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-author-golden-revolution

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

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  366 Comments

ag1969
Jan 16, 2013 - 10:03am

Thoughts

I talked a friend into buying 300 ASE's this past weekend. He called me Monday for advice on how and where to purchase them. I told him on Monday that it was a bad day to buy and he should wait for a dip under 30. Did I give him good advice or should he pull the trigger now?

tpbeta
Jan 16, 2013 - 10:03am

@DayStar

The Tylers pumped up "the distribution of German gold...is about to change" into "German gold, all official 3,396 tons of it, is about to be moved." They were the source of that error - nobody else. Nothing changed in the story except the factual inaccuracy they added. It's absurd to then blame the Bundesbank for backtracking, as some people are doing.

If folk want to talk about lies, it seems perverse to ignore the most blatant inaccuracy in front of our nose.


Jan 16, 2013 - 10:06am

ag1969

I have been waiting for a dip into the low 30s the past couple of days. I am starting to wonder with this morning's relative strength.

ag1969
Jan 16, 2013 - 10:14am

Doc J

I have been a little stressed since Monday. I was kind of proud of myself that I was able to talk this guy into silver at a wake of all places, and then when he, much to my surprise, followed up with me on Monday, I tell him to wait. If we get a black swan and a moonshot instead of the more than likely criminal smashdown, I will feel like a jerk.

Byzantium
Jan 16, 2013 - 10:15am

@tpbeta & Ag1969

@ tpbeta, I don't think that the popular view here is that the Germans did a U turn, but rather that the facts once they were known were less profound than we had hoped. Everybody knew that we were working on a leak, and had to wait for confirmation. I too am grateful to the Tylers.

Ag1969; you nailed it; it is a charade aimed at mollifying the German voter.

8 years to repatriate from France, could it be more ridiculous?

Hopefully, rather than mollifying the German voters, it will insult and enrage them.

And I agree with the comments above, about whose gold this is. The German politicians and Government should just tell the Bundesbank to f*ck off; the gold is not theirs, it has nothing to do with them, and they will not be involved in the timing and manner of its repatriation, nor have any involvement with the gold thereafter. It should be the same in every country. Shouldn't be a plaything for politicians either; a more trustworthy custodian needs to be found.

tpbeta
Jan 16, 2013 - 10:17am

@Byzantium

But the Tylers altered the info from their source.


Jan 16, 2013 - 10:17am
achmachat
Jan 16, 2013 - 10:19am

ag1969

why bother risking being too late... all that for a best case scenario of one dollar difference per ASE?

So what if the prices fall a dollar after he bought 300 ASE? Where do you think the price will be in one year? In two years? etc.

rpboxster
Jan 16, 2013 - 10:22am

@ Urban Roman: TX Precious Metals

I've dealt with TPM several times. LOVE THEM! Stopped using Tulving. Service at TPM is among the best of any type of business I have ever dealt with. Do not hesitate to deal with TPM. Packaging, tracking, speed and live customer service or questions are all top notch. Prices are very good too, IMHO, especially when they have coupons or specials. Selection is limited, but they carry the things I buy.

ag1969
Jan 16, 2013 - 10:23am

Oh, I hear you Achamat

But you know how the newbies can be after they buy and then experience the volatility. Maybe I will just tell him to buy, and if it drops a buck, go to tfmetalsreport.com and blame some guy named Turd. Problem solved!

rpboxster
Jan 16, 2013 - 10:25am

"By 2020"

doesn't mean that Germany won't get the gold in 2013. Everyone is assuming the long date means that it will be an 8 year process. It could be done in a month and still happen "by 2020". It was only put there to calm people down.

Byzantium
Jan 16, 2013 - 10:25am

@tpbeta

They provided links to the original, and advised that their translation was a matter of best endeavours. If they set out to deceive, then what was in it for them? They were 24 hrs away from being outed, and sooner if a German speaking reader who could be bothered, took the time.

