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

Indenture
Jan 16, 2013 - 11:27am

philpat: "Certainly. I stand

philpat: "Certainly. I stand by my comment in its entirety. The return to a Gold standard means a return to currency having value, as measured by the Gold that backs it. So that 16 Trillion debt, and counting, might be a small problem until Gold gets revalued to, shall we say, $20K per ounce for starters. My point being that you can't simply back all existing fiat by Gold at existing values because, indeed, there is more fiat than the Gold to back it." This I understand. All existing fiat cannot be backed by gold at existing values, which has nothing to do with the quantity of gold in the world, it only has to do with the price of gold. So it sounds like gold can be repriced. The problem I am having, and it has been consistent with my writing, is why silver will go along for the ride. If a currency's value is determined by gold what will determine silver's value?

ancientmoney
Jan 16, 2013 - 11:27am

U.S. to help France steal Mali gold, er, stop Al Queda . . .

by Craig Whitlock, 21st Century Wire:

The Pentagon may become involved in military operations against Islamist rebels in the West African country of Mali by providing airlift and “limited logistical support” to French troops fighting there, Defense Secretary Leon E. Panetta said Monday.
.
“We have a responsibility to go after al-Qaeda wherever they are,” Panetta told reporters as he began a weeklong trip to Europe. “We’re going after them in Yemen and Somalia, and we have a responsibility to make sure that al-Qaeda does not establish a base for operations in North Africa, in Mali.”U.S. defense officials said they were reviewing requests for assistance from France, which sent troops to Mali on Friday in an urgent attempt to prevent Islamist rebels and other guerrillas from overrunning the ragtag Malian army.

indosil
Jan 16, 2013 - 11:27am

Gold Lagging

Gold seems to be lagging....Silver seems much more stronger....

ancientmoney thurd aye
Jan 16, 2013 - 11:32am

@thurd aye . . . I feel badly . . . let's take up a collection

for poor Jamie Dimon. He's not even in the running (yet) for U.S. Treasury Sec.

Mudsharkbytes
Jan 16, 2013 - 11:35am

What the hell are they thinking?

I know gun control discussions can irk some on the home page, but I just finished watching that video about Bank of America stopping payments on ammo purchases and it makes me think what the hell is going through their heads?

I don't know what the actual percentages are of people in this country who are really okay with gun control, but reading comments made on articles posted online from regular news sources gives me the impression a significant majority of people aren't really behind gun control at all yet, so why are companies like Wal-Mart and Bank of America going out of their way to piss off their customers? These companies are ultimately only interested in their bottom line so they must feel confident this isn't going to cost them any business.

This scared the bejezus out of me and I'm not even a gun enthusiast - I have one shotgun for home protection and that's it. With all this craziness, I'm thinking I better get a few more thought quickly.

Seems to me TPTB are going to an awful lot of trouble to anger people who are armed and intend to stay that way. Doesn't bode well.

Urban Roman
Jan 16, 2013 - 11:39am

Poor Jamie

... having to pony up that $6B to make up for the trading losses ...
What? He still gets a bonus? Get a rope!

Ancientmoney, the star on that AF Logistics badge looks like it is on Caracas. Just noticed that.

And a question for Turd's Army: the front page shows an advert stating that it has made $70K since last year. Is that per-client, or is the $70K divvied up among the dozens (hundreds?) of participants?

DayStar tpbeta
Jan 16, 2013 - 11:42am

RE: Zero Hedge Report on Germany's Gold

TPBeta, you seized upon a portion of the story that simply stated how the German gold is currently allocated,

"the distribution of German gold, of which 45% is held in New York, 13% in London, 11% in Paris and 31% in Frankfurt, is about to change."

That statement does not speak of the amounts to be retrieved. If we look at the article at Handelsblatt, it did not have a lot of detail https://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-will-deutsches-gold-zurueckholen/v_detail_tab_print/7629600.html

but it did say, "Now, the gold from New York and Paris to be retrieved." From reading that statement, it is a fair conclusion to state what Zero Hedge reported. I think it is unfair to accuse ZH of lying based upon what was in the Handlesblatt article.

DayStar

The Green Manalishi
Jan 16, 2013 - 11:44am

German Gold Repatriation

Don't get this. If you want the Gold in your country, just get it now. Why wait - it's yours after all. Where is that ruthless German Efficiency?

