Those who have been reading this blog for some weeks or even months now, have perhaps lost interest in the machinations of the Federal Reserve, or the Chinese accumulation of Gold and Silver.
But if what I’ve been reading in recent days is even half-way true, then the next two years will reveal how the Chinese have been playing America for a “CHUMP” as the Americans might say.
If you’ve been reading my missives over the last 6 months, you will have learned that in 2012, China imported over 2,000 tons of Gold, and a similar amount last year. James Rickards thinks the Chinese have accumulated over 5,000 tons since they began their buying spree, which took on a life of its own in 2004, after modest accumulations in the preceding 30 years, sourced mainly from internal mining.
In the late nineties, the U.S. had lost approximately 200+ tons per year to overseas buyers. This little detail was discovered in document FT900.
And the Chinese have been accumulating through several import routes, though apart from their pronouncement in 2009 that they had over 1,000 tons, they have been remarkably silent on their current Gold holdings.
In 2009, when they made their last pronouncement along with it, they made what perhaps at the time seemed an unusual statement.
According to a Reuters article:
“China’s SOE regulator, the State-owned Assets Supervision and Administration Commission (SASAC), had told the financial institutions that SOEs reserved the right to default on contracts”
SOEs for those not familiar, are “State Owned Enerprises”, and includes Banks, and other large commercial organisations still under public, and thus communist party control.
SASAC took over the job of overseeing SOEs’ derivatives trading from the securities regulator in February 2009, after several Chinese firms reported huge losses from derivatives, and quickly tightened the rules, ordering firms to quit risky contracts and report their positions on a quarterly basis.
As I have discussed before, China has been importing gold at a sprint since 2004, and increasing amounts.
China’s Yuan – New global reserve currency?
As well as this they have been for some time the world’s biggest producers of Gold.
Rumours abound of Chinese officials scouring West African nations, but particularly Democratic Republic of Congo, and Ghana, buying up Gold at the spot price from artisanal miners, and tales of Chinese miners with guns to protect themselves, and to intimidate local officials have come to light too, and those miners are sending their recovered gold back to China to support families back home, who will send it to the Chinese Central Authorities to add to their stock-piles.
These resources are perhaps approximately another 40 tons per month back home.
And there’s more – I also learned last week, that Russian junior Gold miners who have been mining small claims, are also sending their Gold to China, and because of export restrictions from the Soviet era, have been turning their gold into knives and forks to get through customs restrictions, (albeit illegally) and this too has been exporting several tons per annum.
When you add in the gold that comes from Canadian, African, Australian, and South American mines that the Chinese have bought in recent years, their Gold holdings could be now even bigger than the alleged 8,100 tons that the Fed claims to have, but which few in the Precious Metals sphere believe is still there.
So what is the Chinese game plan?
The statement made above by the SASAC could be a clue.
Ever since 2008, and even in 2003, the Federal Reserve have been expanding the money supply, according to some reports I’ve read this could be as much as $4 trillion since the end of the tech-boom, that fuelled the biggest stock-market rally in history.
The recent rally in 2014, in which the DOW climbed to 17,000 was largely pumped up because of the cheap money being pumped into the economy.
And the Chinese have stated that they “MAY” default on derivatives. Is this because they expect the Fed to default on its Gold supply, which according to several reports – using a motoring analogy – is on fumes. It has been stated by several experts, that the supply in the vaults at JPMorgan, Goldman-Sachs and the other large American Bullion banks are down to the tens of tons, at least according to Harvey Organ’s Blogspot.
Indeed according to figures provided by Harvey Organ, the American bullion banks have already defaulted on many of their contracts, but the parties to those contracts have been bought out.
And we know that ABN Amro the largest Dutch bank has already informed its clients that they will not be supplied with their precious metal, but the cash equivalent. What will happen if all those derivatives contracts decide they want their precious metals, and the cupboards are bare?
Can you say – KABOOM?
And to add one more piece to this particular jigsaw, I recently learned that the Federal Reserve, is planning to cut the cord between real money and those numbers on the bank’s ledgers, even further. The story goes that the Federal Reserve will stop the use of American paper currency in the very near future. Quite possibly as early as September 2014, which would mean that all those paper dollars sitting in private vaults, household safes, overseas corporate and money-laundering crime bosses’ underworld slush-funds, and drug-dealers’ suit-cases, will have to be spent, or deposited in bank accounts somewhere in the world or risk being lost.
The amount of paper currency in circulation, if spent in a wild spending spree could be the trigger point, that sends the value of the dollar into a tailspin, or more likely inflation into the hyper-sphere – giving the Feds, a huge problem as the US economy balloons and then busts taking the world with them.
And China’s gold reserves, would then become the hard asset backing that the United States currency used to have, and has used to attain global reserve currency status, and this will allow the Chinese the opportunity to become global overlords as the American Military became on the back of their free spending ways.
So is there an antidote to this forthcoming mayhem?
When any currency falls due to banking madness and political lunacy, there’s only one solution really…
Buy Gold, Silver and Crypto-currencies young man, and soon – It’s gonna get a lot more expensive.