China, Gold and Reserve Currencies

366
Tue, Jan 15, 2013 - 9:33am

Our pal, John Butler, has alerted us to this very interesting new report from the OMFIF (Official Monetary and Financial Institutions Forum). The report discusses the likelihood/probability that, one day soon, the world will be offered an additional "reserve currency", the Chinese renminbi.

Many of you will recall the podcast I had with John Butler back in May. If you need a refresher, here's a link. Obviously, the material covered is still relevant. https://www.tfmetalsreport.com/podcast/3835/tfmr-podcast-22-john-butler-...

This new report covers some material that is near and dear to our hearts here in Turdville. However, since it was compiled for the OMFIF by the World Gold Council, some of its conclusions are debatable. Namely, the idea that a gold standard would be nearly impossible to resume and that fiat currency will likely continue to rule the day. Regardless, as John explained to me in the email below, once the "Golden Genie" is out of the bottle, it's going to be difficult for fiat currencies to compete. And why is China accumulating all of that gold, anyway? (800 metric tonnes in 2012 alone and that's just the amount they voluntarily reported!)

Hey there, Turd.
Happy New Year to you.
Thanks for your note. I consider the OMFIF report significant given the context. On it's own it would mean little as the OMFIF is strictly an advisory and discussion group. But when you consider the rapid rate of gold accumulation by China, the other BRICs and various other countries and the BRICs stated aim of reducing the use of the dollar as global reserves, well then the OMFIF report, as I argue in my brief comment here: https://www.financialsense.com/contributors/john-butler/breaking-news-om... , represents a new, unfolding working arrangement for what the next major policy steps are likely to be. As my book argues, once the golden 'genie' is out of the bottle I doubt that it will be easily controlled and any attempt by currencies to 'share the stage' with gold will be short-lived. Eventually, gold will assume the dominant global reserve position and some sort of 'gold standard' will emerge. It may happen quickly in a crisis or it may unfold over a longer period of time in a more controlled fashion. I don't have the answer to that although something tells me that the occasional crisis will be unavoidable.
Indeed, a crisis may be brewing just now as I read that the Bundesbank has decided to repatriate Germany's gold: https://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-wil... But is the gold available? Will the US, the UK and France deliver? On what time frame? This one will be interesting to watch; we're not talking about Venezuela or Ecuador here, we're talking Germany.
2013 is off to an exciting start!
Best,
John

Here's some additional background before you get started. First, here's a link to the OMFIF site:

https://www.omfif.org/

And if you're not familiar with the WGC, here's a link to their site:

https://www.gold.org/

and a video from their site discussing the report:

https://www.gold.org/government_affairs/research/

Finally, here's the report link in pdf format so that you can print a hard copy if so desired:

https://www.omfif.org/downloads/Gold,%20the%20renminbi%20and%20the%20multi-currency%20reserve%20system.pdf

And here it is in scribd. Please take the time to read and comprehend this report.

TF

Gold, the Renminbi & Reserve Currencies by Turd Ferguson

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turd [at] tfmetalsreport [dot] com ()

  366 Comments

Byzantium
Jan 15, 2013 - 6:13pm

Elaborate scam?

Regarding repatriation of the German gold, there is one scenario that troubles me (triggered by some insightful comments on the ZH article).

The starting position is that Western central banks are all in cahoots with each other, and have primary allegiance to each other and their fiat construct, rather than to the host country. (If you don't agree, then skip the rest of this post).

The scenario is as follows: To restore credibility to the claimed physical gold of NY & London, Germany will ask for most of its gold to be repatriated, and to the amazement of the world, and not least the blogosphere, will receive it without delay or incident. The MSM will claim that the blogosphere suspicions have been slain, and trust in the system is restored.

What is required to pull this off, is to nobble the assay team in Germany, so that they sign off the tungsten bars as authentic gold. Then it can sit unaudited for another 50 yrs.

The extent of this treason on the German nation would be epic, since in signing off on what they had received, would bring closure to the French & US liability to Germany.

I know it sounds far fetched; but I don't think that all is as it seems. Germany's CB to my mind, were not under that much pressure, that they would have done such a U turn.

Byzantium
Jan 15, 2013 - 6:20pm

Elaborate scam, addendum.

Too many things could go wrong; they'd have to be desperate to try a stunt like that.

Yes, desperate.

wonderer
Jan 15, 2013 - 6:20pm

anyone want to help a grandma decide?

Sold a nice table on craig's list, and have a little bit of cash to buy a roll for my tiny stack. What makes the most sense - a roll of dimes, quarters, halves, etc. I think I have enough for a roll from apmex.

Bollocks
Jan 15, 2013 - 6:25pm

@ Byzantium re: Elaborate scam?

Those very thoughts have been churning away in my mind ever since I heard about the German gold story and started to put things together myself.

Yes, very well thought out. I think there's a good deal of sense there, and perhaps not far-fetched at all.

The Fed made huge bailout "loans" to European banks after the sub-prime "crisis" (we know it was all planned in advance) . They are clearly all closely-linked. What you say fits exactly with what I've been thinking.

I guess we'll see how this pans out over the next few months, eh?

meegoreng1
Jan 15, 2013 - 6:27pm

@ Byzantium

Seems like the rabbit hole goes deeper.

enkidu
Jan 15, 2013 - 6:28pm

German Gold

Personally I just think the fed will give the gold back. Welcome to the next stage of this bull!

Dyna mo hum
Jan 15, 2013 - 6:28pm

Wonderer

I recommend this guy. Never a problem yet. If you like 40% try this guy.....https://www.ebay.com/itm/300847207842?ssPageName=STRK:MEWAX:IT&_trksid=p...

Pegasus
Jan 15, 2013 - 6:29pm

Report from LCS in Oregon

Just returned from my local coin shop. They have always had 10 oz. silver bars in the past 5 years since I started going there. Not today. Not even any silver rounds or other bullion types. Completely out of 90% as well. The owner told me silver has been flying out the door. He said he still had some eagles at $4.00 over spot, which I initially declined. After grocery shopping, I went back to see if any bullion had came in, and he had one 1 oz. silver round that came in while I was gone. I decided to go ahead and purchase 10 of the silver eagles for $347. ($34.70 ea.) which was a little bit of a discount from what he originally quoted me. He said the 2013 eagles were still a few weeks out.

Folks, this looks like a shortage to me. I've never seen my coin shop this bereft of silver before. Keep stacking everyone, our day (year) in the sun is not far off.

Rui
Jan 15, 2013 - 6:29pm

Santa is basically a freegolder

He does know a lot about gold but his belief in another paper game like freegold to solve the current crisis shows he's not quite clear about what the right solution is.

Bollocks
Jan 15, 2013 - 6:30pm

@Byzantium

"they'd have to be desperate to try a stunt like that."

Just seen that second post of yours.

Well, these are desperate times we're living in, aren't they? The USA - 16.5 trillion debt and rising. All of Europe in huge fraudulently-created debts too.

The banks are desperate to keep it going as long as possible before it all collapses. The longer you can keep the ponzi-scheme alive, the more you can loot.

So, makes perfect sense to me.

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