ShanghaiDaily: Gold for Asset protection

[LargoWinch]

What a novel idea! :rolleyes:

China should 'trust, but verify'
By David S. Markun | 2009-8-20

RECENTLY there has been much discussion about the dilemma the Chinese government faces stemming from its large holdings and continued purchases of United States government debt.

The Chinese government is rightfully wary of American fiscal carelessness, and the possibility of holding on to assets that will be worthless over time given the very real prospect of a declining dollar.

China could achieve asset protection by informing the US that it will continue to buy US debt but only if denominated in yuan. Alternatively, China could insist on purchasing bonds that give it the right of redemption in either dollars or gold.

...

Continued here.

[FRED]

Re: ShanghaiDaily: Gold for Asset protection

What a novel idea! :rolleyes:

"Thirty-seven years ago the world’s economies started on the circular track back to Bretton Woods. We will sooner or later be back where we started, with international transactions guided by a fixed gold price." - The Fourth Currency

[Mega]

Re: ShanghaiDaily: Gold for Asset protection

Fred
You must understand that China/India/Etc MUST BREAK THE POWER OF NEW YORK/LONDON 1st!

No point moving to Gold or silver or oil or tea or coffee...........If NY/London are FREE to inflate/deflate to their advantage. Why do you think the "Bric's" are holding off?

Given half a chance NW/London would destablise ANY $ replacment.

Mike

[cobben]

Re: ShanghaiDaily: Gold for Asset protection

China is not in the forefront of monetary reform -

Zimbabwe's CB will once again lead the rest of the world's clueless CB's down the straight & narrow path of monetary responsibility . . .

http://news.za.msn.com/africa/articl...ntid=149286295

" . . .
HARARE - Zimbabwe's central bank governor on Thursday proposed bringing back the worthless local currency and ensuring its value by backing it with gold, an idea quickly rejected by the finance minister.
The government abandoned the Zimbabwe dollar in January and now uses foreign currency, after a decade of hyperinflation estimated in multiples of billions left the local unit worthless.
"What I am calling for is the guarded reintroduction of the Zimbabwe dollar where such new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamond or platinum," Reserve Bank chief Gideon Gono wrote in the state-run Herald newspaper.
The loss of the local currency has sharply eroded Gono's influence, and he has repeatedly tried to reassert himself by calling for the return of the Zimbabwe dollar, which went into freefall during his five years in office.
Finance Minister Tendai Biti quickly shot down the proposal, simply telling reporters: "The Zim dollar is dead and buried."
Gono's stewardship of the Reserve Bank is one of the main battles within Zimbabwe's six-month-old unity government between long-ruling President Robert Mugabe and his erstwhile rival Prime Minister Morgan Tsvangirai.
Mugabe unilaterally appointed Gono to a new five-year term after the unity accord was signed but before the government had taken office.
Biti, the top aide to Tsvangirai, has often feuded publicly with Gono, who enjoys strong support from Mugabe.
Mugabe has also called for the return of the Zimbabwe dollar, saying poor Zimbabweans have no access to foreign currency."

[metalman]

Re: ShanghaiDaily: Gold for Asset protection

China is not in the forefront of monetary reform -

Zimbabwe's CB will once again lead the rest of the world's clueless CB's down the straight & narrow path of monetary responsibility . . .

http://news.za.msn.com/africa/articl...ntid=149286295

" . . .
HARARE - Zimbabwe's central bank governor on Thursday proposed bringing back the worthless local currency and ensuring its value by backing it with gold, an idea quickly rejected by the finance minister.
The government abandoned the Zimbabwe dollar in January and now uses foreign currency, after a decade of hyperinflation estimated in multiples of billions left the local unit worthless.
"What I am calling for is the guarded reintroduction of the Zimbabwe dollar where such new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamond or platinum," Reserve Bank chief Gideon Gono wrote in the state-run Herald newspaper.
The loss of the local currency has sharply eroded Gono's influence, and he has repeatedly tried to reassert himself by calling for the return of the Zimbabwe dollar, which went into freefall during his five years in office.
Finance Minister Tendai Biti quickly shot down the proposal, simply telling reporters: "The Zim dollar is dead and buried."
Gono's stewardship of the Reserve Bank is one of the main battles within Zimbabwe's six-month-old unity government between long-ruling President Robert Mugabe and his erstwhile rival Prime Minister Morgan Tsvangirai.
Mugabe unilaterally appointed Gono to a new five-year term after the unity accord was signed but before the government had taken office.
Biti, the top aide to Tsvangirai, has often feuded publicly with Gono, who enjoys strong support from Mugabe.
Mugabe has also called for the return of the Zimbabwe dollar, saying poor Zimbabweans have no access to foreign currency."

