View Full Version : IMF urged to sell gold to battle cash crunch
A panel of financial statesmen advised the IMF to sell 400 tons of its gold reserves as part of a new strategy to avert a long-term crunch in its finances.
But the International Monetary Fund should proceed with care in selling any gold to avoid destabilizing world markets, the panel members including former Federal Reserve chief Alan Greenspan recommended.
The IMF has more than 3,200 metric tons of gold as part of its financial stockpile, but has fought shy of offloading any of it. The sale of 400 tons could raise 6.6 billion dollars at current market prices, the panel said.
IMF chief Rodrigo Rato appointed the panel in May last year to come up with ideas to avert a cash crisis for the global lender, which has seen its operational income slump as debtor countries repay their Fund loans early.
The committee was chaired by Andrew Crockett, former head of the Bank for International Settlements, and also included European Central Bank president Jean-Claude Trichet and People's Bank of China governor Zhou Xiaochuan.
It said the IMF should also broaden its investment mandate, with a view to generating extra income of 45 million dollars a year on capital markets.
And the IMF could invest part of the annual dues paid by its 185 members, yielding a potential 300 million dollars a year, the panel's report said.
"If adopted, the measures would set the Fund's finances on a sustainable basis, and ensure a solid financial foundation for the Fund's important role in the international community," Crockett said.
Rato welcomed the recommendations, which will be taken up for debate by the IMF's executive board.
"The report represents a key milestone in our work and is an important step in developing an appropriate new income model," he said.
Money from the gold sales should be put in an endowment fund, which could yield annual investment profits of 195 million dollars, the report by Crockett's panel said.
"The committee emphasizes that these limited gold sales should be handled in a way to avoid causing disturbances to the functioning of the gold market and, accordingly, should be coordinated with current and future central bank gold agreements so as not to add to the volume of sales from official sources."
The IMF's finances have become strained as more and more clients emerge from years of economic crisis, during which they became reliant on its bailouts, to stand on their own feet.
The latest country to exit IMF supervision is Ecuador, whose new leftist government said this month it would pay back its 33-million-dollar debt early, so depriving the Fund of income from interest repayments.
The IMF expects to post an operating shortfall of 105 million dollars in its current fiscal year through April, with 67 million of that linked to early repayments from Indonesia, Serbia and Uruguay.
To plug an immediate shortfall, the IMF said last May it would transfer its reserves of 8.7 billion dollars into a new investment account to generate extra returns on the bond markets.
But Rato noted at the time that the IMF needed to come up with long-term solutions to its funding problems.
http://www.turkishpress.com/news.asp?id=161122
Wowl, Sir Alan Greenspan the closet goldbug himself saying to unload the shiny yellow metal.
So if the IMF can't find any suckers at today's interest rates, which way should we suppose interest rates go? Myself I'm more inclinded to borrow at lower rates, but those third world cesspools with CIA sponsored tinpot dictators might not know any better.
Wowl, Sir Alan Greenspan the closet goldbug himself saying to unload the shiny yellow metal.
Alan is so kind to want to protect the gold market like that... especially when the most likely buyers are either central banks or very wealthy big buyers just waiting for a place from whom they can buy large quantities at low transaction costs to increase their ownership. It's exactly what happened in the '70s, and in my opinion will not work even close to as well as it did then.
"Central banks stand ready to lease gold in increasing quantities should the price rise."
-- Alan Greenspan, testimony to Congress on July 24, 1998
That was when gold was under $300...
I think he and the IMF need to change their breakfast cereal. ;)
http://www.nowandfutures.com/grins/bowl_of_stupid.jpg
Alan is so kind to want to protect the gold market like that... especially when the most likely buyers are either central banks or very wealthy big buyers just waiting for a place from whom they can buy large quantities at low transaction costs to increase their ownership. It's exactly what happened in the '70s, and in my opinion will not work even close to as well as it did then.
That was when gold was under $300...
