We often hear the voices of near lunatics discussing conspiracies and plots between global superpowers that are aiming at gold, usually something to do with a new world order and all that kind of stuff. Themes and subjects like these are widely debated in online media, thanks to the internet and the appearance of obscure ‘truth’ somehow coming from this medium, has increased the efficiency of this type of media itself. Everyone has free access to it (technically not everyone, cases like China and North Korea must be considered) and anyone can publish his opinion on it.
Having this in mind creates misconceptions, mistruths, and false beliefs, a dangerous combination that leaves people naive to the real situation we are facing. We must think and hear some logical and rational ideas with an open-minded stance, not dribble with stories presented as facts with no real evidence behind it. To get a grounded understanding of the actual situation, it is well worth reading about James Rickards’ worldwide scale economic plots. Mr. Rickards is a well-known American lawyer, finance academic who writes about the upcoming monetary disaster. He has a couple of really successful books published on the subject.
He wrote a really interesting article for The Daily Reckoning, titled “Why the U.S. is Letting China Accumulate Gold” and that’s what I want to talk about now. I really haven’t seen monetary events from this kind of a point of view. He really considers that there is a clear cooperative relationship between the People’s Republic of China and the United States of America.
In fact, China is the biggest and stronger US trading partner. Despite all the ideology differences, looks like this relationship are really valuable and both countries are interested to maintain it healthy and strong. Now, Mr. Rickards use a great example to explain the role of the massive gold demand by China the latest years.
“Right now, China officially does not have enough gold to have a ‘seat at the table’ with other world leaders. Think of global politics as a game of poker” he said. Having huge gold reserves gives you the power and relevance between international superpowers. The elite must hold gold in huge quantities. But when your reserves become technically “huge”?
He stated that “The U.S. gold reserves at the market rate is about 2.7 percent of GDP”. In the meanwhile “In China, that number is 0.7 officially”. Now we know for sure how many gold China has, and thanks to that, we also know that is not powerful enough yet. In comparison with other superpowers worldwide, China actually holds a little gold reserve if we consider the size of its economy.
The author determines that the gold prices manipulation is evident and it’s because the US wants to help China to avoid being left behind. “If you took the lid off of gold, ended the price manipulation and let gold find it level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because their economy’s growing faster and because the price of gold would be sky-rocketing, they could never acquire it fast enough. They could never catch up” he stated in the mentioned article.
So the actual gold prices depression is intentional? According to Mr. Rickards, it is. There is a cap on gold prices while China purchase the quantity it needs. After that, the mentioned cap will be eliminated. But why is this happening? China does not feel comfortable with its dollar’s reserves. Any FED decision on the monetary policies affect the Asian country and that escapes from its will. With a healthy balance of dollars and hard assets, like gold, in China’s reserves, the PBOC will sleep better.
Why the US is doing this for China? The relationship between these countries has become fundamental for the worldwide economy. China is the main manufacturing and exporting in the world. It is a well-known fact that biggest US companies have factories in the Asian country. They have to watch closely to the eastern ally and take care of him. China knows well about its relevance to the US and the rest of the world. This quid pro quo situation will be active for much longer.