While doing the research for this article, it appeared the leaders of China have been listening to Ron Paul while most leaders in the U.S. continue to mock him.
Though history proves fiat currencies fail, central banks, including the Federal Reserve are bound and determined to convince the world that this time history won’t repeat itself.
So, if you were China and you owned $1.2 trillion in U.S. bills, notes, and bonds, what would you do to hedge your bets and cover your fanny? Exactly what China is doing: buying gold. In fact, they are buying so much; it appears they are preparing for a world beyond the fiat dollar. A future world in which the renminbi backed by gold could become the dominant reserve currency.
State-owned China National, CEO Sun Zhaoxue commented on the acquisition of African Barrick Gold Ltd, saying, “As gold is a currency in nature, no matter if it’s for state economic security or for the acceleration of renminbi internationalization, increasing the gold reserve should be one of the key strategies of China.” So, in spite of the fact China is the world's largest producer of gold, it appears important enough for China to still acquire interest in mines in other countries.
And Zhaoxue sounds suspiciously like Ron Paul when he says, “Gold is currency.”
But then we hear Ben Bernanke, chairman of the Federal Reserve Bank, telling students at George Washington University how impractical a gold backed currency is, “I mean, what you have to do to have a gold standard is you have to go to South Africa or some place and dig up tons of gold and move it to New York.”
So while Bernanke is teaching students it’s too much of a problem to mine and ship gold to the U.S. to fill our void, the Chinese are buying up the mines — in Africa.
China is mining gold, buying gold, buying gold mines and encouraging its citizens to buy gold. They are even minting gold coins in various sizes to make it easier for citizens to accumulate. Maybe we need to take another look at Zhaoxue’s statement. “…for the acceleration of renminbi internationalization…” And right now the renminbi is fiat like all other currencies, right?
Reports in the past have told us it would be years before the dollars’ place, as the world reserve currency would end. At one time economists speculated if the dollar were ever replaced, it would be by the euro. Not anymore. Following the world wide financial collapse in 2008, and the stresses by such countries as Greece, the euro continues to teeter. The world watches for the impact of more Euro zone bailouts; it’s not looking good. All eyes right now are on Spain, as a not “if” but “when” bailout.
And then there is the fiscal cliff Ron Paul has warned about in the U.S. Failure by our nation’s leaders to reign in spending on domestic social issues, tighten tax loop-holes that encourage off-shore banking and investments by the rich (Hello Romney), an out of control military industrial complex pushing U.S. imperialism all over the world, and of course the Bush era tax cuts that are getting ready to expire and the now loss of the petrodollar. Add to that, the never ending Federal Reserve’s QEs. How much more can the fiat paper dollar withstand, even if stacked a billion thick?
Many people just don’t realize how aggressive the competition against the greenback has become in just the last two years by the red renminbi of China. The remnimbi is positioning itself to be viewed as a real global reserve currency alternative. China is not one to make public most of their financial plans, but let’s look at some of the stories that have made it into the mainstream media:
Russia and China in 2010 decided to do away with debt exchanges using the U.S. dollar and instead trade directly in ruble and renminbi.
In December 2011, Japan and China announced they would be promoting trades directly with each other and sidestepping the dollar. Last year's trades were about $340 billion. At the same time China announced a direct $11 billion currency swap with Thailand.
In January 2012, Wen Jiabao, the Chinese Premier, signed a $5.5 billion currency swap with the United Arab Emirates.
Then at the end of January there is an article from Forbes answering the question “Why is China buying so much gold?” Forbes simple answer; a substitute against capital flight. What? The Chinese Premier, Wen Jiabao is the one flying all over the world setting up all these currency swaps.
In late March 2012, according to Zeebiz, “The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders…” And, “The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28% over the last few years, but at $230 billion, remains much below the potential of the five economic power houses.”
In March 2012, we learned Dubai-based Emirates NBD the largest bank is selling dim sum bonds, debt securities issued in the Chinese yuan.
Again in March 2012, China and Australia sign a $30+ billion swap agreement. According to the Reserve Bank of Australia, “The main purposes of the swap agreement are to support trade and investment between Australia and China, particularly in local-currency terms, and to strengthen bilateral financial cooperation. The agreement reflects the increasing opportunities available to settle trade between the two countries in Chinese renminbi and to make RMB-denominated investments.”
In April, we learn in a report from Forbes, that China will be avoiding U.S. financial sanctions against Iran by making oil purchases not only bartering goods, but also using gold.
In late June 2012, China and Chile agreed to strengthen their ties in a strategic partnership and double their trade in three years. The leaders of the two nations, Jiabao and Pinera, also announced the completion of negotiations on investment-related supplementary deals to a bilateral free trade agreement.
Also in late June of 2012, China and Brazil agreed to a $30 billion currency swap.
Hold on a minute, what did Ron Paul say about the U.S. establishing trade around the world but keeping our noses out of other nations business? Sounds like the leader of China was listening to Ron Paul. According to Paul’s critics, what we are witnessing from Jiabao is isolationism in action. Of course, the enlightened know this isn’t so. In fact, Jiabao is a stellar example of Paul’s non-interventionist stance and is promoting trade with other countries.
Then in August 2012, Germany and China announced they are going to be doing a lot of their trade in the Euro and renminbi. The article leaves out any mention of bypassing the dollar. Maybe by now it should just be understood.
China encourages its citizens to accumulate gold. Gold coins are minted in China in varying sizes easing the way for the people to accumulate gold. China is the largest producer of gold in the world. And now as China increases trade around the world using renminbi, and it is also beginning to use gold as currency and in exchange for oil.
Ron Paul has repeatedly said the U.S. should consider gold a currency and if we are to continue printing paper dollars we need to return to a gold standard, so the dollar will have value. The Federal Reserve Bank, Obama, Romney and their supporters brush away Paul's comments as though his warnings were gnats.
Ron Paul alerts us of a day when the dollar has no value. He warns of a day this country topples over a fiscal cliff.
On that day, don’t be surprised to look up and see the renminbi--- backed by gold emerging as the world’s reserve currency.