I think he and the IMF need to change their breakfast cereal. ;)
http://www.nowandfutures.com/grins/bowl_of_stupid.jpg
What was gold in 1945? $35 62-years later gold sits at $650 for a return of 4.7% per year. I would hope the big players and the Central Banksters have better portfolio managers than that. I would think 400 tons finds it's way into Chinese fake Rolex watches and Indian costume jewelry, those are the only countries I can think of that wouldn't mind getting rid of several billion d0llars of green pieces of paper.
google had volume of 12.4 million shares today, and closed a tad over $500. there's your worrisome $6billion in volume, which would buy 400 tons of gold. one stock, one day.
google had volume of 12.4 million shares today, and closed a tad over $500. there's your worrisome $6billion in volume, which would buy 400 tons of gold. one stock, one day.
Looks to me like the shiny metal is going to have to compete with Google, Dell Computer and the new tech bubble tomorrow. I'm pretty sure between China and India they can pick up $6 billion in gold tomorrow and put it to some good use.
metalman
01-31-07, 08:53 PM
IMF would sell gold because European central banks won't anymore
Submitted by cpowell on 06:50PM ET Wednesday, January 31, 2007. Section: Daily Dispatches
By Michael Kosares
Centennial Precious Metals, Denver
http://www.usagold.com/
Wednesday, January 31, 2007
I don't think we are going to see any sale of gold by the International Monetary Fund. It looks like the Central Bank Gold Agreement's inability to reach the 500-tonne quota for the 2006 agreement year (only 350 tonnes were sold) left more of an impression than any of us realized.
The IMF's Committee of Eminent Persons, which interestingly included the head of the Chinese central bank and former Fed Chairman Alan Greenspan, is saying essentially that the IMF "could" supply the shortage left if the Central Bank Gold Agreement can't meet the 500-tonne allotment in the future. This translates to market neutral because, theoretically, whether the IMF sold gold or not, no more than 500 tonnes would go on the market over the CBGA year.
It seems that the gold banking system needs roughly 50 tonnes of gold liquidity each month to keep from locking up. There is a natural deposit attrition rate in the gold banking business. In the natural flow of things, individuals and entities request their gold deposits back, and somehow 50 tonnes seems to get the job done. That 50 tonnes has to come from somewhere, and lately the European Central Bank system has been stepping up when the liquidity gets tight -- as the gold supplier of last resort. It may that the European banks have signalled their intent to withdraw further from the CBGA allotments (maybe France is about to back out of sales?), and the IMF group is trying to fill the gap.
And maybe more depositors might want their gold back, since many of them are stretched Third World banks and depositors from places like the Persian Gulf and fewer central banks are willing to part with their gold.
At any rate, it's an odd assortment of "eminent persons" in this IMF group, and we should take note of its composition: Andrew Crockett, former director general of the Bank for International Settlements and currently president of JPMorgan Chase International; Mohamed A. El-Erian, president and CEO of Harvard Management Co.; Greenspan; Tito Mboweni, governor of the South African Reserve Bank; Guillermo Ortiz, governor of the Bank of Mexico; Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency; Jean-Claude Trichet, president of the European Central Bank; and Zhou Xiaochuan, governor of the People's Bank of China.
You can always tell that Greenspan has had a hand in the festivities when you read sentences like the following: "The limited sale of fund gold should be ring-fenced to exclude further sales and subject to strong safeguards to limit their market impact."
There is no doubt in my mind that China would like to see the IMF sell ALL its 3,217 tonnes of gold, particularly if China might become a primary recipient. Without any fanfare China would happily write the check for all 3,217 tonnes. Otherwise, I can't imagine why the Chinese central bank might have been included on this IMF committee, unless it was to demonstrate that the system is at least trying to get them some gold. Perhaps the Harvard Management Co. is thinking similarly (smile).
To round this off, we should remember that the last time British Chancellor Gordon Brown tried to get his hands on the IMF's gold, he was stopped dead in his tracks by the U.S. Congress. This new attempt to shake loose the IMF's gold may be happening because the new Congress might be more amenable than the last.
From the view of these "eminent persons," it's at least worth a try. But they may be in for some rough sledding. Key Democrats were opposed to the last IMF gold sale proposal because suppression of the gold price meant reducing the income of Third World gold-mining countries. That's probably why this IMF committee assiduously addressed the price-suppression concerns. We should remember that the United States holds virtual veto power over IMF actions. We'll see if Congress is more amenable this time around, but we have our doubts.
