes of gold, the report stated.

    Maybe the cabal just says then, "Oopsie!! We can't find your 100 tonnes of gold!! How else may we help you Iran?"



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