I don't believe that any error was intentional, and the whole saga anyway reminds us never to take anything at face value.

Zoltan
Jan 16, 2013 - 10:29am

Petition Update

The counter shows 5,640 signatures now on the way to 25,000? Read elsewhere that 100,000 would now be required but the ticker isn't updated yet. Expect it to get bumped up if the count gets anywhere near requiring them to do an audit.

https://petitions.whitehouse.gov/petition/perform-assayed-public-audit-all-treasurys-claimed-8100-tons-gold-and-net-swaps-loans-sales/rGyFTLwD

Z


Jan 16, 2013 - 10:29am

Ag1969

Excellent analysis. I completely agree. I was hoping to weigh in sooner, but work is insane right now. Le's see how this plays out.

Some constants we know, that when combined, compel your conclusion:

(1) Central Bankers admit lying in the past;

(2) International financial scandals have permeated into the highest levels across all countries, sectors and institutions (LIBOR, HSBC, Bernie Madoff, et al.);

(3) Bernanke, when questioned, said gold was a "tradition"; yet, could not explain why the central banksters store gold for international settlement even though he says gold is not money;

(4) FDR accomplished gold confiscation during a time of crisis, proving beyond dispute the essential, valuable role of gold as money;

(5) The stated logic of Germany's gold repatriation fails (France and Germany share a common currency, the Euro, hence Germany need not store gold in France; so why was not the gold repatriated a decade ago when the Euro was launched? By that logic, then, something must have changed in the past decade so as to warrant Germany demanding its gold back, so, what changed?);

(6) The only thing that makes sense is that the politicians in Germany want to hold onto power so they must placate their subject by paying lip service re gold repatriation, and then in reality te politicians simply make it look, on paper, like gold is coming back to Germany, when in realit it is just a small shuffle of the deck;

(7) This Mali situation smells to hig heavens, time will tell what the real story is, and finally

(8) Hillary Clinton has yet to provide sworn testimony about Benghazi, which to me is the missing link in a major part of this whole story (gun running to Syrian insurgents, Libyan gold, now Mali gold, what is next?).

There you have it.


Jan 16, 2013 - 10:29am

Ag1969

Excellent analysis. I completely agree. I was hoping to weigh in sooner, but work is insane right now. Le's see how this plays out.

Some constants we know, that when combined, compel your conclusion:

(1) Central Bankers admit lying in the past;

(2) International financial scandals have permeated into the highest levels across all countries, sectors and institutions (LIBOR, HSBC, Bernie Madoff, et al.);

(3) Bernanke, when questioned, said gold was a "tradition"; yet, could not explain why the central banksters store gold for international settlement even though he says gold is not money;

(4) FDR accomplished gold confiscation during a time of crisis, proving beyond dispute the essential, valuable role of gold as money;

(5) The stated logic of Germany's gold repatriation fails (France and Germany share a common currency, the Euro, hence Germany need not store gold in France; so why was not the gold repatriated a decade ago when the Euro was launched? By that logic, then, something must have changed in the past decade so as to warrant Germany demanding its gold back, so, what changed?);

(6) The only thing that makes sense is that the politicians in Germany want to hold onto power so they must placate their subject by paying lip service re gold repatriation, and then in reality te politicians simply make it look, on paper, like gold is coming back to Germany, when in realit it is just a small shuffle of the deck;

(7) This Mali situation smells to hig heavens, time will tell what the real story is, and finally

(8) Hillary Clinton has yet to provide sworn testimony about Benghazi, which to me is the missing link in a major part of this whole story (gun running to Syrian insurgents, Libyan gold, now Mali gold, what is next?).

There you have it.

tpbeta
Jan 16, 2013 - 10:30am

@Byzantium

I agree it wasn't likely intentionally malicious. I expect it was a sloppy over-writing to make it a better story for their readers - like poor journalists do all the time.

Byzantium
Jan 16, 2013 - 10:31am

Reply to self

"a more trustworthy custodian needs to be found for the national gold."