IMF would sell gold because European central banks won't anymore
There is no doubt in my mind that China would like to see the IMF sell ALL its 3,217 tonnes of gold, particularly if China might become a primary recipient. Without any fanfare China would happily write the check for all 3,217 tonnes. Otherwise, I can't imagine why the Chinese central bank might have been included on this IMF committee, unless it was to demonstrate that the system is at least trying to get them some gold. Perhaps the Harvard Management Co. is thinking similarly (smile).
From the view of these "eminent persons," it's at least worth a try. But they may be in for some rough sledding. Key Democrats were opposed to the last IMF gold sale proposal because suppression of the gold price meant reducing the income of Third World gold-mining countries. That's probably why this IMF committee assiduously addressed the price-suppression concerns. We should remember that the United States holds virtual veto power over IMF actions. We'll see if Congress is more amenable this time around, but we have our doubts.
Something to keep in mind here, China's Central Bank doesn't collect gold, China's industry does. Gold plated electronics, fake Rolex watches, military gear all use gold. China will purchase this gold for consumption, not to stick in the ground someplace. But yep, that's why the Chinese Central Banker was there. When you consider the Federal Reserve has approved everyone of our 535 representatives plus our VP and President, when the BIS tells you to do something, certainly conngress knows better than to get in the way.
Something to keep in mind here, China's Central Bank doesn't collect gold, China's industry does.
Do you have any links that show that?
The PBoC bought 12.7 million ounces in 1999, another 3.1 million in 2001 and another 3.2 million in 2002, and still show the entire quantity on their balance sheet.
Do you have any links that show that?
The PBoC bought 12.7 million ounces in 1999, another 3.1 million in 2001 and another 3.2 million in 2002, and still show the entire quantity on their balance sheet.
By comparison to the over 100 million ounces that just the IMF holds that's not doing a very good job of collecting. China runs several economic systems, the government one is Chartalist and as such there is no need for gold. I'd be more interested in knowing who China purchased that gold from and what currency was used for the transaction. Probably came from South Africa and if so it wasn't a d0llar transaction.
By comparison to the over 100 million ounces that just the IMF holds that's not doing a very good job of collecting. China runs several economic systems, the government one is Chartalist and as such there is no need for gold. I'd be more interested in knowing who China purchased that gold from and what currency was used for the transaction. Probably came from South Africa and if so it wasn't a d0llar transaction.
They've only been at it for less than 7 years, the IMF used to have hundreds of millions of ounces and their trend is nothing but down since the '60s, that's only what the PBoC is admitting to, and the PBoC proxy folk are on record multiple times with interest in purchasing more gold.
Nothing that I've seen or heard of has any data on where is came from but it wouldn't surprise me if some of it came from the BoE.
I gather you don't have any links that show that China's Central Bank doesn't collect gold?
lately the European Central Bank system has been stepping up when the liquidity gets tight -- as the gold supplier of last resort.
bart, how does this phrase reconcile with your own work on the ecb and gold?
They've only been at it for less than 7 years,
China is a 4K year old society, maybe they more than anyone understand the history of gold, silver and opium.
the IMF used to have hundreds of millions of ounces and their trend is nothing but down since the '60s, that's only what the PBoC is admitting to, and the PBoC proxy folk are on record multiple times with interest in purchasing more gold.
Gold has many uses, the best ones have nothing to do with money. Looks like the IMF is going to have 400 tons less gold pretty soon and as Sir Alan suggests that gold will not sell on the market but will be a private affair and the Chinese guy being there tells us who will privately buy it.
Nothing that I've seen or heard of has any data on where is came from but it wouldn't surprise me if some of it came from the BoE.
South Africa or Central Asia more than likely. China gets about 500K barrels a day of crude from Central Asia and Central Asia probably used the capital from the gold sale that they have plently of, to increase crude capacity. China has no need to protect their currency from the BoE, or Wall Street or George Soros so what purpose does gold serve except that's what the Austrians and the Ancap boyz would like you to believe.
I gather you don't have any links that show that China's Central Bank doesn't collect gold?
