Guest Post: "Discussing The London Gold Pool and SWIFT", by James Gibson

Longtime TFMR member James Gibson volunteered this information in the hope of answering some questions on The London Gold Pool of the 1960s and the current SWIFT system of international payments.

Thanks to James for all his efforts in documenting this information and putting it out to the masses through his great book, "From East To West".

TF

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Recently, I noted that a Turdite requested the story of The London Gold Pool and several Turdites have been discussing the USA’s threat to expel China from SWIFT.

So, I thought that it might be appreciated if I quoted some extracts on these subjects from my book.

FROM WEST TO EAST
The Greatest Transfer of Power and Wealth in the History of Mankind

The London Gold Pool

Amongst the many initiatives agreed on at the Bretton Woods Conference was the intention to introduce a system described by many as a gold exchange standard, which was, in essence, a diluted variation of the classic gold standard.

Under this new Bretton Woods gold exchange standard, most countries fixed, or pegged, their currency’s exchange rate to that of the US dollar. National central banks could, if they so wished, exchange their US dollar holdings into gold at the official fixed rate of US $35 per ounce. However, that option was not available to corporations or individuals. Under this Bretton Woods system, all currencies pegged to the US dollar also had a de facto fixed value in terms of gold.

The gold exchange standard did not affect the independent global or regional markets in which gold was freely traded as a precious metal commodity. For the Bretton Woods system to have been effective on a sustainable basis, the fix of the US dollar to the price of gold should have been adjustable. Failing that, the free market price of gold would have to be maintained near the official Bretton Woods’s fixed price of $35 per ounce.

The larger the gap, known as the gold window, between the free market gold price and the official fixed price, the more tempting it was for nations dealing with internal economic or financial problems to buy gold at the Bretton Woods price and sell it in the open gold markets for the higher floating free price, which was dictated by supply and demand.

With post war economic activity picking up, international trade and foreign exchange reserves rose. However, there was only a marginal increase in global gold mine production. The result was that the gold window was experiencing upward pressure. The situation was not helped by the United States suffering from persistent trade imbalances. This begs the question: Why was gold not revalued to a suitable price so as to eliminate the pressure on the gold window?

US oil import quotas and restrictions on trade inflows proved insufficient to arrest the outflow of gold from its reserves. Things came to a head during the 1960 presidential election debates, when panic gold buying led to a surge in the open gold free market price to USD$40 per ounce. The US Federal Reserve and the Bank of England reached an agreement to stabilise the open market gold price at, or near, the official price, thus ending the drain on the United States’ gold reserves. They would do this by allocating a substantial tonnage of gold to be held by the Bank of England for sale; ergo, they sought to flood the market with sufficient gold to depress the free market price and discourage investment demand.

In November 1961, a total of eight nations entered into an agreement on a system to depress the free market price of gold back down to the official fixed price of USD$35 per ounce and thereafter defend that price by means of targeted gold sales and purchases on the free gold market.

This cartel of governments, and their creation, became known as the London Gold Pool.

As part of the agreement, each of the eight participating nations made a contribution of gold bullion to the London Gold Pool, led by the United States pledging to match all other contributions on a one-to-one basis, thus contributing 50 percent of the pool.

By 1965 the London Gold Pool was increasingly unable to balance the outflow of gold. Excessive inflation of the US money supply, in part to fund the costs of the Vietnam War, resulted in the United States no longer being able to redeem other nations’ US dollar holdings into gold, simply because the world’s gold reserves had not grown fast enough to keep pace with the United States’ trade deficit, which had grown to US$3 billion.

The London Gold Pool came under ever-increasing pressure of failure, causing France to announce its withdrawal from the agreement in June 1967 and physically remove a large amount of its gold bullion from New York to Paris.

Another 1967 run on gold and an attack on the British pound accelerated the rate of collapse of the London Gold Pool’s arrangements. By spring 1968, the international financial system was moving toward a crisis more dangerous than any since 1931.

Despite policy support and market efforts by the United States, the 1967 attack on the British pound, coupled with the run on gold, forced the British government to devalue the pound by 14.3 percent on 18 November 1967.

Additional measures were taken in the United States in an attempt to avoid a continuation of the run on gold and the attacks on the US dollar. On 14 March 1968, due to heavy gold demand, the US government requested the British government to close the London gold market. The British government petitioned the queen, who declared a bank holiday on Friday, 15 March.