not such a stupid idea...

German Reichsmark

The Reichsmark was introduced in 1924 as a permanent replacement for the Papiermark. This was necessary due to the 1920s German inflation which had reached its peak in 1923. The exchange rate between the old Papiermark and the Reichsmark was 1 RM = 10¹² Papiermark (one "trillion" in modern English, one "billion" in German and other European languages, see long and short scales). To stabilize the economy and to smooth the transition, the Papiermark was not directly replaced by the Reichsmark, but by the Rentenmark, an interim currency backed by the Deutsche Rentenbank, owning industrial and agricultural real estate assets. The Reichsmark was put on the gold standard at the rate previously used by the Goldmark, with the U.S. dollar worth 4.2 RM.

[MarkL]

Re: ShanghaiDaily: Gold for Asset protection

This article discusses Central Bank Gold Agreement #3 (CBGA3) which was signed last week and directly addresses why gold investors shouldn't fear Central Bank sales. One issue I've always been concerned about is CB selling gold as a defense mechanism for their fiat currencies. But this is a strong argument against that happening. Here's a couple of excerpts...

"Conspiracy theorists often point out that gold, history's ultimate form of money, is the mortal nemesis of today's fiat paper currencies. They are certainly right on this fact. But then they extrapolate it too far, inferring that CBs want to drive the gold price as close to zero as possible. What better way to eliminate the monetary competition than killing gold? The 10 years of CBGA history utterly refute this extreme thesis.

CBGA 1 effectively increased the annual gold supply by 16%. You'd think this was bearish, right? On the contrary, it was very bullish! Over the 3 trading days after this Agreement was announced, gold rocketed 13.7% higher.
..
The original CBGA was bullish because it took a great deal of uncertainty out of the gold market. Investors finally knew that European CBs would not dump too much gold too fast, cratering the gold price.
..
To better visually parse the changes in reserves, I highlighted large selling. Yellow, orange, and red cells respectively represent CBs selling 5%+, 10%+, or 15%+ of their gold reserves in a single calendar year.


..
And so far in 2009, with this CBGA year ending in just 6 weeks, CBGA selling is only running 27%. It's at just 136t out of the 500t annual limit!
..
Interestingly, the European CBs themselves just officially acknowledged they are going to slow their gold sales in the future. Last Friday, August 7th, 2009, the 19 CBs now in the CBGA officially signed CBGA 3. Once again, they led off with "Gold remains an important element of global monetary reserves." And incredibly, they actually shrunk their annual quota back down to 400t per year between now and 2014! This alone shows they are selling less gold, but the IMF comments in the release cement this case."

Please note that the above text is very small portion of the article, which must be reviewed to get the full flavor of the author's position.

I'm looking forward (and hoping) to hear iTulip's expert's opinion on whether the collapse of fiat currencies around the world and/or significant dollar inflation might cause CBs to sell or buy Gold and why. Obviously, it will drive the average investor to buy. But CBs may have different motivations in EJs predicted scenario....

[metalman]

Re: ShanghaiDaily: Gold for Asset protection

This article discusses Central Bank Gold Agreement #3 (CBGA3) which was signed last week and directly addresses why gold investors shouldn't fear Central Bank sales. One issue I've always been concerned about is CB selling gold as a defense mechanism for their fiat currencies. But this is a strong argument against that happening. Here's a couple of excerpts...