I gather you have absolutely no clue what a Chartalist System is and why there is no need for gold to run it. The only hype I've read for the last five years is how any day now China is going to convert their trillion d0llars of reserves to gold and the end result every year for the last five years is it never happens. Obviously your motitvation is you'd like to be holding a bag of gold that is worth more a year or ten years from now. Best of luck with that.
bart, how does this phrase reconcile with your own work on the ecb and gold?
There's no conflict. Most of it seems to be paper gold ("receivables") though, and I also note that it seems that they're trying to defend the 500 Euro level... and will also lose on the longer term.
I gather you have absolutely no clue what a Chartalist System is and why there is no need for gold to run it. The only hype I've read for the last five years is how any day now China is going to convert their trillion d0llars of reserves to gold and the end result every year for the last five years is it never happens. Obviously your motitvation is you'd like to be holding a bag of gold that is worth more a year or ten years from now. Best of luck with that.
As I noted above, you seem to not have any links that show that China's Central Bank doesn't collect gold when they have 600 tonnes on their balance sheet, Adam Smith and Knapp and Minsky and legal tender issues etc. notwithstanding.
As I noted above, you seem to not have any links that show that China's Central Bank doesn't collect gold when they have 600 tonnes on their balance sheet, Adam Smith and Knapp and Minsky and legal tender issues etc. notwithstanding.
Here you go,
Three months after a peaceful handover in July 1997, Hong Kong was dragged into the Asian Finanical Crisis in which at one point the Stock Market fell by 22.8% within a week. Between summer 1997 and summer 1998, the Hang Seng Index of leading shares lost nearly two thirds of its value, leading to the government making the decision to intervene in the market by buying billions of dollars worth of shares. While this may have prevented the market from collapsing and staved off pressure for the Hong Kong dollar to be depegged from the US dollar, the move was widely criticised as it was perceived as undermining Hong Kong's status as a free market economy.
http://en.wikipedia.org/wiki/History_of_Hong_Kong#Beginning_of_1997:_transition
Looks to me like Hong Kong needed about 600 tons of gold to defend their currency. You want links from me and I only ask a very simple question, Why does a Chartalist System need any gold?
Looks to me like Hong Kong needed about 600 tons of gold to defend their currency. You want links from me and I only ask a very simple question, Why does a Chartalist System need any gold?
I'm not sure how the Hong Kong situation is related. That was 1997 and the PBoC's admitted purchases started in 1999.
I'm also uncertain of how Chartalism is related to the record of gold purchases and existence of 600 tonnes on the PBoC's balance sheet.
All I'm saying is that your original statement of "China's Central Bank doesn't collect gold" does not check with existing facts of which I'm aware, Chartalism notwithstanding.
I'm not sure how the Hong Kong situation is related. That was 1997 and the PBoC's admitted purchases started in 1999.
I'm also uncertain of how Chartalism is related to the record of gold purchases and existence of 600 tonnes on the PBoC's balance sheet.
All I'm saying is that your original statement of "China's Central Bank doesn't collect gold" does not check with existing facts of which I'm aware, Chartalism notwithstanding.
When China builds the Three Gorges project at an estimated cost of about $25 billion, where did that money come from? How was it created? It certainly didn't come from borrowing, taxes or gold so how did China create this $25 billion? This is just one small example of how China works.
Jim Nickerson
02-01-07, 01:51 PM
When China builds the Three Gorges project at an estimated cost of about $25 billion, where did that money come from? How was it created? It certainly didn't come from borrowing, taxes or gold so how did China create this $25 billion? This is just one small example of how China works.
Tet,
I don't understand how you can ask questions, and then draw a conclusion when the questions are not answered. How do you do that?
When China builds the Three Gorges project at an estimated cost of about $25 billion, where did that money come from? How was it created? It certainly didn't come from borrowing, taxes or gold so how did China create this $25 billion? This is just one small example of how China works.
maybe they paid the workers in u.s. dollars. or perhaps they printed yuan while using the dollars for imported materials.
maybe they paid the workers in u.s. dollars. or perhaps they printed yuan while using the dollars for imported materials.
I'm sure much of what China imports involves the d0llar, especially those US companies operating in China use the d0llar, but China and Russia did away with the d0llar for cross border trades three years ago and interborder trade between Russia and China is skyrocketing. China certainly isn't paying their workers with d0llars. I seriously doubt China's copper imports from Chile involve the d0llar anymore either. South Africa doesn't require the d0llar for gold. Looks like the world is moving away from the d0llar.