A conference scheduled for that weekend in Washington served as the vehicle for emergency discussions on the international monetary situation and to reach a decision with regards to future policy on gold. The events of that weekend led the US Congress to repeal the requirement for a gold reserve to back US currency as of Monday, 18 March 1968.

The London Gold market remained closed for two weeks, whilst gold markets in other countries continued trading with increasing gold prices. These events led to the closure of the London Gold Pool.

With the temporary closure of the London gold market in March 1968 and the resulting instability of the gold markets and the international financial system in general, Swiss banks took urgent action to minimise effects on the Swiss banking system and currency. They did so by establishing a gold trading organization, called the Zurich Gold Pool, which helped establish Zurich as a major trading location for gold bullion.

The collapse of the London Gold Pool forced an official policy of a two-tiered gold market system by:

(1) Maintaining the official fixed price of gold at USD$35 per ounce

(2) Allowing free open market gold transactions

It was agreed that the London Gold Pool member nations would refuse to trade gold with corporations or private persons. In an attempt to minimize the gold window, the United States pledged to suspend gold sales to any government that traded in the free gold markets.

Amidst accelerating inflation in the United States, this unsustainable situation collapsed in May 1971, when West Germany was the first nation to withdraw support for the US dollar and officially abandon the Bretton Woods accords, precipitating a quick decline in the value of the US dollar. Under pressure from currency speculators, Switzerland also withdrew support in August 1971 with USD$50 million in gold purchases; France followed suit with gold purchases of USD$191 million. This brought the US gold reserves down to approximately eight thousand one hundred tonnes, from an all-time high at the end of World War II in excess of twenty thousand tonnes!

It is worth noting that there has been no independent audit of the United States of America’s official gold reserves since 1953.

There is an old saying that goes “He who owns the gold, makes the rules.”

One cannot help but wonder how much of the gold sold during through the London Gold Pool ended up in the vaults of the Puppeteers.

Nixon Opts Out of the Gold Exchange Standard in Favour of Fiat Currency

The significant and rapid depletion of the United States’ national gold reserves was clearly unsustainable. President Nixon was faced with two choices:

  • significantly devalue the US dollar against the price of gold

or

  • terminate the Bretton Woods gold exchange standard

Nixon, like most politicians, did not wish to be fiscally restrained by gold, so, on 15 August 1971, he chose the easy option and temporarily suspended the gold exchange standard. As with all “temporary” government measures, it became permanent in March 1973.

Effective from 1 January 1975, it once again became legal for US citizens to own gold. The events of 1971 ignited a bull market

SWIFT

In 2012, under pressure from the United States, Iran was expelled from the world’s international banking transfer system (SWIFT), which had a profoundly adverse impact on Iran’s economy. This US-driven action only served to galvanise China to develop and introduce, as a matter of great urgency, an international transfer system capable of operating independently of the US dollar and SWIFT, as it was obviously critical to China’s national and economic security.

By the fall of 2016, China had very substantially put in place the essential financial infrastructure required to operate an international financial system independent of the US dollar, should that need become imperative. Detailed below are the principal building blocks of that system:

  • An alternative international payment system to SWIFT, called CIPS (China International Payment System), is now operational.
  • Foreign central banks are now able to participate in the Chinese interbank bond market.
  • China has granted permission for twelve foreign central banks to participate in the Chinese onshore foreign exchange market, with further approvals expected.
  • Precious metals markets are open to international participation through the Shanghai International Gold Exchange.
  • Some commodity markets are now open to international participation by commodity trading and brokerage firms.
  • Stock markets are open to international participation through the Hong Kong-Shanghai stock connect programme.
  • The BRICS New Development Bank has been established, which will provide similar services as the World Bank.
  • The Asian Infrastructure Investment Bank (AIIB) has been established to focus on supporting the rapid infrastructural development in Eurasian (Silk Route), BRICS, and affiliated nations.
  • A gold fund with a seed capital of yuan 100 billion (~USD$16 billion) has been established, with the specific objective of building up the sovereign gold reserves of the BRICS and SCO countries, through acquiring/building gold mines along the new Silk Route.
  • Chinese and Russian credit card systems, which are settled in yuan and rubles, are operational and handle very substantial settlement volumes. *
  • Multiple bilateral currency swap agreements for the settlement of trade in yuan have been signed with over thirty countries, including the United Kingdom, Germany, France, Switzerland, and Australia. This enables settlement of international trade without using the US dollar.
  • The introduction and development of yuan bond markets in key major financial centres around the world is progressing steadily, in line with China’s plans to internationalise the yuan.
  • The introduction of a Chinese twice-a-day gold fix in yuan became operational on 19 April 2016.
  • The establishment of an oil futures market priced in yuan, open to international participation, is expected to open in the second half of 2017.
  • The yuan became one of the basket of major currencies that make up the IMF’s SDR (Special Drawing Rights) on 1 October 2016, which de facto makes the yuan one of the world’s secondary reserve currencies.
  • Russia is in the final stages of preparation for the launch of its own oil futures market priced in rubles in the second half of 2017.