What's the problem?

ancientmoney
Jan 16, 2013 - 11:46am

From GATA site, Chris Powell re German repatriation:

Dear Friend of GATA and Gold:

The Deutsche Bundesbank's plan announced today to repatriate some of Germany's gold reserves from the Federal Reserve Bank of New York is so incomplete and slow as to increase, not diminish, doubt that all the gold is really available.

Venezuela last year managed to repatriate all its gold from the Bank of England in a matter of months, but apparently the Bundesbank will need seven years to retrieve only a small fraction of its gold from the New York Fed.

Bundesbank board member Carl-Ludwig Thiele's comment today, defending such a minimal repatriation, seems silly. "If I hold gold in my own vaults, I have to check it myself," Thiele said, according to the Reuters story appended here. So, Herr Thiele, if you keep it somewhere else you don't have to check it?

Appended are the Reuters story on the Bundesbank's announcement, the full text of the Bundesbank's statement, and an incisive response from Peter Boehringer on behalf of Germany's Repatriate Our Gold campaign and the German Precious Metals Association, who notes the need for a full audit of Germany's gold that guards against impairment of the reserves through leases and swaps.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Urban Roman
Jan 16, 2013 - 11:46am

About that central-bank Au distribution

Why doesn't the NY Fed have half of its gold on deposit in, say, Paris?

I mean, Paris would take good care of it, and you never know when someone will come and knock down the building you have it in in NY.

benque
Jan 16, 2013 - 11:47am

Graphene woes

So there I am giving the old Norton an overhaul when I hear about this hi-tech graphene stuff. Well now, I've got to make a new wiring harness......hell, why not give it a try.

12 years later: Finally figuered out how to solder the damn stuff, and make a harness. Now all installed, fire up the old beast (2 kicks.LOL...I am good with Nortons!), and off we go for a test ride. First bump in the road...dead! No juice!! Whats all that black powder under the bike? Oh yeah, graphite is brittle.

Now where did I leave my copper wire and silver solder?

gdog ag1969
Jan 16, 2013 - 11:50am

@ ag1969

I'd say pull the trigger now, better safe than sorry. I'm sure when he needs the silver most, he won't be looking back thinking about the small amount of fiat he could have saved. Just my two rupees for what it's worth. ;-)

BagOfGold
Jan 16, 2013 - 11:51am

Poor Jamie...

He certainly will have a hard time trying to live off half of his paycheck!...Alas...poor Jamie...what will he do?!?...

Bag Of Gold
tmosley ancientmoney
Jan 16, 2013 - 11:52am

Ancientmoney: You buy silver

Ancientmoney:

You buy silver NOW, and use silver to buy gold LATER.

If you do it right, you should be able to turn an ounce of silver into five ounces of gold, if you silver cost average into gold during the panic.

I own practically no gold.

erewenguy TF
Jan 16, 2013 - 11:57am

Bruno Mars

Bruno Mars -

70's music for a 70's economy - it all comes around again

tmosley
Jan 16, 2013 - 11:59am

Benque: Graphene is as

Benque:

Graphene is as different from graphite as diamond is.

Suggest you rise above denial and accept the fact that things change before they leave you behind. No-one ever got rich by clinging to the past. Lots of people got mega-rich by seeing and understanding what was coming down the road while understanding the current situation as well.

Bollocks
Jan 16, 2013 - 11:59am
ancientmoney tmosley
Jan 16, 2013 - 12:00pm

@tmosley . . . thanks for clarification

I feel uncomfortable owning just one or the other, so have both.

I sure like the idea of silver at 10x gold, though! Hope like hell it happens in my remaining lifetime, or at least those of my kids . . . that would be a good time to switch at least a sizeable amount of silver to gold, I think.

Stock_Canines
Jan 16, 2013 - 12:02pm

@tmosley

"you should be able to turn an ounce of silver into five ounces of gold" - so you think silver at some point will be worth 5X gold?! Are you high. What's your price forecast? Silver 10,000 and gold at 2,000? This site just gets crazier and crazier . . .

Are any of us surprised the whole German repatriation of gold story was going to turn out to be a non-event on the market price of the metals? This idea that some market catalyst is going to cause the metals to leap in price by 30, 40, 100 percent is the stuff of fairy tales. Gold and silver will grind higher as long as the fiscal and debt problems remain in focus, but the rise will be orderly.

ivars
Jan 16, 2013 - 12:03pm

I think, Germans are just

I think, Germans are just putting pressure on France in Europe game, as well as on others whom they address with these possible demands . Chess , not hysteria. Countries with economic power use it to leverage their position as post crisis cooperation starts to change to cooperation within blocs, countries with military leverage use that. In case of opposite strengths, they try to neutralize military power by economic, and vice versa. Just the beginning, but thought out many steps ahead.

