Convertibility

A long, long time ago (not so long, really), around 400M people lived in a strange, double-tiered system. The currency issued by the state was pure scrip, forced into being by the will of the committees ruling the lands. They represented the future work output of the people thus ‘led’ by the committees, and to a smaller extent the natural resources of the countries. The problem with the latter was that trade and exports were restricted, and property/contract law was enforceable only at the discretion of the state in question, not any of its trading or investment partners.

The fiat money was colorful, adorned with historical eras and figures of old. Heroes, martyrs, idealized fools of history, battles won, poets, landmarks, national symbols. All of which was intended to make the unfortunate residents feel better about their ‘money’. So there would be less grumbles raised about how it was not convertible into any currency used by other countries EXCEPT those within the same trade zone, and then only generally with restrictions. Nothing could be bought from any other country, except those within the trade zone.

While some real money was issued as a token gesture, this was unattainable to the vast majority of the population.

Beyond these handicaps, a further issue was that economic output (including the manufacture of goods, production of food and raw materials, energy sources, etc.) was centrally planned by the same all-knowing committees mentioned above. Simple things, like coffee, citrus and nylon pantyhose became luxuries. Since both supply and price were centrally controlled, even those items which WERE being manufactured were often scarce goods. Having cash was not enough to make a purchase, you had to be friends with the store manager, the butcher, the department store clerk (or know someone who WAS), so the item would be reserved for you (generally in exchange for a surcharge or an owed favor). You could buy a LOT of stuff in Moscow in the seventies with a suitcase full of bluejeans.

If you wanted ‘Western’ goods (or Japanese electronics, French perfume/cognac, caviar) and were not a member of the elite, you could either go to the black market, or traipse over to a small number of special shops allowed to transact ONLY in non-local, hard currency. The annual allowance of currency one could buy: $0-$100. While not always explicitly reserved for foreigners and domestic VIPs, these stores (like travel abroad and real money) were generally out of reach for the vast majority of the populace.

The system was, in historical terms, a transient one. But if you ask the residents how long their 40-80 year respective period lasted, they might answer: generations.

While that specific scenario is not by any means necessarily going to repeat, it is interesting to observe that not only was such a system possible, but it managed to prolong its existence over half a century or more. And depending on your view of how things currently operate in the countries in question,

one might argue that committees are increasingly dictating currency issuance and valuation (and thus prices), as well as gaining increasing influence over what is produced and where it is sent. Not just in this region, but throughout the rest of the world as well – especially the part that generates the vast majority of the global economy. The yuan is a partially convertible currency, after all – and the conversion seems to mostly only happen in one direction.

‘Buying local’ would take on an interesting new meaning, if one were to start shopping for a cheap US-made knockoffs of Asus laptops and iPhones, or if those in the West seeking to conspicuously advertise their wealth were to drive bullet-proof Russian SUVs instead of tricked-out Hummers…

When Zero Hedge first started out, in those heady days and weeks after the proper website had been established (and we eventually found out the servers had been located in Switzerland), one of the hallmarks of the content was original research reports from large investment banks. Sometimes without their explicit, specific permission to use the material.

Though the domicile of the published data and materials perhaps made it more difficult for the legal departments of aforementioned financial institutions to get direct access to the ‘perps’ (in their view, anyway), the flow of these reports began to be outweighed, then dwarfed by the independent research and content. I suspect that the old nemeses such as GS eventually decided that acknowledging the existence of such 'digital dickweeds' was a necessary price to pay to obtain a cease-and-desist order to stop the flow of such reports. But this piece from our very good friends doing the work of God on behalf of everyone (but most especially themselves and their owners) is a throwback to the old days.

Tyler(s) of course take the research in a direction not stated by its original authors. But it connects quite a few dots, IMHO. Very much worth a read:

How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring

Given the size of the legal department attached to her (soon to be former) company, Blythe way very well have been telling the literal truth when stating that their commodity positions were on behalf of clients. Since their in-house side bets may either be covered by some other loophole (or simply a NatSeck designation from an appropriate authority, forbidding the mention thereof, like IT companies and their data flows), they might have judged that a public statement known to be untrue in one sense, may be perfectly defensible in a legal sense.