"Conspiracy theorists often point out that gold, history's ultimate form of money, is the mortal nemesis of today's fiat paper currencies. They are certainly right on this fact. But then they extrapolate it too far, inferring that CBs want to drive the gold price as close to zero as possible. What better way to eliminate the monetary competition than killing gold? The 10 years of CBGA history utterly refute this extreme thesis.

CBGA 1 effectively increased the annual gold supply by 16%. You'd think this was bearish, right? On the contrary, it was very bullish! Over the 3 trading days after this Agreement was announced, gold rocketed 13.7% higher.
..
The original CBGA was bullish because it took a great deal of uncertainty out of the gold market. Investors finally knew that European CBs would not dump too much gold too fast, cratering the gold price.
..
To better visually parse the changes in reserves, I highlighted large selling. Yellow, orange, and red cells respectively represent CBs selling 5%+, 10%+, or 15%+ of their gold reserves in a single calendar year.


..
And so far in 2009, with this CBGA year ending in just 6 weeks, CBGA selling is only running 27%. It's at just 136t out of the 500t annual limit!
..
Interestingly, the European CBs themselves just officially acknowledged they are going to slow their gold sales in the future. Last Friday, August 7th, 2009, the 19 CBs now in the CBGA officially signed CBGA 3. Once again, they led off with "Gold remains an important element of global monetary reserves." And incredibly, they actually shrunk their annual quota back down to 400t per year between now and 2014! This alone shows they are selling less gold, but the IMF comments in the release cement this case."

Please note that the above text is very small portion of the article, which must be reviewed to get the full flavor of the author's position.

I'm looking forward (and hoping) to hear iTulip's expert's opinion on whether the collapse of fiat currencies around the world and/or significant dollar inflation might cause CBs to sell or buy Gold and why. Obviously, it will drive the average investor to buy. But CBs may have different motivations in EJs predicted scenario....

relax... read this...

and this...

[ThePythonicCow]

Re: ShanghaiDaily: Gold for Asset protection

relax... read this...

and this...

Did not EJ state, sometime in the last year, something to the affect that gold is not money?

Sometimes I think that our understanding of money and economics is stuck in the Industrial Age. Just because gold has been the finest store of wealth for millenia and a fine investment for the last decade, and just because the dollar has been a miserable store of wealth for a century and looks to continue that tradition aggressively into the future, does not mean that there is anymore a reliable long term physical means to store wealth, nor that gold will be an continuously excellent investment for the next decade, nor that the major monetary systems of the world will return to a gold basis anytime soon.

Most of the ways to preserve wealth these days seems to require ceaseless energy, such as through innovation (e.g. Apple) , more efficient production (e.g. China), or dynamic accumulation of power (e.g. the U.S. or certain monopolies.)

There might not be a "put it in the safe" means to preserve wealth for long periods in our present times. I know of no God given reason why we should presume we are blessed with such a means. It might be that the role of money as a medium of exchange is partially overwhelming its role of wealth preservation during this period of rapid world wide economic diversification, innovation and integration.

EJ has apparently invested some of his savings in gold. But clearly he has also invested some of his savings and presumably more of his energy in iTulip, as a fountainhead of economic discussion, developing a recognized brand for innovation in these matters.

He did not just build a self-sufficient bunker, bury his all his savings as gold in the backyard, and disappear from view.

[LargoWinch]

Re: ShanghaiDaily: Gold for Asset protection

Most of the ways to preserve wealth these days seems to require ceaseless energy, such as through innovation (e.g. Apple) , more efficient production (e.g. China), or dynamic accumulation of power (e.g. the U.S. or certain monopolies.)

Accumulated wealth should not require "ceaseless energy" in order to preserve its purchasing power.

That is exactly the goal of the CBs: a big giant treadmill for all but them and their fiends - sorry - friends.

I have a hard time with my grand parents doing anything close to the list above in order to preserve what they worked so hard for.

[ThePythonicCow]

Re: ShanghaiDaily: Gold for Asset protection

Accumulated wealth should not require "ceaseless energy" in order to preserve its purchasing power.

