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Rules
Someone sent me this link yesterday to a 3 minute clip of Paul Harvey from back in 1965. How prescient and clairvoyant was this man to say what he did nearly 50 years ago? He spoke these words long before any of what is happening today was even dreamed (nightmared) of by even one out of 1 million people. I urge you to listen (read the captions) and if you’re old enough, think back to what the world was like when he recorded this.
I wanted to write a short piece about China and how it has been accumulating Gold. They officially “admit” that they have 1,054 tons, this figured was released nearly 3 years ago in 2009 and is surely stale. If you look at the chart below, and add the imports and domestic production together since 1999 you come to a figure of nearly 5,000 tons.
Do you believe that they have exported ANY Gold or sold ANY Gold over this time frame? If so, can you think of any logical reason for them to do so? I cannot. Did they have ANY Gold at all prior to 1999? Probably so, maybe not much and probably more Silver than Gold but that’s another topic. In any case, the point I am trying to get at is that China is probably THE largest holder of Gold on the planet other than possibly the population of India (non official holdings).
Is this important? Well, yes I think it is very important. I think this is important because if true, China would be the 2nd largest holder of Gold in the world. Not only that, if as much anecdotal evidence suggests, the U.S. has been a seller of its Gold for years then China would be THE largest holder in the world. They are also neck and neck with Japan and our own Fed as the largest holders of U.S. Treasury bonds. They may hold the most Gold and are also a top holder of our debt at the same time.
Do you understand what this really means? It means that they hold ALL of the financial cards. Their treasury has options… ours does not. Their currency is not “over issued”, ours is. Their currency is probably undervalued while ours is without a doubt overvalued. They can effectively dictate higher interest rates to us if they wish just by selling our bonds. Yes, The Fed can (and will) step in to purchase what is being sold but this requires a bigger balance sheet and diluting the currency further. In a nutshell, we have weaved our way into a corner with only one way out, print and borrow more. China on the other hand has engineered itself straight into the driver’s seat. It is as true today as it always has been, “He who has the Gold makes the rules.” By connecting just a few dots, it looks as if China has the Gold and thus will be making the rules in the foreseeable future.
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2012-11-14 20:41:20
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