Zero Hedge articles, even if correct in their premise and based on provable, documented premises, take anywhere from months to years to come into the mainstream, and begin to be publicly discussed by MSM, regulators, and on a few occasions politicians and people who appear to wield significant power.

However, things seem to be accelerating just a tiny bit lately. The note published above, in combination with the current geopolitical situation, not to mention even Nostradamus and the triumvirate of (FO)(FO)(A) forecasting and broadcasting the eventual inevitable flammability (or watery death) of paper representations of precious metals (or at least gold) would start to make me a little bit nervous to hold substantial amount of wealth in such paper products.

The problem is one of a slippery slope – at what point does the invalidation of the paper representation of some piece of wealth stop? What forms of wealth can and which cannot be represented via paper, are precious metals truly the only ‘examples’, if they ever become such? How are other tangible assets recorded and traded around the world? At what point does conversion between various abstract/fiat representations and the true articles themselves become difficult, or even impossible?

Apparently, the saying was Scottish, and really originally went:

“Possession is eleven points in the law, and they say there are but twelve.”

Keep stacking.

122 Comments

Undecided's picture

Early bird gets the worm.

Number First

Louie's picture

#2

Second

gold slut's picture

Great article JY!

An excellent subject for discussion.  I often have to catch myself when I become a bit too obsessed with getting my cost average down, or whether I can save £5 next month if I hold back a purchase this month.

The day will come when we wake up to find there is none to be had anywhere at any price... £5 off or not.

'Possession is eleven points of the law', so true.  I suppose the 12th point is whether the goons can find it if they come looking.

El Gordo's picture

China gold imports article...

I seriously studied the China gold imports article posted at Zero, and despite my background in finance and at least average intelligence, I still haven't fully comprehended the process.  I will probably study it a little more before concluding that either I am an idiot or that the scheme being utilized is too complex to be understood by anyone - in which case it could also be total BS, but who would know.  Things we take for granted today which are understandable by all used to be considered magic when majority of the populus was illiterate (a condition we are trying our best to recreate), at least in the US.  Long Island was purchased from the natives for a few shiny trinkets, so how would you value those trinkets exchange value?  Paper is paper, even if there is some claimed underlying asset represented.  Real estate is merely rented from the government who retains the right to tax it right out from under you if all other methods fail.  Hiding your meager metals may be the only way to preserve anything of value, but what good are they if there is nothing to trade for.  Obviously, if you read this, you can determine that I'm more than a little confused by all this, but of one thing I am certain - there is no better time than the present to take advantage of relatively cheap metals prices and load up while you still can.

Gold Dog's picture

I drink

the fifth!

Now to read.

Motley Fool's picture

Jy

Thanks for the link. I quite enjoyed the ZH comments. I find it interesting that this was posted roughly about the time the crash JPM buy silver campaign was reaching its height. So much confirmation bias, ahahahah. Fun to see.

For amusement value, I have been saying for years that these are the current dynamics, china selling papergold and buying physical, though of course I did not speculate on the exact mechanics.

Gold Dog's picture

On convertibility

It occurs to me that anything and everything is worth exactly what someone will pay/barter for that item. You can't eat gold!

Some preppers have a years worth of diesel saved up in case the power grid goes down. What will it be worth if we suffer from an EMP event and the generator is toast? What is it worth if that chap is the only one in ten miles that can recharge your batteries.

I have about two winters worth of firewood and a wood burning fireplace stashed in my back garage, what is it worth if I am afraid of using it because the smoke and smell of cooking canned bacon just makes me a target?

There is a viable and dynamic market for everything, including labor going on at all times.

On another note, either here or on ZH someone posted regarding the Gubbmint's balance sheet recently put out by the GAO. I call bullshit on the total value of the assets only being in the $2 trillion range.

-What would land developers pay for Yosemite? The Grand Canyon and surrounding areas, including the water rights of the Colorado River?

- What is the 80% of Utah that they own worth?

- All the airports and associated systems?

- The natural resources are vast, vast I tell you!

- The interstate highway system alone would probably fetch close to a quarter trillion for someone that wanted to own some toll roads.

Tu amigo,

Don Perro

Gold Dog's picture

And another thing...

Thanks JY, good article as always!