Sorry for my lapse into La-La land; I'm back to reality now.

We all need to be our own central bank. Every state office and official reports directly or indirectly to the banking cartel.

Double Bogey
Jan 16, 2013 - 10:33am

Ag1969

You've probably explained the volatility in silver, have him buy 1/2 now, and maybe pick up some more later. I'd also tell him to buy a set amount every month, or every 2 weeks.

Byzantium
Jan 16, 2013 - 10:38am

@ tpbeta

what resources do you think that the ZH crew have?

On Sat Nov 5th 2011, they ran a story that the CME was about to hike margins on gold and silver. I sold a big chunk of metal on Bullionvault immediately, in anticipation of a price drop (which didn't come). The source of the info was a CME communication sent out on early Friday evening, the wording of which was misleading, and the CME subsequently apologised.

Moral of tale; ZH is great for identifying smoke. Do your own due diligence and proceed with caution. I have no issue with ZH; I want to be told when there is smoke. Even in the absence of facts, I know it is time to drop the whisky bottle, and get the rifle & binoculars out (figuratively speaking).

ZH has changed my world for the better, warts and all.

ancientmoney
Jan 16, 2013 - 10:51am

Wyoming steps on Obama's gun law toes . . .

Wyoming is the first state in America to consider a “just say no” approach to proposed federal gun bans.

A bill has been introduced in the state congress that would penalize any federal agent attempting to enforce an assault weapons ban or a limit on magazine capacities. The bill calls for a punishment of 1-5 years in prison and a $5000 fine.

According to The Daily Caller,

“it also contains broad language prohibiting any “public servant … or dealer selling any firearm in this state” from enforcing “any act, law, statute, rule or regulation of the United States government relating to a personal firearm, firearm accessory or ammunition that is owned or manufactured commercially or privately in Wyoming and that remains exclusively within the borders of Wyoming.””

PM Stackin' Fool
Jan 16, 2013 - 10:52am

2020??

2020 is all I need to hear! They don't Fucking have the Gold (sorry for the explicit). This is what needs to be spread to the masses...will people finally wake up?

Larry
Jan 16, 2013 - 10:55am

@Larry: You Have To Lie

Luxembourg Prime Minister Jean-Claude Juncker, the man who is the head of the Eurogroup council of euro-zone finance ministers.

Mr. Juncker says he has “had to lie” and, speaking about touchy economic topics, “When it becomes serious, you have to lie.”

https://blogs.wsj.com/brussels/2011/05/09/luxembourg-lies-on-secret-meet...

RaRaRasputin
Jan 16, 2013 - 10:55am

German gold repatriation

Hey all

Well this is quite a news story and made it to BBC Radio 4's Today programme 8.15am news this morning and I almost stacked the car!!

It's running in the Torygraph as well as this article:

Gold price on the rise: How to invest in bullion

The price of gold was on the rise today after Germany’s decision to repatriate its bullion. We explain how you can profit.

https://www.telegraph.co.uk/finance/personalfinance/investing/gold/98056...

As to Turd's question about why all from France? Maybe Frau Merkel is upset with Monsieur Hollande and wanted to make a point?

Ambrose E-P's take is this:

The Bundesbank says there is little reason to keep gold in Paris now that Germany is reunified and at peace. The bank will retain some reserves in London and New York for trading and liquidity purposes.

https://www.telegraph.co.uk/finance/personalfinance/investing/gold/98044...

My tin foil hat suggestion: they want it repatriated to back a return of the deutschemark when they leave the Euro to compete against the new superpower gold backed currency the renminbi ;)

RaRa

tpbeta
Jan 16, 2013 - 11:02am

@Byzantium

I like Zerohedge too, but in this case it was them that introduced the untrue element, in order to make a better story. We shouldn't just give them a free pass because we think they're on our side. In British journalism there's a saying - "comment is free, but facts are sacred".

old tradesman
Jan 16, 2013 - 11:04am

whats next gold and silver

2nd Amendment ALERT!!! I just called Bank of America... you have to hear this!
ancientmoney tmosley
Jan 16, 2013 - 11:09am

@tmosley . . . silver vs. gold

In the earlier post, you said to use silver to buy gold, because gold will retain its new, higher values after reset, but silver won't.

