Collapsing Global Economy, Imploding Financial System: China Has Only One Option
Global Research, May 27, 2015
Url of this article:
http://www.globalresearch.ca/collapsing-global-economy-imploding-financial-system-china-has-only-one-option/5451955
http://www.globalresearch.ca/collapsing-global-economy-imploding-financial-system-china-has-only-one-option/5451955
The title is of course a little misleading because
China has many options, none of which except one in my opinion will
actually work. Options to what exactly you ask? Options to a
collapsing global economy and an imploding financial system which will
surely affect China as much as anywhere else, but with one caveat. I
take these events as a given, others do not but betting against an
outright panic and global bankruptcy is betting against pure mathematics
itself.
Let’s back up a little bit and look at where China is
currently. They are the second largest economy in the world (maybe the
largest, we can’t really know because the numbers here, there, and
everywhere are made up). China is by far THE largest manufacturer in
the world and also an enormous exporter. China is also in a three horse
race as to who owns the most U.S. Treasuries with Japan and
unbelievably the Federal Reserve itself. They have an oversized shadow
banking system which has already been shown as fraudulent in several
cases regarding copper, zinc and lead as “collateral” (or not).
The Chinese also have a stock market bubble boiling that makes the tulip craze look tame.
Because of sheer size of the country, they are opening something like
four million brokerage accounts per month. In recent days they have had
several stocks hit new highs only to drop 50-60% or more in just one
day. In fact, they had one company stock hit a new high and then go to
ZERO the following day because it was discovered their books were cooked
to a crisp.
We also know China is a huge importer of gold AND the
largest producer of gold in the world. NONE of their production ever
leaves their borders. There have been estimates of gold tonnage held by
many. Alisdair Mcleod believes they may have 25,000 tons or more, I
personally believe it is possible if you include legacy or “elders”
gold. Others believe the number is closer to the 5,000 ton range. My
belief is that 10,000 tons is a justifiable number and very easily
proven, if this is true, much of it had come from the U.S. and other
Western sources and thus depleting the reserves.
I assume the number is 10,000 tons or more, this is a safe
number in my mind. I think it is also a safe bet to say the U.S. has
sold a minimum of one half of “our” gold which would leave about 4,000
tons. If this is the case, there is already a new world order where
China has as much gold as numbers 2, 3 and 4. Looking backwards in
time, after the Bretton Woods agreement, the U.S. had every incentive to
keep the “price” of gold down at $35. This is so and evidenced by the
old saying “it’s as good as gold”. The saying originally came about as a
description of the dollar. As it turns out, the dollar was NOT as good
as gold, in fact it was not as good as anything, even a cup of coffee.
The dollar was overprinted and abused (inflated) by politicians (the
Fed) in order to hide anything and everything “bad”. This worked until
we hit the wall, let’s call this wall “debt saturation”. Now, the
process is reversing and will end in a massive deflation versus real
money while fiat currencies follow their issuers into insolvency.
Getting back to China, whenever they do make an
announcement of how much gold they have, the yuan will appreciate
greatly versus all fiat currencies. Many will pooh pooh this thought
because “China will never do that, they will kill their own
manufacturing base”. Let me answer this before moving forward. The
Chinese are very smart people, they can see the West is hitting the debt
wall. They also know that as the wall is hit and markets begin to
implode, their “customers” are going to have an even harder time buying
Chinese produced goods. In fact, they already know this. They already
know this is happening and can see it in their trade figures …which is
why they recently formed the AIIB and are working feverishly to open the
“old silk road” trade route! They are simply lining up new customers
from one end of the silk road to the other!
I have hypothesized many times in the past, China has built
out their infrastructure and even “ghost cities” using credit. Once
the credit markets begin to default, they will be left with “stuff”, in
place and will last for the next 50 to 100 years. Roads, bridges,
buildings, airports, ports, etc., you name it they have already built
it. And yes, their stock market will crash, their real estate market is
already softening, in reverse and declining. I am not saying it will
be all rosy, to the contrary, there will be bankruptcies galore in
China… with a caveat. The “government” of China will go through this
liquidation phase with the most gold in the world.
Moving forward, since China will be hurt badly as
investments default, I believe they will re price their gold higher
initially. I believe marking their gold higher in terms of yuan will be
their only option. They will be forced to in order to “recapitalize”
themselves (and their banking system) and begin to fill in the black
holes created by defaulted U.S. Treasuries and other “assets” held. You
see, not only is the old saying “he who owns the gold makes the rules”
true, it is also true that he who owns the gold has the ability to PRICE
IT.
This has been true for so many years as the U.S. (the West)
has wanted low gold prices as a show or display that their fiat
currencies were “good”. Now, as the curtain goes down on the West,
China will want a very high gold price in yuan for when the curtain
rises again. A gold price maybe even higher than it should be will give
the PBOC more power initially AND will allow them some room to inflate
and grow. Please notice I am only talking about China in this
paragraph. As for the dollar and other Western currencies, they will be
revalued downward versus the yuan which gives gold priced in dollars a
double whammy of re pricing.
Let’s tie this all together and look at the old silk road
and the trade route China is focusing on. It goes from Asia, through
the Middles East and into Europe. Could this be why various European
nations are repatriating their gold? Not only because they have lost
trust in their custodian but they also know China will put an emphasis
on gold holdings in the future? What do many Asians hold as money?
Yes, Gold. Indians? Gold. Arabs? Again gold. The point I am trying
to make is the “old silk road” might as well be called the “yellow brick
road” and one paved with gold from beginning to end! It seems to me,
the only ones who don’t understand this or even disagree are Westerners
and in particular, Americans. Our standard of living is about to pulled
right out from under us while violently proclaiming “it can never
happen”. I would say, it should have already happened but has not
because we still had a few kilos left to supply the paving crew of the
“Wizard of OZ paving company”.
The above was finished midday on Saturday, since then two
new pieces of news have come out. First, China announced it is setting
up “the world’s largest gold fund” .
They will earmark $16 billon to purchase physical gold. If you do the
math, this is around 500 tons or about 20% of global production. By
calling it “the world’s largest gold fund”, maybe China is saying they
do not believe “GLD” is real? Just an observation.
In the latest piece of news, http://rt.com/business/261289-
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