*In 1999, China had just one supercomputer, whilst the United States of America had some 250. Today China has 168 supercomputers, whilst the United States is down to only 165, but China’s supercomputers, being more modern, include many of the fastest.

It is not widely appreciated, but supercomputers have enabled China to become the number-one processor of credit and debit card payments worldwide. The Chinese state-owned China Union Pay has issued more debit and credit cards than Visa and MasterCard combined, and its cards are used in approximately 150 countries.

Supercomputers have also been instrumental in China becoming a world leader in virtual cyber currencies, such as Bitcoin, using blockchain technology. Cyber currencies require exceptionally complex and sophisticated software for their creation and use, only made possible by using supercomputers. Supercomputers also provide the processing power and capabilities necessary to handle and keep track of financial transactions in a highly secure, decentralized environment that minimizes the possibility of hacking.

The bottom line is, that if the USA expels China from SWIFT that would very likely provide the necessary trigger for China and Russia to launch their own international financial system operating independently from the current US Dollar dominated international financial system. Under those circumstances both China and Russia would very likely also launch their separate oil futures markets, as well as providing the facility to switch the proceeds of oil sales denominated in yuan and rubles into physical gold bullion. That would be the last thing that the USA would wish to see happen, as it would lead to the death of the US Petrodollar.

24 Comments

4 oz's picture

Nice read, thank you!

Nice read, thank you!

jaba's picture

I will be out for 4 hours

But will be happy to answer any queries to the best of my ability upon my return.

Dogbone's picture

Thanks

You know, if you look at the timeline between Bretton Woods and the gold pool, the time necessary for the gold pool to roll over and die, and then the time for the U.S. closure of the gold window, it is absolutely amazing that the petrodollar has functionally outlasted its predecessor  and by so, so much. Other than Koos Janssen, whom do you reference to see if the new "Gold Brokers" in China are as honest/transparent as thery would want us to think? How do we know the whole new gold transacting edifice isn't just another gold-plated petrodollar-type scam? Strong work, now I really need to buy your book (maybe some copies for distribution).

Dogbone

flipper22's picture

Very Informative

Thank you!

AGXIIK's picture

Print this Frame it

Hang it on the wall

And buy some gold and silver

jaba's picture

@ Dogbone

The probity of any financial, economic and political systems will always be limited by the extent of the honesty and integrity of the political and financial leaders.

From my research conducted in the writing of this book, I am of the opinion that both Xi Jinping of China and Putin of Russia are sadly the world's only true statesmen left at this point in time. I believe that their intentions to re-introduce gold into their financial systems are genuine, and I believe that both nations have very significantly more sovereign gold reserves than is publicly stated.

Both Jinping and Putin have been lobbying the G20 for years to draw up and implement sweeping financial reforms that address not only the symptoms, but the root causes of the problems confronting the international financial system, but to no avail. When the next financial crisis hits, and if the G20 are unable to agree upon timely and sweeping reforms, then I expect that will be the trigger to cause the Chinese-Russian bloc to go their own way and launch their own financial system as outlined in my post.

Dogbone's picture

@jaba

Thanks for the response. Ordered a couple copies of your book. Will study them closely and then circulate to the few people I know awake enough to get it. Thanks for your hard work. I hope you get the same platform and audience as Willem Middlekoop found. Kudos to you, sir

Dogbone

jaba's picture

@ Dogbone

Thank you for the kind words.

I hope that you find the book both interesting and thought provoking.

@viking_analytix's picture

NWO

Thanks, James!  I am glad to have a copy of your excellent book.  It will remain a great reference for years to come.

I saw a video recently from the Corbett Report:

In this update, Mr. Corbett gives an overview of the yuan-oil contract and provides some context and background.  While he isn't a financial author or participant (like you), he does a good job.