Ta,
DP

Motley Fool's picture

El Gordo

If you like I will put in simple terms what I understood from their explanation.

1. Company in china borrows money in yuan. They have to pay Chinese interest rate.
2. They use this money to buy gold, and store this gold in a warehouse. They get a warrant showing their ownership of said gold. There are some storage costs.
3. They use this warrant as collateral to take out a loan in say USD, with much lower interest rate.
4. They hedge the price of gold changing by taking out a short position on the gold in the futures market. (The physical serves as the underlying long, making them net neutral.)
5. Chinese interest rate - USD interest = Gross Profit - storage and transport costs - hedging cost = Net profit.
6. At this point it gets a bit fuzzy...but either the company uses this same warrant to take out another loan. OR. (more likely)...the company who now have possession of the warrant uses it to make a loan in USD with the warrant as collateral.
7. The warrant keeps switching hands and new loans keep being made on it. Each one hedges on the paper market with a short.

So. Several shorts are created for one underlying stack of gold, creating downwards pressure on the price.

The problem of course lying in there not being a limit of the warrant only being used as collateral once.

Of course the above explanation is still not wholly accurate, as they talk of gold fabricates moving, and increasing apparent import and export values. Perhaps this is how they created the illusion of more gold existing, allowing them to issue more warrants on one underlying stock.

So perhaps step 2.5 is : They send off this gold for fabrication, and re-export to hong kong, while hanging on to the warrant.

Patrancus's picture

Convertibility

the piece reminds me of the scrip issued by various Barter exchanges during the mid 70's to early 80's. all manner of scrip could be found for trading into goods and services. These various forms of scrip might also be valued differently depending on what happened to be in  inventory of the various exchanges. Trade brokers within the exchanges competing with one another for trade transaction fees charged for transactions between members of exchanges.  In some instances it was a basic model for a basket of scrip or currencies for that matter as long as the barter exchange membership's fiat cash business was not working for them as was the case then with no cash buyers for warehouses filled to the brim with inventory, or not enough cash services being sold to the street, very different times now, no inventory piled high, only cargo ships anchored in Asian ports, and dry shipping companies selling off containers by the 1000's to preppers waiting for sky-net.

Groaner's picture

Traitor Dan,, to the gold community

Ever since he no longer does his Weekly Wrap up on KWN he has been bashing gold bugs every chance he gets.. People who do that are trying to raise themselves up, the cheap way.
He never admits that the bullion banks, Fed ever intervene in the gold/silver markets which is nuts since their most precious FIAT money system is in the balance compared with real money.
This article on Zhedge is interesting on China could be involved too in keeping the prices down.
http://www.zerohedge.com/news/2014-03-22/how-china-imported-record-70-billion-physical-gold-without-sending-price-gold-soarin

If you read Dan's blog and go to the comments section and read some of his comments. Note this one about Andrew M.

Thanks Dan, appreciate the analysis.

I see Andrew Macguire is over at KWN weaseling out of ANOTHER blown LMBA default prediction.
What is it with these people constantly trying to predict market bottoms and tops, defaults, collapses etc.? It's nothing more then attention seeking behavior.
The constant "crying wolf" by talkingheads like Macguire and others is getting old and it borders on obsessive or feigned outrage that's designed to suck goldbug newbies in. It seems like it could be both.

I hope someone out there is making a list of all the dire 2014 predictions about gold and the dollar and derivatives etc that most of these shills basically staked their reputations on that 2014 is THE year it all falls apart and gold/silver skyrockets blah, blah, blah.

I think some of the hucksters make it up as they go along. It sure seems that way.

Reply
Replies

Trader DanMarch 21, 2014 at 6:32 PM
Dan the Man;

Remember - this is the same guy who kept pushing that stupid backwardation claptrap as gold fell all the way to $1180. He should have no credibility but then as P. T. Barnum once said: " A sucker is born every minute". Apparently there are plenty of suckers who are willing to fork over their hard-earned money to keep him going.

I do not know what it is about people but once they get involved in a cult ( which is what the gold is always manipulated all the time crowd really has become) they are incapable of clear and rational thinking. Anyone who is objective can see this guy for what he is; a flim flam man; however, to those within the cult, he is a hero.

