China is Buying up Gold

Kitco Commentator's Corner

Jim Roger's views

See link for Jim Roger's view of China, US, UK and Australia.

"Plato said in The Republic that the way societies revolve is they go from dictatorship to oligarchy, to democracy, to chaos and back to dictatorship.'' China, according to Rogers, is in the early stages of oligarchy. And, America, if it's not careful, is heading for chaos.

Reserve earns praise, but not our politicians

China on ‘Treadmill to Hell’ Amid Bubble, Chanos Says (Update1) - Bloomberg.com

China on ‘Treadmill to Hell’ Amid Bubble, Chanos Says (Update1) - Bloomberg.com

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China is buying Gold

From China Daily...

Bitten by the gold bug, Chinese investors are now rushing to hoard the yellow metal as fears over the global recession deepen.

The increased sales of gold bars and gold jewelry in Shanghai, Beijing, Guangzhou and other large cities are reflected in the precious metal's price surge on the Shanghai Gold Exchange (SGE), which trades in gold contracts for forward deliveries. Gold prices quoted on the SGE have increased by an average 6.74 percent in the past month to the current level of about 209 yuan a gram.

"Gold demand in China in the first quarter rose to 114 tons, up 2 percent over the same period last year, solely boosted by an increase in jewelry demand," according to the latest Gold Demand Trends report for the first quarter of 2009 published by the World Gold Council.

The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36 percent rise in value. China is the world's second largest gold consuming country after India.

"As we know, in late April, the People's Bank of China announced its gold reserves had risen 454 tons since 2003 to 1,054 tons, a signal that the central bank is taking gold as a reliable hedge against financial uncertainties," said Cheng.

According to Cheng, China now plays a greater role in the global gold market. Based on its increased holdings, China is fifth-largest gold reserve nation after the United States, Germany, France and Italy. In addition, China is also the world's largest gold producer and the second-largest gold jewelry consumer next to India.

"China's demand for gold bullion reached 68.9 tons in 2008, up 176 percent from 25 tons in 2007," said Cheng.

China students laughed at Geithner

What was it?

U.S. Treasury Secretary Tim Geithner told a crowd of students in Beijing that the trillion dollars worth of U.S. government bonds the Chinese hold are "very safe."

The Students laughed....they know better.

Gold bugs at last have their perfect trinity

From the UK Telegraph Will it be inflationary or deflationary and what is the direction for gold?

***************

China has doubled its bullion reserves and left us in no doubt that it will spend more of its $40bn monthly surplus on hard assets rather than the toxic paper of Western democracies.

...It is striking how many of those most alert to the deflation danger are either veterans of Japan's Lost Decade or close students of it: Albert Edwards at Société Générale, Russell Jones at RBC Capital, Nobel laureate Paul Krugman, the Fed's Ben Bernanke, and Athanasios Orphanides, who helped draft the Fed's study on the Japan trap. "People always thought Japan's bond yields had to rise, but they kept falling and Japan is still not really out of deflation," said Mr Edwards. Indeed, 20 years after the Nikkei peaked at over 39,000 it stands today at 9,280. Interest rates are 0.01pc. The yield on two-year state bonds is 0.34pc. Still there is not a whiff of inflation.

....America's debt-gearing has exploded, as it has in the UK and Europe. This looks awfully like Irving Fisher's "debt deflation" trap of 1933. It will be a long slog for households to bring their debt-to-wealth ratios down to manageable levels.

......Still, we think it is highly significant that both China and Russia – two of the biggest holders of foreign reserves – are both buying gold," he said.

...out of fear that the most corrosive phase of this crisis lies ahead. There are two more boils to lance: Europe and China. As the IMF keeps telling us, Europe's banks are still covering up their vast toxic debts. Nor has the G20 begun to address the root cause of the global crisis, which lies in excess exports from East (aided by currency manipulation) to an over-spending West. China is putting off the day of reckoning with its crisis response, which is to build yet more plant to flood the world with yet more over-capacity.

Andy Xie: "If China loses faith the dollar will collapse"

From Naked Capitalism
It's easy for Americans to pooh-pooh bearish talk about the dollar. Yet the sterling was once the reserve currency, and has fallen, what, by 80% since it lost its standing.

With increasingly dubious accounting and lax enforcement, the US capital markets no longer stand out by virtue of being better regulated. Yes, they still may be deeper and more liquid. But overseas buyers have to look hard at foreign exchange risk. The direction for the dollar in the long term is certain to be down. Overextended debtors trash their currencies (see the Great Depression, the Nordic and Swedish banking crises, and the Asian crisis for a few of many examples).

What is interesting about the Xie piece is that even the stalwart Chinese retail investor has become leery of the dollar. Despite th logic of "oh if you sell, you only hurt yourself", the flip side is if you become certain you are indeed holding a depreciating asset, it makes sense to exit. You want to be early, not late, out.

And that logic, if it starts to take hold, in classic run on the bank fashion, could lead to a disorderly fall in the dollar. It isn't clear what the trigger might be, but Bob Shiller contends that sudden flights from markets don't necessarily require an event to kick them off. And given that Willem Buiter, who though fond of colorful writing, is hardly an extremist, foresees a collapse in dollar assets if the US fails to contain its fiscal deficit, talk of a dollar plunge isn't a a radical view.

China has been buying Gold

April 23, 2009
SHANGHAI/BEIJING (Reuters) - China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tons and confirming years of speculation it had been buying.

China, Friend or Foe?

From the WSJ - April 18, 2009

A cave complex blasted out of the rocky coastline on China's southern island province of Hainan is home to one of the newest and potentially most lethal weapons in Beijing's arsenal: a home-grown submarine designed to launch nuclear-armed ballistic missiles.

So when the USNS Impeccable, a U.S. surveillance ship, was snooping in the area last month, China set a trap.

How long with the US Dollar be the reserve currency?

China is concerned about the US dollar. They know that the US is devaluing its dollar and they do not like it. They want sometime more secure and has been promoting a more diversified international monetary system that will be less reliant on the US dollar.

April 18, 2009 - BOAO, China (Reuters) – China's Premier Wen Jiabao said on Saturday that economic polices of countries which issue global reserve currencies require closer supervision as part of building a diversified international monetary system. His comments, an apparent reference to U.S. economic management that Beijing has blamed in part for the global financial crisis, were twinned with a pledge to promote more international use of the yuan, China's currency.

“It’s a bear market rally,”

George Soros told Bloomberg today. Leave it to the odd Hungarian billionaire to state the obvious: “It’s a bear market rally because we have not yet turned the economy around… This isn’t a financial crisis like all the other financial crises that we have experienced in our lifetime.”

So where is Soros -- one of the world’s most successful investors -- putting his billions? “I think Brazil actually,” says the thickly bespectacled one, “together with China, will be among the recovering countries. The outlook for Brazil is better than for most other countries.”

How China sees the world - The Economist

IT IS an ill wind that blows no one any good. For many in China even the buffeting by the gale that has hit the global economy has a bracing message. The rise of China over the past three decades has been astonishing. But it has lacked the one feature it needed fully to satisfy the ultranationalist fringe: an accompanying decline of the West. Now capitalism is in a funk in its heartlands. Europe and Japan, embroiled in the deepest post-war recession, are barely worth consideration as rivals. America, the superpower, has passed its peak. Although in public China’s leaders eschew triumphalism, there is a sense in Beijing that the reassertion of the Middle Kingdom’s global ascendancy is at hand.