Tet,
I don't understand how you can ask questions, and then draw a conclusion when the questions are not answered. How do you do that?
Bart believes China is going to go to gold, I don't believe that since China's system doesn't involve gold. Just pointing out an example of the Three Gorge Project as to how China's system works.
Bart believes China is going to go to gold
...
That's not what I said.
I'm sure much of what China imports involves the d0llar, especially those US companies operating in China use the d0llar, but China and Russia did away with the d0llar for cross border trades three years ago and interborder trade between Russia and China is skyrocketing. China certainly isn't paying their workers with d0llars. I seriously doubt China's copper imports from Chile involve the d0llar anymore either. South Africa doesn't require the d0llar for gold. Looks like the world is moving away from the d0llar.
how foolish they would be not to buy things [copper, gold, turbines, pumps, etc] with dollars as long as there are sellers willing to accept dollars. perhaps they, like you, think the dollar will appreciate. or perhaps, as i suspect, they spend dollars every chance they get.
how foolish they would be not to buy things [copper, gold, turbines, pumps, etc] with dollars as long as there are sellers willing to accept dollars. perhaps they, like you, think the dollar will appreciate. or perhaps, as i suspect, they spend dollars every chance they get.
What possibly can Russia or China spend d0llars on? Oil? Gas? Shitty US military gear? POS stocks and bonds? US golf courses? Boeing jets? Crappy cars? Hair cuts and burgers? Not much the Russians or Chinese can purchase with Uncle Buck accept maybe allies.
When China builds the Three Gorges project at an estimated cost of about $25 billion, where did that money come from? How was it created? It certainly didn't come from borrowing, taxes or gold so how did China create this $25 billion? This is just one small example of how China works.
This still has nothing to do with the original question, and you apparently do not have a direct answer.
Just fair warning here too - the next time you try and put words in my mouth like with that comment on "Bart believes China is going to go to gold", I won't be as kind as just to note that something was not what I said.
This still has nothing to do with the original question, and you apparently do not have a direct answer.
Just fair warning here too - the next time you try and put words in my mouth like with that comment on "Bart believes China is going to go to gold", I won't be as kind as just to note that something was not what I said.
Here's a link Bart
http://www.china.org.cn/english/11988.htm
Central Bank Plans for New Gold Exchange
Governor of the People's Bank of China Dai Xianglong, said that the central bank has decided to scrap the planned system in the gold sector.
For decades, the central bank has been the sole decision maker regarding China's gold production and circulation. Gold producers have to sell all of their output to the central bank, which then resells it to gold users.
The gold exchange that was created allowed the four state owned commercial banks to purchase gold as well, I would assume to sell that gold to gold users. Now maybe China's gold purchases have occured because domestic producers haven't been able to keep up with China's commercial gold demand. Lot's of gold used in electronics, lots of commercial uses for the shiny metal.
China has 400 tons of gold, not much by Central Bank standards, especially for the 4th largest economy in the world, but there are a lot of gold users fake Rolex watches, printed circuit boards, electronic connectors, computers, these are all gold users and the Chinese Central Bank and State banks control that trade.
Now my question was why would a Chartalist System need gold for the creation of money?
Now my question was why would a Chartalist System need gold for the creation of money?
i don't recall anyone, in any of my readings on this board or elsewhere, suggesting that the chinese needed gold for the creation of money. in fact, it is universally reported that they print yuan to buy dollars earned by their exporters. [sometimes they may try to sterilize those yuan by issuing bonds.] the reason i and many other observers think the chinese want gold is that gold is something they can buy with all those dollars they've been accumulating. at least "gold" is part of what my decoder ring says when i input "diversify reserves."
Here's a link Bart
http://www.china.org.cn/english/11988.htm
Central Bank Plans for New Gold Exchange
The gold exchange that was created allowed the four state owned commercial banks to purchase gold as well, I would assume to sell that gold to gold users. Now maybe China's gold purchases have occured because domestic producers haven't been able to keep up with China's commercial gold demand. Lot's of gold used in electronics, lots of commercial uses for the shiny metal.