It really is quite tragic.

Safety Dan's picture

Hey Gold Dog Nice To Read You

Houston we have a problem, amigo.. I believe the gubbermints best made assessment values 2 years ago for some reason; they needed it.. Maybe for the Chinese to see about loaning.. Who knows.. 

80% of Utah is likely worth much, much more than assessed. There's gold in there hills/forestry lands that we are unable to be granted permits to work claims. My grand dad had 3 working silver claims lost to the US forestry acts. He was told he could get working claims rights. Someone forgot to tell the forestry people...  But it helped me learn about looking for PM claims in other areas.

Growing up in Utah I've learned there is much more in natural resources that published or written, as is the case in Wyoming, Colorado, Idaho and other states. 

Someone forgot to tell the gubbermints best.. Now look at the fine mess we are in.. 

JY thank you for another fine thought provoking article. 

Groaner's picture

Another Traitor Dan reply

Gene BellamyMarch 22, 2014 at 6:54 AM
YTD returns for Vangaurd 500 index fund (VFINX) is .93%. YTD return for GDXJ is 33.14%. The gold stock pumpers are wrong and the mainstream stock pumpers are right? Depends on your time frame.

Reply
Replies

Trader DanMarch 22, 2014 at 7:23 AM
Gene;
It certainly does depend on one's time frame... Are you assuming that those who own gold stocks first sold all of their holdings in early 2013 ( or 2012 for that matter ) when gold fell below support and entered a bear market?

If so, the HUI was trading near 400. Today it is trading at 236 after losing more than half its value since early 2013.

The HUI has sadly fallen from its peak over 600 to as low as 188 or so at the end of last year. That is an investing catastrophe no matter how one measures it.

did those broken stop watches warn any of these poor folks? NO, they did not. They kept up with the same BS and the same wild theories.

I wrote a while back, eventually all those bottom pickers in gold would be proven to be correct. So what? Anyone can call a bottom if that is all that they do, time after time after time after time. All markets eventually stop going down once they fall low enough in price to stimulate value-based buying.

Many of the gold miner management finally got the message to get their act together and run their companies in a responsible manner but not until far too many of their shareholders were financially ruined.

Gold had fallen near the cost of production and some of the miners had made the hard decisions to close unprofitable mines or sell them off and begin getting a handle on their debt loads. The market is rewarding them for so doing but as I said above, but at what great cost to so many shareholders.

The cult of gold has led too many astray. It is a tragic waste of talent because some involved in this cult are otherwise very intelligent and nice people. However, they have lost their ability to be objective and that comes with a very steep financial price.

It is fine to have convictions - we all do. What is not fine when it comes to investing is not being able to understand that a market is moving against you and no matter how hard you might argue the point, it does not care about your opinion. It is going to do what it is going to do and you are either moving along with it and making some return on investment or you are losing money.

Reply

Blythesshrink's picture

Trader Dan

Firstly Andrew Macguire has never given a time table on the LBMA default, - but there's plenty of evidence that it's coming unless alchemy becomes a reality. I mean was Kenneth Hoffman lying too when he said on Bloomberg recently that the vaults in London are almost empty?

“You could go into a vault in London a couple of years ago. The vaults were packed to the rafters with gold, and the gold would trade from me to you to somebody else. You can walk into those vaults today and they are virtually empty."

As to backwardation, I'll take Antal Fekete's view on it over Norcini any day.  I mean honestly given Norcini or Antal Fekete, who would any neutral look to for an informed, intelligent opinion on gold backwardation?

http://www.professorfekete.com/

Norcini is arrogant, unprofessional and totally wrong to make statements like that.

abguy4's picture

EE brain-wash programming

I post this not only as a chance to look at Lauren Lyster, but also to illustrate how brainwashed we ALL are, in every conceivable way, before we even know it. At the beginning of this 3 min interview, Jim Rickards (the frkn EE shill that he is), drops this statement so fast it almost goes unnoticed, RE; Ukraine; "The US must be seen as doing something. That's why we are instituting economic sanctions". Well, except that I am hyper sensitive to EE brain-wash programming these daze. Does anyone think that the Russian press said; "The US just invaded Iraq, we must be seen as doing something", OR, "The US just invaded Libya, we must be seen as doing something"?

