Will China Make the Yuan a Gold-Backed Currency?

If China Backs Its Currency with Gold, It Could Have Profound Effects for Investors … and Consumers

Larry Edelson – - writes today:

I know for a fact that Beijing wants its yuan to eventually become a gold-backed currency, much like the Swiss franc was originally. Backing the yuan with some gold will certainly help it become a major international currency.

Edelson is a financial adviser who travels frequently to Asia, a former high-volume gold trader who is interviewed a lot in the mainstream  financial media.

I have no idea whether Edelson is right or not.  But he’s not the first to make the claim.

Doug Casey says that if one country – such as China – switches to a gold-backed currency, the dollar will be toast:

All it will take for the world to realize that U.S. dollars are nothing more than hot potatoes is for one country (Doug postulated that maybe China would be first) to introduce a gold-backed currency. If China introduced a gold-backed yuan, for example, who on earth would want anything to do with U.S. dollars?

Similarly, SafeHaven points out:

Suppose a large exporter, such as China, which undervalues its currency and runs a large trade surplus as a result, takes a huge radical step and goes all the way to a 100%-reserve gold currency. The ultimate hard currency. If this succeeds, China is the new England – the financial capital of the world, forever. Everyone else’s money? In a word: pesos. Hard currency is Chinese currency. China’s natural supremacy over the barbarian kingdoms of the West is restored.

Goldcore argues:

China is clearly trying to position the yuan or renminbi as the alternative global reserve currency. The Chinese likely realise that they will need to surpass the Federal Reserve’s official, but unaudited, gold holding of 8,133.5 tonnes.

***

World Bank President Robert Zoellick recently mooted the possibility of a return to some form of gold standard. It seems extremely likely that senior and influential Chinese policy makers, bankers and  government officials may be having similar thoughts.

Simit Patel writes:

China’s central bank continues to aggressively accumulate gold. Is this a setup for making the renminbi a gold-backed currency? Many have speculated that this is the game plan. Certainly a currency that is gold-backed will have appeal as a reserve currency capable of storing wealth; indeed, the reason why the US was able to position itself as a reserve currency is largely because it was once pegged to gold.

MaxKeiser says:

China is clearly trying to position the yuan or renminbi as the alternative global reserve currency. The Chineselikely realise that they will need to surpass the Federal Reserve’s official, but unaudited, gold holding of 8,133.5 tonnes. China is the sixth largest holder of gold reserves in the world today and officially has reserves of 1054.1 tonnes which is less than half those of even Euro debtor nations France and Italy who are believed to have 2,435.4 and 2,451.8 tonnes respectively.

***

[This] game theory article is great because it points out that China does not need to amass a gold stock similar to the US, it can simply go to a gold standard now and effect a simultaneous devaluation against the dollar (as game theory dictates that the US and all other CB’s would be forced to follow China’s lead, or risk losing all their capital as investors buy the only gold backed currency in the world).

And Wikileaks noted several reasons for China’s stocking up on gold.  ZeroHedge summarizes:

As the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar’s reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China’s perspective is that “suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.” Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold…

From Wikileaks:

3. CHINA’S GOLD RESERVES

“China increases its gold reserves in order to kill two birds with one stone”

“The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): “According to China’s National Foreign Exchanges Administration China ‘s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.”

This entry was posted in Business / Economics, Politics / World News. Bookmark the permalink.
  • john worthington

    Another possibility is the USA revaulues it gold stealing a march on the others. This would help support the US Dollar, and the large debt of the USA

  • gozounlimited

    Why China is compelled to act and take control of the worlds monetary system?

    Rothschild Gold Fixers, Dubai & the Annunaki

    By Dean Henderson
    theintelhub.com
    May 20, 2012

    It was during the 1980’s US/Saudi-financed mujahadeen offensive on the Afghan people that Dubai – one of the emirates comprising the United Arab Emirates (UAE) – became a duty-free port and drug money laundry, serving much the same role as Hong Kong had for the Illuminati banksters during the Vietnam War.

    Where Hong Kong had financed CIA opium for arms swaps in the Golden Triangle, Dubai served the CIA smack for weapons trade in the Golden Crescent – an area which comprises parts of Iran, Afghanistan and Pakistan.

    Golden Crescent opium production eclipsed Golden Triangle production just as the CIA was springing into action in Afghanistan. While international banks in Dubai laundered the proceeds, Sharjah – another UAE emirate – housed a duty-free airport specializing in covert weapons shipments. [1]

    Gold is the currency of drug and weapons traffickers and Dubai is the favorite hub in the global bullion trade. The British Bank of the Middle East dominates the Dubai gold trade.

    read more: http://theintelhub.com/2012/05/20/rothschild-gold-fixers-dubai-the-annunaki/
    ************
    Cramer: Financial Anarchy, Bank Runs In Spain, Italy Within Weeks

    On Meet The Press, MSNBC Mad Money host Jim Cramer warns there will be financial anarchy and bank runs in both Spain and Italy within weeks.

    On MSNBC’s Meet The Press Jim Cramer tells host David Gregory “I’m predicting bank runs in Spain and Italy in the next few weeks. Without coordinated policy there will be financial anarchy.”

    This is particularly alarming given Cramer’s obvious conflict of interest.