China has 400 tons of gold, not much by Central Bank standards, especially for the 4th largest economy in the world, but there are a lot of gold users fake Rolex watches, printed circuit boards, electronic connectors, computers, these are all gold users and the Chinese Central Bank and State banks control that trade.
Now my question was why would a Chartalist System need gold for the creation of money?
I've never questioned or commented on the general are of China's system including the flow of gold to industry, nor that they did or didn't want gold to trade, nor that industry uses are or aren't part of the flow. I also did not make any statements about commercial banks or demand or fake Rolexes or electronic components, or indeed about any need or requirement for gold in order to create money for that matter. I am not a "gold bug".
What you said was "Something to keep in mind here, China's Central Bank doesn't collect gold, China's industry does.".
What I said was that China in the form of the PBoC bought a total of 600 (not 400) tonnes (about 19.3 million ounces per their balance sheet) of gold between 1999 and 2002. None has been sold either to industry or anyone else since that time. There are also multiple times that various officials have stated an intention to diversify their reserves, and that it may include some into gold.
And that's the entirety of my point, and you have as yet to either change your original incorrect statement to match the provided facts, or provide any links or any other data to show that China has not collected gold since 1999 as those facts show.
Once you answer that point, I'll give you at least one answer about the Chartalist issue.
What you said was "Something to keep in mind here, China's Central Bank doesn't collect gold, China's industry does.".
What I said was that China in the form of the PBoC bought a total of 600 (not 400) tonnes (about 19.3 million ounces per their balance sheet) of gold between 1999 and 2002. None has been sold either to industry or anyone else since that time. There are also multiple times that various officials have stated an intention to diversify their reserves, and that it may include some into gold.
And that's the entirety of my point, and you have as yet to either change your original incorrect statement to match the provided facts, or provide any links or any other data to show that China has not collected gold since 1999 as those facts show.
Once you answer that point, I'll give you at least one answer about the Chartalist issue.
I see nothing that you say that disputes my statement, if anything it shows the amount of gold in realtionship to China's Foreign reserves has gone down every year. China held $470 billion in foreign reserves in 2004, that represented 2% of it being gold. Today China holds over $1 trillion in reserves and dispite gold's rise in price over those 2-years the percentage of gold to foreign reserves is lower. I try to point out that China steps in to help with the Asian meltdown of Hong Kong to show this could very well represent China's 1999 purchases and you sidestep this statement. Hong Kong being a former colony of the Bank of England it would be hard to untangle all the gold holdings of Hong Kong. Sovereignty was transfered in 1997 and the following year the meltdown starts.
Maybe we have a different view of collecting, because to me that means you have more of something not less. I'm sure your comments about Chartalism will be just as enlightening.
I see nothing that you say that disputes my statement, if anything it shows the amount of gold in realtionship to China's Foreign reserves has gone down every year. China held $470 billion in foreign reserves in 2004, that represented 2% of it being gold. Today China holds over $1 trillion in reserves and dispite gold's rise in price over those 2-years the percentage of gold to foreign reserves is lower. I try to point out that China steps in to help with the Asian meltdown of Hong Kong to show this could very well represent China's 1999 purchases and you sidestep this statement. Hong Kong being a former colony of the Bank of England it would be hard to untangle all the gold holdings of Hong Kong. Sovereignty was transfered in 1997 and the following year the meltdown starts.
Maybe we have a different view of collecting, because to me that means you have more of something not less. I'm sure your comments about Chartalism will be just as enlightening.
I finally see what you're driving at with those small minded semantic and misdirection offerings, since it's the only way to show there's even a glimmer of having made a correct statement.
Of course "bought" and "collecting" have two entirely different meanings. And of course the PBoC is so out of it that it takes 2-4 years before the PBoC's collections to occur after the Hong Kong "cause". It couldn't possibly have anything to do with those years being a low point in gold.
And too bad they only have almost 20 million ounces too, they're such a woos of a Central Bank. The last time I read the raw facts, 600 tonnes is almost identical to zero tonnes too. And of course Central Banks always tell the absolute truth on their balance sheets, so the PBoC couldn't possibly have more than stated. I almost forgot, gold doesn't play any part in their 4000+ year history either.