Mr. Corbett believes that China/Russia shouldn't be viewed as monetary saviors; they are just putting pressure on the U.S. to "get a better seat" at the NWO table.  He further implies that China/Russia might be viewed as the anti-thesis in the Hegelian dialectic.  I for one, have been "picking sides" (rooting for the end of the petro-dollar), but if Mr. Corbett is correct, then I have been duped/misled, once again (like when I voted for Trump because he was going to "drain the swamp" - what a sad joke).

I just want to be free!  And I believe that a classic gold standard (or something like it) could liberate humanity from the shackles of endless debt.  Mr. Corbett's pessimistic view is therefore a big discouragement, but unfortunately makes a lot of sense to me.  If he is right, then perhaps the only thing I have left to hope in is the glorious re-appearing of Christ.

I would be interested to hear your take on this.  If the petrodollar collapses only to be replaced by the NWO fiat SDR, then it seems that we will not become free, just have different masters. Is there hope for humanity (other than spiritual)?

jaba's picture

@VikingKing6

First, let me thank you for your kind words regarding my book.

You are not the first person to ask me that question. The research that I conducted during my writing of the book led me to believe that Jinping of China and Putin of Russia are the real deal. They share a common vision for the development of Eurasia into a new vast free trade zone. They also wish to see sweeping reforms that address not only the symptoms , but the root causes of the core problems facing the international financial system.

Are they part of the NWO? IMO the answer is no! If they are then we are truly f**ked.

Do they put their nations interests first? IMO the answer is yes.

Do they want to co-operate and live and trade amicably with the West? IMO the answer is undoubtedly yes, but their efforts in that regard have been repeatedly rebuffed because they refuse to be subjugated by the USA into becoming vassal states.

As I mentioned to Dogbone in an earlier comment in this thread "The probity of any financial, economic and political systems will always be limited by the extent of the honesty and integrity of the political and financial leaders." I believe that Jinping and Putin have shown by their actions that their intentions appear to be genuine, but only time will tell.

@viking_analytix's picture

Thanks for the insight!

Thanks for the insight, James!  I certainly hope that you are right!

AngryCitizen's picture

So What Happens If

They (IMF) don't let in China and Russia currencies into the SDR as much as they want and the IMF makes them conform more to the existing system in order to get a bigger slice of the action...What do you see happening after the competition starts and the petrodollar slides down from where it is now? (I am wondering what's gonna play out? War? Trade wars? Two competing systems: East & West?) Not asking for the crystal ball view, just your view if China and Russia don't get what they want...They got more gold then the US, probably...But they are not easily intimidated or bullied by the U.S. right now. Do you think the western bankers will / can compete with fiat? Will they go to gold in some degree?

Thanks so very much for a great book and education!

benque's picture

Without access to SWIFT

I assume that Chinese companies would be unable to do business with their (and here I assume again) largest customer, the USA, as well as those countries not using CIPS.

Would this not precipitate a massive number of bankruptcies of Chinese companies in the short term, with extreme economic disruption and unemployment following right behind?  How could China maintain political stability in the face of such turmoil, and could this also precipitate regime change and acceedence to US demands?

I do not believe China could "bail-out" all those industries, as I would guess if it could, it would have to be with it's vast reserves of US treasuries.  Caught in a US financial conundrum, until that day arrives when they have exchanged those reserves for something not tied to (controlled by) the USA.

I would really appreciate your thoughts on this James, and thank you for your very informative topical post.

Edit to add:  The old saying : "If you owe the bank $1,000, the bank owns you.  If you owe the bank $1,000,000, you own the bank."  Well, USA owes China $trillions in fiat debt, so theoretically still pulls all the strings.

AngryCitizen's picture

Benque, Chinese Play Chess

Pretty well. I would guess they'd be working hard on finding & developing other markets, probably already are. Russians, too. I wouldn't think they'd "pull the plug" before they were as ready as they could be. Would you in their place? They're probably doing with neighbor countries what we did with them in the '90's and 2000's. Especially with India.

I'm most likely missing a few big pieces of the puzzle that James can fill in. Just "thinking out loud."

jaba's picture

@VikingKing6

So do I !!!!

jaba's picture

@ AngryCitizen

Last October the Chinese Yuan became one of the five currencies that make up the SDR.  I quote below some brief extracts from my book.