Or, repeat that for the other 15 countries we've invaded. Or, do you think the Chinese press said; "The US just invaded Yemen, we must be seen as doing something". Hell NO. But Lauren never even questioned him on that point - and I doubt anyone else in the MSM would have either. Our 'intervention' into EVERY country on Earth is now taken as a given - that's how brain-washed we are. And if they don't have a conflict we start it. Never forget the EE motto;

"Out of chaos - order". What Order?  - the NWO of course.

http://finance.yahoo.com/blogs/daily-ticker/russia-financial-warfare--unpredictable-140836266.html

Mr. Fix's picture

Could it happen?..................No chance!. . . ;>(

How (& Why) JPMorgan & COMEXShould Be Sued For Precious Metals Manipulation

Submitted by Tyler Durden on 03/22/2014 - 19:46

While every other asset class in the world has now been found to be subject to some form of manipulation (from LIBOR rates to FX fixes and from commodity warehousing to HFT equity front-running), the stakes in a COMEX silver/gold/copper manipulation lawsuit are staggering. Not only is market manipulation the most serious market crime possible, the markets that have been manipulated and the number of those injured are enormous. It is likely not an exaggeration to say that any finding that JPMorgan and the COMEX did manipulate prices as we contend could very well result in the highest damage awards in history. That’s no small thing considering the tens of billions of dollars that JPMorgan has coughed up recently for infractions in just about every line of their business. Our point is that no legal case could be potentially more lucrative or attention getting than this one. It is clear the CFTC will never act and so class-action lawsuits may just be the only way the data is du into deep enough to uncover the truth.Could 

DeaconBenjamin's picture

Thanks JY

Regarding the Chervonetz

20110630_chervonetz1923front_reducted.jp

It is my understanding that the RSFSR (which minted its own coinage through 1923) minted these in the early 1920s because the Europeans wouldn't accept Communist paper.  There were some things the Soviets wanted under the New Economic Plan that had to be imported.

I Run Bartertown's picture

Never Enough

Revealed: Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees

"Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees."

------------------

http://www.immigrationdirect.com/immigration-news/us-visas/tech-industry-giants-support-immigration-reform/

"The world's most influential technology leaders are raising their voices in support of immigration reform. Executives like Facebook's Mark Zuckerberg and Microsoft's Bill Gates are leading the fight to allow more immigrants with STEM (science, technology, engineering and math) skills to work and live in the United States."

-----------------------------------------------------------------

http://jutiagroup.com/20120921-10-companies-with-the-biggest-cash-stockpiles-in-america/

10 Companies with the Biggest Cash Stockpiles in America

2. Google (NYSE: GOOG)
Cash Balance: $44 billion

6. Cisco Systems (Nasdaq: MSFT)
Cash Balance: $56 billion

7. Microsoft (Nasdaq: CSCO)
Cash Balance: $73 billion

8. Apple (Nasdaq: AAPL)
Cash Balance: $117 billion

---------

For they have sown the wind, and they shall reap the whirlwind: it hath no stalk: the bud shall yield no meal: if so be it yield, the strangers shall swallow it up.

El Gordo's picture

MF

MF - I appreciate your efforts to explain the China gold transactions, but I'm still stupefied.  I'll try ask a couple of questions that you may understand better than I do:

1. Company in china borrows money in yuan. They have to pay Chinese interest rate.  ? - Who from?
2. They use this money to buy gold, and store this gold in a warehouse. ? Who do they buy from - the need USD to buy gold, no one will take yuan, except perhaps other Chinese?  They get a warrant showing their ownership of said gold. ?The gold in the warehouse is presumably pledged to secure the yuan loan, plus there should be some margin requirements in there for the borrower?  They do have the warrant, but wouldn't it be assigned to the original yuan lender, unless they started out with huge equity from somewhere?  There are some storage costs.
3. They use this warrant as collateral to take out a loan in say USD, with much lower interest rate.  ?At this point, they now have 2 loans against the same asset, namely the gold in the warehouse?
4. They hedge the price of gold changing by taking out a short position on the gold in the futures market. (The physical serves as the underlying long, making them net neutral.)  ?OK, they now have 2 loans and a short position all having a claim on the gold in the warehouse.
5. Chinese interest rate - USD interest = Gross Profit - storage and transport costs - hedging cost = Net profit.  ?Don't they presumably actually owe interest on both loans, not just a net position?
6. At this point it gets a bit fuzzy...but either the company uses this same warrant to take out another loan. OR. (more likely)...the company who now have possession of the warrant uses it to make a loan in USD with the warrant as collateral.
7. The warrant keeps switching hands and new loans keep being made on it. Each one hedges on the paper market with a short.