And here you assert yet another odd logical fallacy by not only saying I ignore your HK statement after I'd addressed it earlier, but primarily that you then blithely ignore the 2000 and 2001 purchases. One point for the ad hominem too.
I imagine your comments about Chartalism to me would be just as creative.
</sarcasm>
And too bad they only have almost 20 million ounces too, they're such a woos of a Central Bank. The last time I read the raw facts, 600 tonnes is almost identical to zero tonnes too. And of course Central Banks always tell the absolute truth on their balance sheets, so the PBoC couldn't possibly have more than stated. I almost forgot, gold doesn't play any part in their 4000+ year history either.
</sarcasm>
Chinese gold, silver and opium are not a very pleasant part of Chinese history.
Paper Money
Paper money NINTH CENTURY AD The Chinese invented paper money at the end of the eighth or beginning of the ninth century AD. Its original name was 'flying money' because it was so light and could blow out of one's hand. The first paper money was, strictly speaking, a draft rather than real money. A merchant could deposit his cash in the capital, receiving a paper certificate which he could then exchange for cash in the provinces. This private merchant enterprise was quickly taken over by the government in 812. The technique Paper 'exchange certificates' were also in use. These were issued by government officials in the capital and were redeemable elsewhere in commodities such as salt and tea. was then used for the forwarding of local taxes and revenues to the capital.
When the Mongols came to power in China, they issued a quaint form of paper money called 'silk notes'. The deposits behind this currency were not precious metals but bundles of silk yarn. All older money had to be cashed in and exchanged for silk notes, and the Mongols spread this unified currency all over the Empire and even beyond. By 1294, Chinese silk notes were being used as money as far afield as Persia. In 1965, two specimens of 'silk notes' were found by archeologists.
When Marco Polo visited China, he was so impressed by paper money that he wrote a whole chapter about it, describing everything about its manufacture and circulation. He described the manner in which it was issued: All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is duly prepared, the chief officer deputed by the Khan smears the Seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the Seal remains printed upon it in red; the Money is then authentic. Anyone forging it would be punished with death.
http://library.thinkquest.org/23062/money.html
From late 800AD to 1500AD the Chinese use paper money, this is the zenith of their civilization. This is a very long period of time for a money system to last, Tally Sticks in England had a similar length of time. Chinese are familiar with fiat, I believe they still hang people who counterfeit. Cowry Shells were more popular than gold or copper in ancient China.
i don't recall anyone, in any of my readings on this board or elsewhere, suggesting that the chinese needed gold for the creation of money. in fact, it is universally reported that they print yuan to buy dollars earned by their exporters. [sometimes they may try to sterilize those yuan by issuing bonds.] the reason i and many other observers think the chinese want gold is that gold is something they can buy with all those dollars they've been accumulating. at least "gold" is part of what my decoder ring says when i input "diversify reserves."
tet, you've never addressed my question here: why wouldn't the pboc prefer gold to [at least some of their] dollars?
tet, you've never addressed my question here: why wouldn't the pboc prefer gold to [at least some of their] dollars?
I would think the pboc likes gold to the extent of gold being an inventory to be consumed by industry and would treat gold much the same as I would treat the inventory I try to stock to support my own manufacturing. I try to stock inventory that in turn makes me money, especially inventory that gets used in many of the assemblies we manufacture. Looks like 2% of China's reserves being gold has supported the level of gold they try to maintain.
I would look more at what is the medium of exchange for the oil and gas that China is importing from Russia and Central Asia, it's not the d0llar anymore and certainly not gold. I haven't found anything that gives a clear indication of whether it's the Yuan or the Ruble or both. I'm pretty sure when both Russia and China talk about diversifying their reserves this is what they mean by it, trading for other currencies, not selling the d0llars they already have.
Now purchasing gold for China could become a political choice as well. Maybe China increases their gold purchases to South Africa in order to help South Africa's economy. I'm not sure if the Chinese are going to buy the IMF gold or just act like they want to and decide not to at a later date. Whatever the decision is, it will be in China's best interests.
vBulletin® v3.7.0, Copyright ©2000-2009, Jelsoft Enterprises Ltd.