"China’s renminbi/yuan officially became a component of the basket of currencies that are used to value the SDR on 1 October 2016. The SDR currency weightings are now as follows:

  • The US dollar has a 41.73 percent weighting.
  • The euro has a 30.93 percent weighting.
  • The Chinese renminbi/yuan has a 10.92 percent weighting.
  • The Japanese yen has an 8.33 percent weighting.
  • The pound sterling has an 8.09 percent weighting.

It is important for the reader to realise that the SDR is just another fiat currency. It has no backing whatsoever other than the faith and confidence in the financial standing of the IMF. The involvement and weighting of the five currencies mentioned above is solely to provide a mechanism for the calculation of the SDR’s value in the foreign exchange markets. Just like any other fiat currency, it is created out of thin air."

"In 2009 an article written by Zhou Xiaochuan, governor of the PBOC, was posted on the official PBOC website, in both Chinese and English, in which he called for a sweeping overhaul of the global monetary system. In that article he stated:

The price is becoming increasingly high, not only for the users, but also for the issuers of the reserve currencies. Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws.

Special consideration should be given to giving the SDR a greater role. The SDR has the features and potential to act as a super-sovereign reserve currency.

This indicates to the writer that China has no aspirations to see the yuan replace the US dollar in the role of the world’s premier reserve currency, because the “price is becoming increasingly high,” and suggests that in China’s opinion, the SDR is best suited to the role of the world’s premier reserve currency, because the IMF has no trade deficit or surplus." 

"The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies, and the GDP may also be included as a weight. The allocation of the SDR can be shifted from a purely calculation-based system to a system backed by real assets, such as a reserve pool, to further boost market confidence in its value."

"SDR policies and strategy would be driven solely by its role as a reserve currency, whereas the US Fed is continually conflicted as to its US dollar strategy, as it impacts both domestic and international markets. What is good for the US domestic market can be detrimental to the international market and vice versa. Using the SDR would eliminate any such conflict and seems a pragmatic solution, but there are cons as well as pros, as will be highlighted shortly."

At present the voting powers within the IMF is not a fair representation of each nations' GDP, and at the G20 Hangzhou summit it was agreed that the IMF would review the voting rights of the IMF members. In this regard I quote below another brief extract from my book:

........."require an overhaul of the IMF’s member nations’ voting powers to more accurately reflect the global economic standing of the various nations, in line with their national GDPs.

For example, the BRICS generate 22 percent of the global GDP yet only have 14.9 percent of the IMF’s voting rights. At the recent G20 meeting in China, it was apparently agreed that the voting powers of member nations would be reviewed in 2017.

Eighty-five percent of the IMF’s voting power is required to approve major IMF decisions. At present the United States of America’s IMF voting power is 16.54 percent, giving it the right to veto any major proposal. Any proposal to amend the voting powers in such a way that the United States of America would lose its right of veto would very likely be vetoed by the United States.

The outcome of the 2017 review of IMF voting powers will be most interesting. On a pragmatic basis, the IMF voting powers should be based upon each country’s percentage share of the global GDP. No rocket science should be required, but no doubt politics will heavily influence the outcome of the aforementioned review."

You ask me what will happen if China and Russia do not get their way? Well they can launch their own international financial system independent of the US Dollar. The BRICS have established the New Development Bank and the Chinese have established the Asian Infrastructure Investment Bank (AIIB) and one of these entities could issue an alternative to the SDR if that was the route that China and Russia wished to pursue. There has also been a lot of talk recently about the impending opening of the Chinese and Russian oil futures markets, which, if linked to a facility that allowed the conversion of the Yuan or the Ruble into gold might be another way of approaching the matter. 

You ask ... What do you see happening after the competition starts and the petrodollar slides down from where it is now? (I am wondering what's gonna play out? War? Trade wars? Two competing systems: East & West?). My book examines this aspect in some detail, but the bottom line is that one of the possible scenarios is that the world is once more split into two economic systems like during the first Cold War, except that next time around it would be the East that has the superior financial and economic system.

If you have any more questions, I suggest that you might enjoy buying and reading the book, as it covers a very wide range of topics that all combine to provide the reader with the big picture including some crystal ball gazing as to possible future scenarios. In essence, I identify the dots that I believe are important and draw my conclusions from the way i connect those dots. The reader may well connect those dots in a diffeernt manner and reach entirely different conclusions. The book was written so as to be easily understood by those unfamiliar with the subject matters covered, and intended to be both interesting and thought provoking. It does not pretend to provide all the answers, just the writer's interpretation.