Then, in the last post, you said:

"Ancientmoney:

You haven't been reading me for very long. "Fizzle" is relative. I think silver will briefly go to 10+x the value of gold, then crash back to 2-4x the value of gold, then steadily decline to a high fraction of gold. That is with TODAY'S pattern of production and consumption continuing. Throw in a graphene electronics revolution, and the same thing happens, only the long term price target shifts from half the value of gold back to the historical 1/16th the value of gold, as silver resumes its traditional role of being "just" money. No different that gold."

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

Since silver is now 1/55th the value of gold, and you assume at worst it goes to 1/16th the value of gold, how does it make sense to use silver to buy gold? I would think it would be more wise to use gold to buy silver, given your last post . . .

usk
Jan 16, 2013 - 11:10am

Is it about Gold or about France?

I am wondering if the last Germans' move has something to do with the capital flight occurring in France right now. Would you keep your gold a country which is about to collapse?

Fresh data from the Banque de France show a sudden rise in outflows in October and November, registered in the so-called Target2 payments system of the European Central Bank.

Simon Ward from Henderson Global Investors said the net loss of funds was €53bn (£43.8bn) over the two months, roughly the period when Mr. Holland unveiled a string of tax rises and suffered a collapse in relations with French business.

A key gauge of the French money supply -- six-month real M1 -- has been contracting at an accelerating rate ever since Mr. Holland's election in May.

It has fallen to levels last seen in the depths of the crisis in 2008. France's money data is now flashing more serious warnings than numbers in Italy or Spain. "Taken together, it is clear that there has been a major loss of confidence and funds have been pulling money out of the country," said Mr. Ward.

Mudsharkbytes
Jan 16, 2013 - 11:11am

@Ag1969

If your friend doesn't have any PM's at all, then he/she shouldn't sit around waiting for the price to drop a buck before buying some if they're interested.

Personally, after the awful experience I had talking my son into going all in silver the last week of April 2011, I no longer try to talk anybody into buying PM's. That was too serious a personal burn for me to risk taking again.

However, I don't think the same thing happening is at all likely right now, knock on wood.

ancientmoney
Jan 16, 2013 - 11:22am

Texas also writing anti-gun law language . . .

by Mike Adams, Natural News:

Texas state Rep. Steve Toth has just announced his intention to introduce a “Firearms Protection Act” into law which would make it a felony crime for anyone, including federal agents, to enforce Obama’s anticipated gun control executive orders, including orders that attempt to limit the size of gun magazines.

“The Firearms Protection Act bill would make any federal law banning semi-automatic firearms or limiting the size of gun magazines unenforceable within the state’s boundaries. Anyone trying to enforce a federal gun ban could face felony charges under the proposal,” reads Steve Toth’s website announcement.

“We can no longer depend on the Federal Government and this Administration to uphold a Constitution that they no longer believe in.”

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

I love that last sentence. Go, Texans!

thurd aye
Jan 16, 2013 - 11:26am

Food stamps next is it?

JP Morgan has halved chief executive Jamie Dimon's pay to $11.5m (£7.2m) because he had "ultimate responsibility" for a multi-billion trading loss racked up in London.

The US bank said that Mr Dimon received $1.5m in salary and $10m in shares for 2012, down from the $23m he secured in 2011. Mr Dimon stunned Wall Street last May when disclosing that the bank's chief investment office (CIO), a division responsible for safely investing surplus deposits, had lost more than $6bn in botched trades in the derivatives market.

The 56 year-old, who is the highest-profile banker on Wall Street, "bears ultimate responsibility for the failures that led to the losses in the CIO and has accepted responsibility for such failures", the bank said.

https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9806421...

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