    Scaring mom and pop away from the market with talks of global financial collapse due to the spirally out of control European sovereign debt crisis means less viewers for his show

    read more: http://blog.alexanderhiggins.com/2012/05/21/cramer-financial-anarchy-bank-runs-spain-italy-weeks-136101/
    ************
    Masses Suckered Into Facebook IPO Burnt With 20% Loss In 2 Days

    Using the branding power of Facebook, Wall Street has suckered the masses back into the stock market only to burn them for a 20% loss in two days of trading.

    read more: http://blog.alexanderhiggins.com/2012/05/21/masses-suckered-facebook-ipo-burnt-20-loss-2-days-136281/

    ALSO thought you should know ….. Beware! New Virus Spreading via Facebook Chat Messaging Window …. see here: http://blog.alexanderhiggins.com/2012/05/21/beware-virus-spreading-facebook-chat-messaging-window-136231/
    ************
    Double trouble at JP Morgan: trader’s losses could exceed $7bn The Independent

    Ina Drew, the head of the chief investment office where the losses occurred and who quit four days after they were revealed, was out of the office for long periods after she contracted Lyme disease in 2010.

    According to JP Morgan traders, in her absence there were regular shouting matches between her subordinates in New York and London. “The strife distracted everyone because no one could push back,” one trader told The New York Times. Ms Drew was seen as the key executive alongside Mr Dimon who steered JP Morgan through the 2008-9 financial crisis. But she became more hands off in the past couple of years, traders claimed.

    read more: http://www.independent.co.uk/news/world/americas/double-trouble-at-jp-morgan-traders-losses-could-exceed-7bn-7771347.html
    ************
    “How many times do we need to see a derivatives trade, utilizing credit default swaps go rogue, lose an astounding amount of money, yet outright banning these types of derivative trades never pops up in the conversation? Why not? Anyone with a math degree knows these things are fundamentally flawed yet billions are bet every day on them. Why? Are credit default swaps the great BP drilling rigs, who cares that they are fundamentally flawed and unsafe?”

    “Seems at the moment, instead of confronting bad derivatives, the spin machine is out in full force to silence even describing the JPMorgan Chase trade accurately. Bill Black calls out the insanity of mislabeling these speculative trades as hedging, the latest snow job that’s going on.” (Robert Oak )

    read more: Too Interconnected To Fail ….. here: http://www.economicpopulist.org/content/too-interconnected-fail

    • gozounlimited

      And This ….. CFTC …. SEC called out for financial regulatory obstruction on behalf of MF Global and concerning Dodd-Frank implementation ….

      see here: SEC & CFTC Heads Testify on Derivatives Reform….http://www.c-span.org/Events/SEC-CFTC-Heads-Testify-on-Derivatives-Reform/10737430876/

      • gozounlimited

        So the newest financial scandal (circus) pits The Senate Banking Committee and the SEC/CFTC against the taxpayers. In the preceding coverage of the committee hearing Gary Gensler (Commodity Futures Trading Commission (CFTC) Chairman) explains how he and Congress made the US taxpayer the guarantor to JP Morgen’s 7 billion loss and counting London swap. Gensler complains that he can’t begin to write regulations lacking staff to deal with 30,000 stakeholders whom he been mandated to serve when writing regulations..

        Had he (Gensler) reached the goal mandated by Dodd-Frank, the US taxpayer would not be subjected to JP’s bailout and MF Global investors wouldn’t be eating dirt.

        The biggest hurdle for both the SEC and CFTC (they state) is there is NO definition of a swap. Both regulators have been assigned the task to oversee swaps, however ….. lets go back to the beginning, the word swap has not been defined. And the SEC’s Ms Schapiro will not define swap until the regulations are finalized. So in the meantime a 27 trillion derivative (swap) market continues to go unregulated….ignored….placated by our corporate/government while it unwinds into the laps of the taxpayers.

        This is the same Gary Gensberg, by the way, that recused himself from Congressional testimony as the regulator and overseer of MF Global.

  • http://AN ONEVOICE

    We need an “i”dentifiable global currency.

  • Josh Freund

    lets beat china to a gold backed currency. Rand Paul in 2016. Rand and his father have been preaching about the Fed depleting our dollar for years and the only way to save it is creating a gold backed currency. If China beats us to it, we are no longer the economic leaders of the world and our country will crumble. Ron Paul warned us. Time to listen up America

  • http://www.westcoastladybugs.com RUSS SMITH

    Hi!, Patrons Of Washington’s Blog Et Al:

    Are we so illiterate of what OUR US Constitution mandates in Article 1; Section 10 that we allow professional politicians to always overrule OUR better judgement? This section of OUR Constitution calls not for a paper backed currency but specie gold and silver coins only in the pockets of all American Citizens as their only means of payment for all debts both public and/or private. This means that the gold being held in repositories in Colorado, New York and Fort Knox, Kentucky should long ago been fabricated by the US Trasury into minted gold coins to be distributed to OUR citizens for Free which means without costs accruing any of us from OUR US Treasury Departmen or any brokerage houses worldwide period. Anything less that obedience to OUR Constitutional mandate in this regard is to be regarded as treason pure & simple; regardless of any of the identities belonging to contrarians of any political or public stripes. Instead of the US Constitution being in force, we now have the impositon of Gresham’s Law which allocates that all our silver money that once circulated in everyday transactions is now kept hoarded, because nobody in their right minds would spend their silver money @ face value would they? It’s ultimately in our collective hands as citizens of the US whether we desire to choose the Constitutional mandate regards specie gold and silver coins as our money or have Gresham’s law invoked as the mediator of our economic affairs based upon the caos of deficits being faciltated via inflation also know as quantatative easing etc.

    RUSS SMITH, CALIFORNIA
    resmith@wcisp.com

  • Laurent-D’Adran

    Let’s hope that China will (soon) be the only one country in the world to have its currency backed by gold, with guarantee to have the Yuan’s unconditionally pay back in gold. And let’s see who’s currency will be toast first.

 

 

Twitter