I hope that this answers the questions that you posed.

jaba's picture

@ benque

By expelling China from SWIFT it would damage the USA far more than it would damage China. IMO the US leadership are just blowing hot air and beating their collective chests. It is pure Kabuki theatre!!! IMO it just will not happen.

Theoretically if the US leadership was foolish enough to expel China from SWIFT the Chinese could still do business with US companies insofar as they could use CIPS and transfer funds between accounts held in countries outside the USA, unless the USA banned US companies from such activities or banned Chinese imports.

If you look at the shelves in the USA's shopping malls, they are replete with Chinese made products. What would the US consumer think if he could no longer buy those products, but instead is faced with buying far more expensive alternatives produced by other nations? What would happen to those US companies reliant on importing and selling Chinese made products, for example Apple? What would be the knock on effect on the US financial markets if Apple's profitability was materially impacted?

In such a scenario, China, along with Russia would very likely launch their alternative international financial system, independent of the US Dollar, They would very likely implement sweeping financial reforms, which would include a vast write down in debt. How that could be done is explained in some detail in the book. They would also very likely launch their oil futures exchanges and permit the conversion of Yuan and Ruble oil sales proceeds to be switched to gold., which would be devastating for the US Petrodollar, Wall St and the US economy.

China and Russia are now working hard to develop Eurasia into a vast new trade zone. This incudes immense construction of infrastructure on a scale that makes Trump's vaunted $1 Trillion expenditure on the revamping US infrastructure look like very small potatoes. They will be creating new markets for their products and expertise and it will be the focus of huge economic growth in the years to come.

By their actions over the last decade or so, the Chinese have shown themselves to be very adept at re-positioning their economy, including catering increasingly for their middle class population with locally made, high quality products which are just as good, or even better than imported foreign alternatives. The Chinese middle class is now estimated to be in the region of 300 million. That is a vast market, and the Chinese are determined to exploit at the expense of foreign made imports.

benque's picture

I cannot agree entirely with your view James

For instance, it takes time to establish new international trading partnerships and processes.  During that time, much damage would no doubt be done.

Now, while China and Chinese companies are struggling to set up these partnerships, sales and exports have essentially been cut in half, or worse.  The lay offs and company closures begin quickly. (Look at Mexico just after Trump's election....many companies could not obtain orders from USA, and panic amongst management was widespread.....and still nowhere near recovered, even today....and I know of this first hand)

China is a land of supply, supply to western countries.  Demand in China is totally dependant upon demand from those western countries.  Chinese middle class would disappear in a puff of smoke, should US exports cease.  And, I have a cell phone, and if Apple were to suspend production for 6 months to one year, it wouldn't bother me, or 300 odd million Americans all that much.  No argument from me that many US companies would suffer great hardships, but it hasn't been that long since production of almost anything, which was once done locally moved to China, and much of the facilities and equipment needed to resume local production are still available, albeit a little bit aged and out of use.  Enterprising Americans would have production of some goods started almost immediately, with all the rest following suit.  Jobs and tax revenue in USA.  Unemployment and bankruptcies in China.

Meanwhile in China, companies would have been falling like leaves in the fall, because there is no one to buy their products.  You can't convince me that Russia, Iran, BRICS, Africa and a few Eastern European countries could replace USA business.

Chinese industry is practically dedicated to USA.  Sure, they would be scrambling to adapt, but their adaptation would be much more difficult than that of USA, in my opinion.

The USA may be rotten to the core politically and financially, but is not at all lacking of resources.  And never dismiss the US people, who have risen to every major challenge in the past, and who, I believe, would see this as a huge opportunity, rather than a dilemma.

So, maybe the actuality would be somewhere in between what you and I see, but never presume the US people are out for the count.

Can China take the risk of all that turmoil, just to support the ravings of a madman who could be as dangerous to them as to anyone else?

jaba's picture

@ benque

Over the last several years China has signed currency swap agreements with at least 33 different nations, including most of western Europe including the UK and Switzerland, as well as Australia, Japan and many more. Those swap agreements are facilitating ever increasing volumes of Chinese trade with the international community without resorting to the use of the US dollar.

Another factor to bear in mind, is that if China was expelled from SWIFT, it could enact its own sanctions on the USA, UK and NATO nations, such as banning all Chinese exports of REMs (rare earth materials) of which China currently produces 90% + of the global production. REMs are a necessary component in a very wide range of modern hi-tech products including your Apple products, as well as most sophisticated weaponry and electronic equipment needed by the military.