So. Several shorts are created for one underlying stack of gold, creating downwards pressure on the price.  ?Is this what we used to call "rehypocation?"  What happens when the music stops?  To quote Hans Solo, "I've got a bad feeling about this." But, obviously I still don't understand what's really going on.

Motley Fool's picture

El gordo

I shall try.

1. They initially borrow money from some Chinese bank. The interest rates there are much higher than in say the west. So the idea here is interest rate arbitrage, similar to the carry trade.

2. Credit standards are very lax in China. Much of this "carry trade' is done by businesses in other industries as additional means to generate income. I think the original loan is made against business capital, not the gold. Since the PBoC wants gold to come in they will easily swap yuan for dollars if you intend to import physical gold. Buying gold with yuan is not that big a deal. 

3. Nope. Just the one, for now.

4. Nope, one loan against other assets. One loan against the gold (a pile of cash). One pile of gold( a long). And one short position to hedge price movements.

5. Right. But don't forget the loans against the gold pile.

Think of it this way. They are transforming a loan in yuan at a high interest rate, to a loan in dollars at a low interest rate, with some neglible costs. They can use this money to now invest in high interest rate yuan bonds...but yes, if they just repeat this process once it would result in a small net loss. However, due to lack of regulatory oversight, they have managed to make multiple low interest loans on the single warrant, through a complicated process of obfuscation, netting them a big pile of cash that will be sufficient to generate income in excess of the interest owed. 

The crux of the issue, and moneymaking, is their ability to make multiple loans on the same assets. This is where the profits come from.

This is a bit more nefarious than rehypothecation, but it is similar yes. When the music stops....much pain commences for those who made the loans, and whoever controls the one gold pile comes out on top.

benque's picture

US Govt Assets

When the US Govt defaults on it's debt to the Federal Reserve, the Federal Reserve will foreclose on assets of the US Gov't.  Now, which assets, exactly, have been put up as collateral against that debt.

I suspect it could be found in the small print of the original Federal Reserve Act.

Edit:  Should have added - why is the FED buying so much US Gov't debt these days?  Will there be a sign put up soon, reading:  "USA - Under new management; Now open for business - firesale!"

dgstage's picture

Putin, Xi Jinping and Obama Are Tightening the Noose Around

Putin, Xi Jinping and Obama Are Tightening the Noose Around America’s Neck

http://thecommonsenseshow.com/2014/03/23/putin-xi-jinping-and-obama-are-tightening-the-noose-around-americas-neck/

SilverSurfers's picture

Can Anyone

explain why the "so-called" petro-dollar adds anything of real value to the FRN? You cant isolate your customers when selling fungible oil. There are many oil producers and consumers providing price discovery. Oil price and economy growth are interrelated.  You can convert fiat through global FX fiat convertibility in micro-seconds of fungible fiat currencies. Sorry for being a slow boat, but I just cant see the petro-dollar as being significant IN ANY WAY. Help!!

The noose is tightening? YIKES!!! OK, hang man it is. (hint, its a four letter word)

Thank you kindly. "If countries need to use dollars to buy oil, it creates an artificial demand for the dollar" Yeah, I have heard that before, but Im not buying it.

Saudies sell oil to germany, germany converts Euro to $ in microseconds. Saudies take them $ and buys gold, or converts into euro's and buys german cars, or what ever. That is a FIFO, without amplification. But yes, there would a time storage in dollars, but it is very transitory, of no lasting effect. THAT IS NOT a significant demand for dollars. However, where the significance comes in is through HOLDING dollars for a significant time period. If the Chinese, or Saudies, or who ever, takes them $ and holds them as RESERVES, then ok, but that is a reserve holding, not a transitory conversion from one fiat to another.

