Let’s compare what China’s leadership has actually done to what America’s elite dreams it can get away with. Alasdair Macleod of Gold Money said China has cornered the gold market. Macleod said the total Money Supply of the 50 largest nations is $67 trillion. Outside the public banking system is the Shadow Banking System which academics recently estimated to be $100 trillion. The Shadow Banking System includes Hedge Funds, Special Investment Vehicles, Money Market funds and others. That is $167 trillion in paper promises used to construct a House of Cards.
Nations all over the world currently use the American dollar as their reserves to defend their national currency. If speculators pull money out of Brazil or Turkey or South Africa, these nations can only defend their people from currency devaluation and runaway inflation by either selling US dollars to buy their currency or by raising interest rates to attract bank deposits from overseas. In the first 2 months of 2014 emerging market stock exchanges lost $3 trillion dollars in value. Turkey and other countries have been forced to drastically raise interest rates to attract foreign capital. This sharp increase in interest rates has shut down economies in the past and will do so again.
China has been accumulating gold to be used as the basis of an alternative currency. A former Wall Street Journal reporter examined US gold exports for the past two decades and discovered that America exported 5,500 metric tons more than was available. America leased its gold supply to the banks. The bankers were allowed to sell that gold five times by selling paper promises to deliver gold. The Chinese decided to buy actual gold bars and transport them back home. Compare that to the people in Europe and America who have paper promises that there is some gold somewhere that will somehow be delivered if they ask nicely for it. There is an estimated 40,000 tons of paper gold deposited in vaults for which there is no bullion. In China selling paper gold which you cannot deliver is a capital offense.
Macleod says the Chinese sold 2,200 tons of gold a year to their citizens at the Shanghai Gold Exchange. If you count Hong Kong gold sales, China sold 2,800 tons of gold to the public. They also produce 430 tons a year from their own mines. He says the Chinese are consuming all of the world’s gold supply leaving us with scrap metal. The Chinese and the Russians have bought gold and silver mines in the US, Australia and elsewhere. The US and Europe are in a serious and permanent gold deficit to Asia.
A lot of gold has been taken out of paper gold Exchange Traded Funds and some from what is left in Central Bank vaults. There is little gold left in America and Europe to meet the demand from Asia. Observers have noted that when the US and London can no longer deliver gold to China that this whole paper scheme will collapse. That means the dollar, the euro and the pound will soon crash.
India obeyed banker requests to restrict gold imports. But elections are coming soon and even the Congress party has been talking of removing restrictions. If restrictions are lifted, the price of gold could jump.
So the Chinese have cornered the gold market and the Americans are sitting on a $167 trillion House of Cards. Speaking of which, the Netflix series House of Cards which depicts the politicians of Washington DC as self-serving, egotistical, degenerate criminals will be shown unedited on Chinese television. This is to let their people know how foolish the American leaders and their voters are.
The problem with the Dollar as a reserve currency is that there is no fixed price telling people in the US, Latin America, Europe, Africa or anywhere else just how valuable their paychecks, savings and pensions are. If they perceive their currency as declining in value, they will dump all their dollars held in reserve and accept a gold backed Chinese yuan. A gold backed yuan would probably have fixed exchange rates for the Russian ruble and maybe 20 other currencies. This would transform 20 competing regional powers into an international power with one currency capable of establishing trade when the alternative is a 1930s style liquidity squeeze.
The world will soon be able to compare the hard work and planning of the Chinese to the American House of Cards. Some say the Chinese government will announce their actual gold holdings in April of this year. They have not revised their current figures of a little over a thousand tons for some time. As I have said before, the minimum estimate of the Chinese gold supply I have seen is 5,000 tons. Others like Jim Rickards say it might be 7,000 tons and Jim Willie says it could be 10,000 tons. This announcement will prove to the world that there is nothing left in Fort Knox.
We also need to compare what the Chinese have down to what America did when they poked the Russian bear in the nose over the issue of the Ukraine. Do these deluded men in Washington and New York really believe that Vladimir Putin will not respond? Do they believe they can successfully respond to every possible counter measures Putin and his allies can take? Do they really believe Putin will allow them to put US nuclear missiles in the Ukraine?
The Russian banks have already cut off the Ukrainian banks from credit which has caused bank runs. The Russians can start more bank runs. What will Obama and Mario Draghi at the European Central Bank do to protect their banks if Putin organizes a few massive bank withdrawals?
What can Obama and the EU do if he raises the price of oil and natural gas to the Ukraine?
What can Obama and Janet Yellen do to defend the dollar if China sells 60 and then 70 and then 80 billion dollars a month in US Treasury bonds to buy gold driving the price up to $1,900 an ounce and flattening the dollar?
The Chinese can set the price of gold and hence devalue the dollar because we are sitting on a $167 trillion dollar House of Cards. That could not have happened in 1913. Prior to the Federal Reserve Act, the US Treasury would have simply have converted those dollars from China into $20 gold coins.