I also re-iterate that I outline in detail how China and Russia could easily write off vast amounts of debt, which would would enable them to ride out any such period of transition. That debt write off option is not so easily adopted in the West, again for reasons clearly outlined in the book.

I do not underestimate the US entrepreneurial spirit and can do attitude, but to offset these factors, the USA, like most of the Western world, is bogged down with bureaucracy and red tape. Over the last couple of decades US industrial/manufacturing industry has been eviscerated and the skilled manufacturing work force has been very largely laid off as evidenced by ~ 95 million people currently out of the US work force.

Manufacturing techniques have been changing at a rapid pace over the last couple of decades, with robots playing an ever increasing role. Do not underestimate the time it would take to cut through the red tape, build the necessary factories, equip them with the required robots, and train up a skilled work force. Bear in mind the absolute plethora of items that China currently sells to the USA and how many different factories and different skills that will be required in a compressed period of time, and the knock on impact that would have on the salaries necessary to attract the right people and the high cost of the end products that would end up on the shelves in Walmart etc. People would balk at the paying the increased cost of the US products. A recent survey concluded that the average consumer cannot even meet an unexpected bill of US$400 without resorting to credit cards, payday loans etc. The consumer is already maxed out.

IMO the implications for the USA would be more profoundly adverse than for China. My book is over 400 pages long, and it is just not possible to provide a comprehensive rebuttal to your point of view in a forum such as this one. If you disagree with my point of view, I have no problems with that, cos we all hold some opinions that we believe are correct, and that is ok, it is all part of life's rich tapestry.

jaba's picture

@benque

One of the facts that is rarely mentioned about China is, that it is the largest oil refiner in the world. So, if/when China launches its oil futures exchange, and if it provides the facility of oil sales proceeds to be converted from Yuan to gold bullion, that is a BIG deal and would be the death knell of the US Petrodollar, more so if Russia, as the world's largest oil exporter, goes the same route as China.

AGXIIK's picture

Here's a bit if irony James

75% of Americans don't have a meager $400 set aside for emergencies

But they're salivating at the chance to buy a $1000 Apple I  PhoneX

Over half of I phone labor and parts are from China and Taiwan.

The rest comes from 200 other countries

Only the brain trust and shillery of B-MAC, the Big Brother Machina Ex Deus is fermented  in the Apple Boffin Tribe, of course.

jaba's picture

@ AGXIIK

So much in life these days seems to be upside down, courtesy of the very sophisticated spin, misinformation and outright lies spread by TPTB and the mainstream media.

People spend money they do not have, on items that they do not need, yet they cannot meet an unexpected expense  of $400. It seems that instant self gratification rules the day!

I remember so clearly the sixties, flower power, make love not war, and a dream of our generation making the world a better place. Boy did our generation drop the ball big time or what. I am however, extremely proud of the job my wife has done in bringing up our three children, who have a strong work ethic, sound moral values and are independent thinkers!

I am glad that I wrote the book, as it was a cathartic process and gave me a certain peace of mind in so far as I have done a small thing to try and spread the truth about where our western society is headed and why.

However, since writing the book, I have come to realise that it is far easier to fool people, than it is to persuade them that they have been fooled; there are none so blind as those that refuse to see. Churchill once said, that a lie can be half way round the world before truth has had time to put on its pants - and that was before the internet!

But notwithstanding all of the above, I am an optimist at heart (albeit a pragmatic one) who believes that it will all end up ok in the fullness of time. It is the part in between now and then that is fraught with danger and difficulties.

benque's picture

re: China and SWIFT

Thanks again for your input James.  I'll continue to think about all that you have written.

jaba's picture

@benque

Thanks. I freely acknowledge that there is so much info now readily available on the internet and from the MSM, it is difficult to sort out the facts from the fiction.

I do not profess to have all the answers, but my book is an honest attempt to lay out what I believe to be the truth, and help to identify the dots, which I have connected based upon the experience that I have gained in the university of life thereby reaching my own conclusions.  I do however, encourage readers to connect the dots based upon their own perceptions/experience, and perhaps their conclusions are very different to my own. But that is what makes the world go round. I just wish more people would endeavour to do just that, but most appear to be unwilling to go outside their own comfort zone.

I wish you well in your deliberations benque.

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