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CHINA'S ROAD TO BEING A GLOBAL RESERVE CURRENCY IS PAVED WITH GOLD [Copy link] 中文

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Post time 2015-5-2 14:19:18 |Display all floors
Instead of trying to be approved by the IMF as one of its five reserve currencies used to issue IMF's XDR's (also called SDR's), which total less than 4% of the actual foreign currency reserves held by central banks around the world, and of which, China's quota, even if approved by the IMF as a special member of the elite issuers of the XDR's, is a mere 6%, equating to the YUan becoming at most, only 0.24% of the actual foreign currency reserves of the world, if China is indeed sincere about making the Yuan a global reserve currency without having to lower its exchange rate for the Yuan, China should simply buy up all the gold in the spot and futures market with $1 Trillion of its $3.8 Trillion dollar foreign currency reserves.

At the current price of gold of approximately $1,180 USD per ounce, and using the ratios of 16 oz per pound, 2000 pounds per tonne, one tonne of gold should cost about $37,760,000.  One thousand tons should be worth $37.8 billion dollars.  Ten thousand tons should be worth $378 billion dollars.  

At 10,000 tons of gold reserves, China would be number one in the world as far as gold reserves backing its currency.  With one trillion dollars, China could hold 26,483 tons of gold as its reserve, making it hold more than the total of the gold reserves of US, Germany, IMF, Italy, France and Russia combined.  Now, that is a REAL INTERNATIONAL RESERVE CURRENCY regardless of what IMF says, and what other countries do.  And, it will not obligate China to overvalue the Yuan, which forces its manufacturers to overprice their products abroad in dollars and at home in yuans.  The Yuan exchange rate can come down to 6.50 CNY/USD without affecting the INTERNATIONAL RESERVE STATUS OF THE RENMINBI.

Isn't this a better, safer, and fairer (to the Chinese factory owners and workers) way to achieve the monetary goal of making the Yuan an international reserve currency, without sacrificing China's export market and manufacturing sector?

SO, WHY NOT?





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Post time 2015-5-3 07:40:31 |Display all floors
This post was edited by abramicus at 2015-5-3 08:05

It is now quite clear that the supposed REASON TO OVERVALUE THE YUAN cannot be in order to make the Renminbi an international reserve currency.

It might be to force the rest of the PBOC to agree to lower interest rates and banking reserve ratios, which will let in the other monster, INFLATION INTO CHINA.

Having forced China's manufacturing into recession by the overvalued Yuan exchange rate, the Economic Hit Men are now forcing China into inflation by lowering interest rates and reserve ratios.

This is called STAGFLATION, which happened under the Carter admnistration, and collapsed the US economy, which is now being orchestrated to occur instead in China.  This is the only explanation that makes sense from all the existing facts on the ground.

INSTEAD OF CHOOSING TO LOWER THE INTEREST RATE AND BANKING RESERVE RATIO, CHINA SHOULD OVERRULE THE PBOC AND LOWER THE EXCHANGE RATE OF THE YUAN TO 6.50 CNY/USD, INSTANTLY, JUST AS DENG XIAOPING DID IN 1992, AND CREATED THE ECONOMIC MIRACLE OF CHINA THAT LASTED 20 YEARS.


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Post time 2015-5-4 16:56:40 |Display all floors
THE FALL IN CHINA'S MANUFACTURING PMI INDEX TO 49.8 FOR THE MONTH OF APRIL 2015 IS A SIGNAL TO CHINA THAT THINGS ARE GETTING WORSE, NOT BETTER, AND IT HAS TO DO SOMETHING ABOUT IT, BEFORE FACTORIES DEFAULT ON THEIR DEBTS, LAY OFF WORKERS, AND SHUT DOWN PRODUCTION, LEADING TO SOCIAL UNREST.  DON'T LET THINGS GET WORSE, PLEASE, BECAUSE YOU ARE TRADING TEN PROBLEMS FOR YOUR ONE PROBLEM RIGHT NOW.  LOWERING THE INTEREST RATE ONLY WORSENS THE PROBLEM BY TRIGGERING INFLATION THAT ROBS THE PURCHASING POWER OF THE SAVINGS OF THE CITIZENS OF CHINA.

THE ONE AND ONLY SOLUTION THAT CURES THE DISEASE CLEANLY AND QUICKLY IS TO DEVALUE THE YUAN TO 6.50 CNY/USD OVERNIGHT.

DO IT, AND SEE IF THE ECONOMY WILL NOT IMMEDIATELY PICK UP, EXPORTS RISE, AND THE FOREING CURRENCY RESERVE OF CHINA JUMP UP BY ANOTHER BILLION DOLLARS IN ONE YEAR, EXTRA MONEY THAT CHINA CAN USE TO FINANCE THE AIIB AND THE BRICS BANK, TO HELP POORER COUNTRIES BUILD THEIR INFRASTRUCTURE UP, IN LINE WITH THE SPIRIT OF THE BANDUNG CONFERENCE TO DEVELOP THE THIRD WORLD, AS ITS INALIENABLE RIGHT.

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Post time 2015-5-5 07:55:45 |Display all floors
China need to buy not only gold but everything there is to buy for the enormous amounts of USDollar she holds as long as it's worth anything, but that will actually increase the value of the Yuan at the same time unless China start printing loads of it. Difficult to unload big amounts of USDollar without crashing it and make the remaining reserves worthless.  

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Post time 2015-5-6 15:12:10 |Display all floors
mikaelforsberg Post time: 2015-5-5 07:55
China need to buy not only gold but everything there is to buy for the enormous amounts of USDollar  ...

Agree, merely selling dollars only crashes the market.  But using it to buy gold and other hard assets increases the backing of the Yuan, which can be traded in the future, if need be, for such assets, if China should be asked to redeem its Yuans for any valid reason.  One of the best assets that preserve value is gold, but there are others.  Unfortunately, land, buildings, factories, mines and resorts in foreign countries can be confiscated by foreign powers, and lack the security of ownership and transferability of ownership that GOLD and other precious metals possess.  Transforming China's foreign currency reserves into such hard assets of enduring value, securable ownership, and transferable ownership, is the correct way to dispose of such foreign currency reserves.  

Using foreign currency reserves to buy up Yuans, in order to achieve a temporary upvaluation of the Yuan, that lasts as long as Chna keeps spending its foreign reserves to buy Yuans, on the other hand, is the least efficient way to use China's foreign currency reserves, and is the most wasteful way of disposing of it, because what China gets in return, tons and tons of Yuans, it could have simply printed for pennies, or if digitally stored, cost practically nothing to obtain.

Using foreign currency reserves to buy up Yuans is also the most self-destructive way to use such reserves, because they are used to overprice Chinese products abroad in dollars and domestically in yuans, that leads to the destruction, closure, and bankruptcy of these manufacturing firms, their secondary tier of businesses, and the banks that lend them money.  What the PBOC achieved in using dollar reserves to buy up Yuans in order to prop up its exchange rate is equivalent to China committing suicide by hanging itself with its own rope of foreign currency reserves, a rope that is 3.9 trillion dollars strong, and unbreakable by any private consortium of manufacturers and banks, including all the SOES combined.  They shall all be hanged by the current Yuan exchange rate until they all perish.



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