Nation states are becoming to too weak to withstand corporate sovereigns. Regional blocs are just the right size to match the capabilities of corporates. Or even weaken them if needed - think Japan plus USA vs. Toyota. The banks with CBs network are the ones with strongest positions, as are military and perhaps energy companies. They dictate the regional affiliations and antagonisms states are moving into.

tpbeta
Jan 16, 2013 - 12:09pm

@Daystar

Well we'll have to agree to disagree. I don't read the original as indicating an amount. For me that was made up by Zerohedge.

SteveW
Jan 16, 2013 - 12:17pm

Something of a deal

Well now we have the details and the NY Fed is said to be sending 37.5 tons a year for 8 years instead of 50 tons a year for 3 years. Guess this was the behind the scenes arrangement.

"Why all of the gold from France and none of the gold from England. And why just 25% of the gold from the U.S.

And why take 8 years to get it all from France? It's just 374 tonnes."

The cover story is that London and New York are the major financial centres and they need gold there for trade settlement? The reality is London has no gold, Germany is near the end of the line of creditors while the Fed said you can have 300 tons and no more? Eight years for both France and New York so they can assemble the shipment from current supplies. At 674 tonnes total its around 25-30% of global annual production (excluding China).

tmosley Stock_Canines
Jan 16, 2013 - 12:42pm

Stock_Canines: Thanks for the

Stock_Canines:

Thanks for the arrogance. It reveals much of your character.

I have been calling for an industrial panic after silver stocks are revealed to be completely consumed at these fraudulent prices since before this site was founded.

Industrial users demand for silver is inelastic, and an industrial panic will trigger a mania, which can easily cause silver to go to unimaginable prices. There is much less silver above ground today than gold, even by official estimates. If and when there is a run on it, it will disappear in a flash, and the users will be forced to bid it up to rip the last bits from private hands even as they buy up future mine production.

And the dollar price is of no consequence. No-one can predict what the idiots in charge will do to our money supply.

As to the German repatriation and your other assumptions--the rise will only be orderly until something breaks. Yes, people have been calling for something to break for years, but such a break is a historical event rather than an accumulation of events. The former can not be predicted, where the latter can. For example, the rise of Hitler could not have been predicted, but the rise of Nationalism in Germany could.

Indenture
Jan 16, 2013 - 12:45pm

tmosley: "If you do it right,

tmosley: "If you do it right, you should be able to turn an ounce of silver into five ounces of gold, if you silver cost average into gold during the panic." I am interested in why during the moment of "panic" the world will turn away from gold and towards silver. The only way for your math to work is for the 'money' of the world, not the people but the big guys like the soverign wealth funds of the world to turn to silver. Why during a "panic" will wealth go to silver?

Indenture
Jan 16, 2013 - 12:49pm

tmosley: I just read your

tmosley: I just read your reply to Stock and you describe an increase in price because of industrial demand not wealth storage. But isn't the current price of silver a combination of industrial demand and wealth demand? What happens if wealth demand disappears from the silver market? Won't the price of silver drop to only industrial demand and isn't that price much lower than the current spot price?

tpbeta
Jan 16, 2013 - 12:57pm

$31.50 on some charts

but weird that the candlesticks show it no higher than $31-47.

https://www.pennystockjournal.blogspot.ca/p/silver.html

ivars
Jan 16, 2013 - 1:54pm

Interesting will fork work

Interesting will fork work again? Or the hammer will allow to cross the top line and stay over it?

ivars
Jan 16, 2013 - 1:55pm

Interesting will fork work

Interesting will fork work again? Or the hammer will allow to cross the top line and stay over it?

SteveW
Jan 16, 2013 - 2:09pm

Spot silver spiked to $31.55

and I was happy to buy back my SLV32 puts at $1.50 for a modest profit. For once I look to have got today's best price. Will pay for the Maples I bought on Friday.

Now will there bet a beat down this Friday?

Karankawa
Jan 16, 2013 - 2:13pm

@ Pax Argentum on high capacity magazines ....

If I understand this correctly, to file is ready to download to print out your own now from Defense Distributed, FOR FREE ;)

DefDist Printed AR Mag - Part II

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