This last week a new financial name may have caught your eye – The Asian Infrastructure Investment Bank, basically a Chinese World Bank in direct competition with the greatest super-power we’ve ever known, the United States of America. We begun to highlight this looming shift of economic strength flowing from West to East about 4 years ago. But it is quite sobering to finally see these developments emerging in mainstream media headlines this week.
News broke of countries signing up to join The Asian Infrastructure Investment Bank (AIIB) in many news outlets but The Economist has such a great advertising strapline we believe they deserve to be quoted:
The Economist: “The world is crazy. But at least it’s getting regular analysis.”
“It is extremely rare for Britain to take a foreign-policy stance at odds with that of its closest and most important ally, America. It is perhaps unprecedented for it to do so by siding, in a contentious issue of global financial governance, with the superpower’s emerging rival, China. Yet that, in effect, is how America seems to interpret Britain’s plans to join China’s new Asian Infrastructure Investment Bank (AIIB) as a founding shareholder. China, naturally, is chuffed. Most other observers are flummoxed. The AIIB is one of a number of new institutions launched by China, apparently in frustration at the failure of the existing international financial order to adapt quickly enough to accommodate its astonishing rise. Efforts to reform the International Monetary Fund are stalled in the United States Congress. America retains its traditional grip on the management of the World Bank.”
What has the launch of this new “China-Bank” to do with the price of Gold?
For years we’ve been highlighting the extent to which China actually owns American debt, and thereby in many way is beginning to ‘own America’. The figures are tragically breath-taking and one wonders how it got to this stage of economic power flowing in the opposite direction to the years of American being the World’s Free Super Power.
“Foreign governments hold about 46 percent of all U.S. debt held by the public. The largest foreign holder of U.S. debt is China, according to the Treasury. In total, China owns about 8 percent of publicly held U.S. debt.” (Tom Murse) Let that sink in. I’m travelling to the States later in the year. During that time for every cent I will hold, China will own 8 cents on every dollar!
To put into perspective: “Of all the holders of U.S. debt China is the third-largest, behind only the Social Security Trust Fund‘s and the Federal Reserve‘s Treasury investments, purchased as part of its quantitative easing program to boost the economy.” That means that after the very US government itself, China has the biggest interest in the US not going bankrupt. Except the US is bankrupt. To an eye watering $18 trillion dollars and rapidly climbing.
Knowing this acutely due to their ‘investment’ in US Debt, China is simultaneously looking to re-position themselves as the controller of a new world currency. Although the actual thought of a communist regime taking over the Super Power Crown from the Republic of America doesn’t sit well at all with me on every level, I can understand the sheer financial tactic, even if I don’t look forward to the potential outworking of such a move.
And by what will this new world currency be backed? The answer is found in what China have been doing for the last two years… amassing physical Gold and Silver.
Chinese Gold demand from Shanghai figures are hard to come by, at least accurately. This is for a strategic reason. According to Brian Lundin at the New Orleans Investment Conference “China are massaging the numbers” and the actual figures of Physical Gold demand from Shanghai Gold Exchange could be off by between 4% – 50%! Again, if you were a government looking to make a quiet, hostile take-over of another super power, wouldn’t you hide your strategy and move in as quietly as possible? I’m not saying I like the idea. I can just recognize standard game-play. Lundin predicts the Gold demand figures are “800 tonnes greater than expected.” What is in no doubt is that since 2013 there has been “a tremendous surge” of Physical Gold (and Silver) acquisition within China. Gold buying has been “ramped up, exceeding and maintaining for 2 years” levels not seen before.
Add these two moves together – the creation of The Asian Infrastructure Investment Bank and the unprecedented buying of Physical Gold and Silver – and you sadly have the two greatest signs of preparation for a Currency War instigated by China on America.
Yesterday the most clearly heartbreaking statement hit Bloomberg and although I pray it will prove not to be true, my logic tells me it more than likely will transpire over the next few decades: “The Obama administration’s vain attempt to prevent allies from joining China’s Asian Infrastructure Investment Bank is feeding a growing perception that U.S. influence in Asia is declining and America is losing its 70-year grip on global economic institutions. This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”
The sobering reality is that even Alan Greenspan, the former Federal Reserve chairman himself has gone on record to state that “we are in fact staring a major market event in the face.”