Hear ye, Hear Ye, China is holding 1.2T$ in forex reserves to support the petro-dollar.

Hear ye, Hear Ye, The US, trying like heck to debase the dollar through QE and Zirp, is absolutely bent on propping up the dollar through the "petro-dollar", the epi center of US foreign policy.

I Run Bartertown's picture

petrodollar

If countries need to use dollars to buy oil, it creates an artificial demand for the dollar.

Like if you go to Chucky Cheese. You buy tokens you wouldn't otherwise need or want, because that's the only way you are allowed to play. If you insist on paying another way, security will escort you out.

Dagney Taggart's picture

I ate US Dollars once

and almost died from cocaine consumption. Gives new meaning to the value of the money being integrated into the money itself.

Mr. Fix's picture

@ Dagney Taggart

That's why we have money laundering.devil

Didn't your mommy tell you to wash your food before eating it?wink

Unfortunately, once you wash your money off, its intrinsic value really does drop to zero.angry

Dagney Taggart's picture

@benque

I would pay to see the American citizen blowback if the Fed tried to take possession of said assets. Of course this depends on their ability to remain reasonably well-armed.

I read an interesting story a while back from the Great Depression where farmers lynched the big city carpetbaggers moving in to buy assets for pennies. The farmers bought each other's assets for pennies instead and handed them back to the original owner, financial coup averted, and went right back to work. The same would probably happen again.

Dagney Taggart's picture

@Fool

So which confirmation bias is stronger? The one shared by the 0.000000001% of humanity that resides here and ZH? Or the one shared by you and the other 99.999999999% of humanity?

Math is our friend.

SS121's picture

The "confusing" China Gold Story...

It's supposed to be confusing.  Why?

Because as long as people are scratching their heads and trying to figure out how all those charts and catchy terms fit together...  they are believing the original story. (even though the entire story is total BS)

Just like with the silver and gold price index 'charts'...

"As long as people believe the charts are MANIPULATED, they will never suspect they are FAKE"  -London Bros. 

or...

"As long as people think i'm using inside info to make these profits, they will never suspect i'm running a ponzi" -Bernie

Smoke, mirrors, a confusing story, then it's "off you go now poor confused masses"...  

It's how the entire World Fiat Currency System operates.

Here's the real super-simple answer to the China/Gold question...

Q: How did China import  X zillion tons of gold without raising the gold price??

A: They didn't.  And the privately owned gold chart is a fake.

Why would something that didn't happen affect a software driven chart? It wouldn't, and it didn't.   (Occam's Razor?)

--

Only Silver and Gold are Money,  Keep Stackin and keep all the fantasy WFCS theater in context.

And get some popcorn ready for their upcoming Global Econ/Currency crisis event, where they will be revaluing the metals charts and trying to implement a new world currency.  All under the smoke screen cover of ChinaGoldPetroDollarMarketManipulationBitcoin Magic.

SS121's picture

The "confusing" China Gold Story...

It's supposed to be confusing.  Why?

Because as long as people are scratching their heads and trying to figure out how all those charts and catchy terms fit together...  they are believing the original story. (even though the entire story is total BS)

Just like with the silver and gold price index 'charts'...

"As long as people believe the charts are MANIPULATED, they will never suspect they are FAKE"  -London Bros. 

or...

"As long as people think i'm using inside info to make these profits, they will never suspect i'm running a ponzi" -Bernie

Smoke, mirrors, a confusing story, then it's "off you go now poor confused masses"...  

It's how the entire World Fiat Currency System operates.

Here's the real super-simple answer to the China/Gold question...

Q: How did China import  X zillion tons of gold without raising the gold price??

A: They didn't.  And the privately owned gold chart is a fake.

Why would something that didn't happen affect a software driven chart? It wouldn't, and it didn't.   (Occam's Razor?)

--

Only Silver and Gold are Money,  Keep Stackin and keep all the fantasy WFCS theater in context.

And get some popcorn ready for their upcoming Global Econ/Currency crisis event, where they will be revaluing the metals charts and trying to implement a new world currency.  All under the smoke screen cover of ChinaGoldPetroDollarMarketManipulationBitcoin Magic.

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