What can Obama and David Cameron do if Putin sells S-400 anti-aircraft missiles and Mach 5.5 Iskander Short Range Ballistic missiles to Iran? And what if he sends fighter bombers armed with who knows what to Iran?
What if Putin sends nuclear missiles to Cuba to counter what Obama is doing in the Ukraine? Will he blockade Cuba? Please inform Mr Obama that blockades are an act of war. What will Obama do if Russian warships armed with nuclear weapons challenge his blockade? What will he do if Russian television shows viewers how many seconds it will take for a very fast Russian missile to reach American cities from either Cuba or from submarines off the US coast?
What will Obama do if Russia and China and their allies in Venezuela, India, Brazil, South Africa, Iran and elsewhere refuse to either buy or sell oil or anything else in dollars? This will end the dollar as a reserve currency. When those dollars from overseas are redeemed stateside, prices will double overnight. Food prices were going to rise sharply this summer anyway due to the drought and the thinning of the US beef supply. What is Obama’s plan to stop the Nationwide Food Riots? Send all the poor people to FEMA camps? He cut Food Stamps twice since November. How will he get the poor to listen to him when their Food Stamps only buy enough for half the month?
To keep foreign nations using dollars as a reserve currency will Obama attack nations that sell oil for the yuan? Will he sink ships that carry oil bought with euros or gold?
What will Janet Yellen do if the Chinese start buying gold and silver bullion and don’t stop until gold resets at $7,000 an ounce?
Of course nobody can restore the coming losses due to banker greed and incompetence. But afterwards what will Obama do if the Chinese offer to buy the stock of America’s banks promising to reorganize them with guarantees from a gold backed yuan against future losses? Will he allow the Chinese to save the banks if it means that they will wind up owning the Federal Reserve? The FED is privately owned by the member banks so China could own the FED and end up holding the mortgages of nearly half the homes in the US. What would Obama offer as an alternative to saving the banks? Will he follow the recommendations of the elite at Davos who said we need to create another hundred trillion dollars in paper money? Do you believe that a $267 trillion House of Cards will be better able to wage war against a gold backed yuan?
We might have less than two months before events force Obama, Yellen, Cameron and Draghi to begin answering these questions.
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There is a solution to these problems. Invade the offshore tax havens in the Caribbean and seize the tens of trillions Wall Street stole from us and the $4 trillion dollars the Chinese leaders have stashed there. The Chinese people will appreciate the return of what their leaders stole.
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2 thoughts on “China Corners The Gold Market. US Pokes The Bear.”
Hahaha! Love the pic for the article, Henry.
Do you know what happens when one country owns all the world’s gold?
Demand disappears because it’s unobtainable, and it eventually LOSES value because people shift to other forms of money for trade and wealth storage.
Yes, it’s epitomized and defined money for thousands of years because it’s scarce, and it’s impervious to decay, but if it’s not circulated, it’s not money anymore. China would probably profit more in the long run by owning half the world’s gold rather then all of it.
As the saying goes, “you can put a hundred pounds of gold on a piano stool, but it won’t play Beethoven”. In the end, it’s just another metal, and people need money for day to day living, regardless of whether or not they have access to gold.
I’m guessing that China’s plan is to issue a new world currency that’s backed by gold, but if you can’t trade it in for actual gold, what does it matter if it’s backed by gold? How would you know how much of the “gold backed currency” is issued, or what it’s worth?
A gold-backed currency can fall victim to the same over-issuance that destroys fiat currencies, and in fact, exactly that is the basis of our “fractional reserve banking” system.
Some historians will say that the first paper currency was issued in China, and others say that the first paper currency was actually receipts for gold held in the vaults of local goldsmiths (Jews), because they were the only people who had vaults. These receipts were traded like money because it was a lot easier than withdrawing your gold to buy something, and the Jews discovered that only a small percentage of the people would ever withdraw their gold at any one time. This allowed the goldsmiths to print more receipts than they had gold for, buy all kinds of things with them, and as long as they remained in circulation, no one would ever know. Over issuance of gold-backed currency is how fractional reserve banking was invented.
And a gold backed currency can also fall victim to the same thing that destroyed our currency, which was backed by gold before 1973. One day the king can wake up and announce that it’s no longer backed by gold, and when that happened here, it was illegal for Americans to own gold bullion, so you couldn’t even trade in your fiat currency for gold if you wanted to.
Today, a gold-backed currency would put China in control of our economy, because they have the gold, and that would give them the same control over us (and our elected officials) that the Federal Reserve bank has now.
A gold backed currency requires a mountain of gold, a Ft. Knox to store it in, and an army to protect it. I would suggest a fiat currency for daily use, and if you want to store your wealth, buy gold with your fiat currency, and stuff that in your mattress instead.