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Tuesday, April 28, 2015
EpochTimes: China Uses Gold to Pursue Global Power
It seems like speculation on how much gold China has and how they intend to use it in the future is becoming a topic of mainstream interest more and more as time goes by. In this EpochTimes article, we have yet another publication speculating on where things might be headed. Below are some quotes from this new article.
BUT IT'S STILL A LONG WAY FROM CONTROLLING GLOBAL FINANCE
"Usually the International Monetary Fund only becomes exciting when it tries to prevent Argentina or Greece from defaulting. After five years of hibernation, another, more obscure area of the financial institution might actually shed light on a mystery of global finance: China’s gold reserves.
Given their usual knack for non-transparency, the Chinese haven’t updated their official gold reserve since 2009, when they stood at 1,054 metric tons, far below the United States, the IMF itself, and European nations such as Germany, France, and Italy.
"Why are Chinese gold reserves important for international finance and what does the IMF have to do with them? Maybe Beijing believes in the satirical version of the Golden Rule: “Whoever has the gold, makes the rules.”
. . . . .
“Whoever has the most gold is able to control gold’s valuation. Controlling gold’s valuation, you can control the valuation of all other currencies,” says Chris Powell of the Gold Anti-Trust Action Committee, a non-profit organization monitoring gold markets.
Henry Kissinger himself believed in that theory when he was Secretary of State in the 1970s. “I am sure the Chinese are well aware of this,” says Powell."
. . . . .
"The public may soon find out how much gold, or power, the Chinese really have.
The IMF is conducting a technical review of its own reserve currency, the so called Special Drawing Right (SDR) this year. So far, only the dollar, the euro, the yen, and the pound were part of the SDR. This year, Beijing has indicated it wants the yuan to be included in the SDR.
“That’s when they are going to have to come clean. If they are trying to get their currency to become part of the SDR, they would have to come out publicly and say how much is going to be held,” says Willie McLucas, of McLucas Family Holdings and veteran of the global gold trade.
Most people think the disclosure of gold reserves is part and parcel of becoming part of the SDRs, however, nothing official has been published on the matter.
The international community, however, is taking China’s endeavor seriously, as there was a meeting by the global central banks in Washington on April 17, 2015, called “Gold, the Renminbi and the Multicurrency Reserve System.” We could see official statements coming at an IMF hearing in May or during the formal SDR revision later this fall."
Having followed this story now for quite some time, it seems like a consensus is now finally emerging on what is going on with China and gold. Both mainstream and alternative media sources are now reporting the idea that the Chinese have been using the BRICS development bank and the new AIIB (Asian Infrastructure Investment Bank) to increase pressure on the US Congress to approve reforms at the IMF which would give China more influence. China feels they have earned this because their economy is now probably the 2nd largest in the world while their voting power at the IMF does not reflect that. You can't really blame China for feeling that reform needs to take place to credit them for their increased contribution to global GDP.
The problem from the Chinese point of view is that the US Congress has not been willing to approve the reforms at the IMF or increase the US contribution to the Fund. The IMF seems kind of caught in the middle between trying to please its largest and most influential members (the US and some EU nations) and most of the rest of the members (led by China).
It looks like this will probably get resolved by the end of this year. If the US Congress approves the reforms and/or approves the inclusion of the Yuan in the SDR currency basket later this year, we can expect that China will be happy with the results and will only seek to use the new development banks to complement the activities of the IMF and the World Bank. This is what they have repeatedly stated many times is their goal.
However, if the US blocks BOTH the IMF reforms and inclusion of the Yuan into the SDR basket, it would make sense for China to move forward more aggressively with their alternative development banks and to promote the Yuan there. Perhaps even by setting up an SDR like currency where a partially gold backed Yuan would be the lead currency for those new development banks.
Either way, China needs more gold because they had so much less than the US and the EU to start with. China can use their vastly increased gold reserves in a number of different ways depending on how things turn out at the IMF later this year. It gives them more flexibility and options.
Unless we do get some kind of major financial crisis this year, it looks more and more like what happens at the IMF this fall to the end of the year will be the main events impacting monetary system change for now. We will just continue to follow it here as events unfold.