Small, long term stable communities of humans deal with this by taking care of their elders, their children, their less capable, their eccentric. "Wealth" is stored in the few necessities of life (pots and pans, shelter, clothing, tools) that one has accumulated over the years, and in the bonds of trust and affection which one has established with ones neighbors. Elders contribute what they can and what they know, such as the elder elephant in a herd knowing where to find water in a severe draught.

But many humans, over much of human existence, have not been so blessed.

The structure, organization and scale of human interaction has been changing rapidly of late. Many humans no longer live in such long standing communities or tribes. Yes, it would be nice if there was a stable store of wealth not requiring ceaseless energy. Yes, that sounds like a proper goal. But perhaps we don't have that now, and to be honest, don't know how to insure that now.

[LargoWinch]

Re: ShanghaiDaily: Gold for Asset protection

Small, long term stable communities of humans deal with this by taking care of their elders, their children, their less capable, their eccentric. "Wealth" is stored in the few necessities of life (pots and pans, shelter, clothing, tools) that one has accumulated over the years, and in the bonds of trust and affection which one has established with ones neighbors. Elders contribute what they can and what they know, such as the elder elephant in a herd knowing where to find water in a severe draught.

But many humans, over much of human existence, have not been so blessed.

The structure, organization and scale of human interaction has been changing rapidly of late. Many humans no longer live in such long standing communities or tribes. Yes, it would be nice if there was a stable store of wealth not requiring ceaseless energy. Yes, that sounds like a proper goal. But perhaps we don't have that now, and to be honest, don't know how to insure that now.

Do you mean like this?

(Side note: I think the "P" in Pythonic should be replaced by Philosophical from now on ;))

[ThePythonicCow]

Re: ShanghaiDaily: Gold for Asset protection

Do you mean like this?

For clarity of my reply, the link goes to a documentary video that is an:

Incredible expose of humanity, its consumption of natural resources and the disparity between rich and poor caused as a result of the current global economic system.

Now, for my brief reply. Yes, that is another aspect of the changes that involve us. I don't know how that environmental destruction and human poverty play out yet, nor quite what to make of it.

(Side note: I think the "P" in Pythonic should be replaced by Philosophical from now on ;))

It is true I have been philosophical than pythonic of late.

[cobben]

Re: ShanghaiDaily: Gold for Asset protection

Is this the future, is Zimbabwe truly leading the world in currency reform?

This bears watching . . .

Why not monetize goats meat, chickens & corn also while we're at it?

The "Zimdollar:" Dead, but still used for bus fare
http://news.yahoo.com/s/ap/20090816/...abwe_zimdollar

" . . .
The independent Zimbabwe National Chamber of Commerce blamed acute shortages of hard currency on payments to buy imported basic goods previously manufactured in Zimbabwe, such as soap and cooking oil from South Africa.
Without enough cash no matter how they cut it, Zimbabweans survive on a mish-mash of currencies.
All the bus drivers can do with Zimdollars is give them back to other passengers in change for American bills. In one reported incident, a passenger pulled a gun on a bus driver who insisted on paying change in local notes.
Outside the cities, where hard currency can be hard to come by, Zimbabwe dollars are used like promissory notes in small transactions. And trillion Zimbabwe dollar notes, the world's biggest denomination bills, are a hit with collectors, selling briskly on eBay. In Zimbabwe, they change hands like tokens or IOUs.
Stores without small change in hard currency don't offer obsolete Zimbabwe dollars in change like the bus drivers do, but routinely provide candies and chocolate bars or "coupons" handwritten on check-out slips to be redeemed on future purchases.
Irene Gwata, owner of a small trading store in rural northwestern Zimbabwe, said hard currency has stopped filtering down to her customers in recent weeks. Locals trade goat meat, chickens and pails of corn for goods, she said.

She saw a village woman board a bus and pay with a live chicken trussed in wire for the 150-kilometer (90-mile) trip to Harare. With characteristic Zimbabwean humor in adversity, Gwata said, "people wanted to know if she was going to get eggs for change.""