Unknown at first glance, is the fact that Greenspan was himself a “radical Gold bug in the 1960’s and early 70’s”. Like all players within the higher echelons of the financial currency markets however, he speaks in “Greenspeak” meaning “it’s complicated to figure out what he really means.”
In an extensive interview with Brian Lundin, Greenspan and Lundin discuss a variety of questions. Lundin then reports back on this during a thirty minute radio interview with SHTFplan.com with another excellent strap line “When it hits the fan don’t say we didn’t warn you.” It is well worth a listen, particularly the first 20 minutes which relate directly to the price of Gold. But if you don’t have the spare time, that is what we are here for, so here are the main points:
1) China has moved in this way to acquire physical Gold (and Silver) due to what is believed to be an official policy on currency to its citizens. I first reported on this three years ago, citing a small piece on the Chinese government officially telling their citizens to acquire small silver bars upwards; and wondering how different things would be if the British and American governments had done the same. The Chinese strategy is to hold Gold for a “long return strategy” and to create “economic power flowing from West to East”.
2) When Lundin was asked “does he believe Gold has hit bottom” he was careful in his answer but replied “Yes, in general terms the dollar is showing its top and gold is showing its bottom.” But he reminded listeners that we’ve been burned a few times before on this question.
3) When asked does he see a rally in the Gold price therefore in 2015, he strongly summed up his position by stating very sensibly that there is “no need to time it that closely. There are bargains out there that should be bought right now and held onto with a two to three year time horizon, with great confidence that the downsize risk is minimal and your upside return is really quite extra-ordinary.”
4) Asked whether the dollar is safe and what would happen to the Gold price over the next five years, Greenspan stated that the Gold price would be “measurably higher” – classic Greenspeak but backed this position up against the “outstanding debt load” being “so great” and in reaction to “an era of Quantitative Easing.”
The interview concludes: “The end has to come at some point… If you look at a chart of the U.S. dollar index it has gone nearly parabolic in the last few months… In any market that is so one sided, that is accelerating so rapidly, that trend will end… it will most likely end in a fairly violent fashion. And if gold rises as a result, so too will other resource assets in the energy and mining sectors. What it boils down to is that the assets that are necessary to keep our system operating will always have value, and that is especially true in a situation where the U.S. dollar happens to be crashing.
In all of this, we highly recommend not forgetting Gold’s more volatile but more accessibly priced sister, Silver. For an in-depth look at this extremely attractive investment metal please take a look at another of my recent blogs: “All that glitters is not Gold, it’s Silver” here.
Here are some of the Gold coins we offer at Bleyer. Take a browse and call one of the team on 01769 618618 to find out how you can invest in a variety of Gold bullion coins today. Their advantages range from high portability to considerable Capital Gains Tax advantages, such as the Gold 1oz Britannia and all Gold sovereigns.
In addition, we hold a wide variety of coins from many nations, for the clients among you who enjoy investing in beautiful designs. Take a look at the stunning Austrian Philharmonics or the extremely popular American Eagle and Buffalo. We’ve noticed an increase in interest in Chinese coins, and Bleyer now offer a variety of denominations of the Chinese Panda in 1/10, 1/4 and 1/2 ounces. These make ideal gifts or as an incentive to start accumulating Gold for a family member or grandchild.
Browse our extensive range of additional South African, Canadian and Australian Gold coins, for a bullion investment that – like all our bullion investment coins – are recognisable and tradable the world over.
And in conclusion, if the idea of a Chinese World Bank doesn’t bother you, just take a look at which country joined the AIIB in the last few days as a “founding member”….
Just days after the ink was drying on the highly questionable ‘statement of agreement’ on Iran’s nuclear capabilities, and with China acting as a mediator in that statement, Iran was given founding membership of the world’s newest and soon-to-be most powerful Chinese banking system.
We can’t protect you from the rest of it but we can help you protect your wealth by acquiring your own Gold and Silver. Please browse our website or call the team now on 01769 618618 or email email@example.com to find out more. We are here to help.