2 thoughts on “Cryptocurrency Devaluation And The Russian-Chinese Golden Bond

  1. Somehow my post does not get trough so I cut it in pieces

    Hi Rory and Dave,

    Lovely interview and I have some food for thought on it. I just read a piece on the dailycoin.org going dinving deep into the Chinese accumulation . A quote from that piece

    If the PBoC is buying gold in excess of the amount that it offically reports, then logically it will not want these purchases to appear in import/export trade statistics. Like all central banks, the PBoC classifies and holds its gold reserves as “monetary gold” (i.e. “monetary gold is gold held as a reserve asset that is available to and controlled by monetary authorities”)[7]. Monetary gold is also exempt from reporting in international trade statistics / customs data[8][9]. Therefore, like all central banks, the PBoC would not have to report any monetary gold that it purchased abroad and then imported into China.

    This quote is also a gem
    In March 2013, Yi Gang, deputy governor of the Chinese central bank, also noted[19] how the Chinese state had to be cautious about official purchases so as not to upset the gold market:

    We will always keep gold in mind as an option in reserve assets and investments….we will also take into consideration a stable gold market. If the Chinese government were to buy too much gold, gold prices would surge, a scenario that will hurt Chinese consumers. We can only invest about 1-2 percent of the foreign exchange reserves into gold because the market is too small.

  2. part two

    Speculation from me on the reason why Russia is supplying China / SGE with 80-100 tons of gold is they want to back the Ruble with gold like China already does. Let me elaborate.

    The SGE is actually split into two parts, one for internal use and one for external use. For internal use, that gold cannot leave China and the external part where it can. Every Chinaman, Chinese company can go there and exchange their paper Yuan for gold. The only difference with the past goldstandard is that its price is not fixed at a fixed price and thus more fit for human nature.

    The external SGE is of way more interest for this speculation. That is the way the Chinese are internationalising their currency. They scheme is basically like this. They offer every country that accepts Yuan as payment (and pay with Yuan for imports). Well, if you dont like to keep your excess Yuan in reserve, you can always exchange them for gold and the amount of gold you get is based on the free market. If you have gold or produce gold and you deal with us in Yuan, you can trade your gold there for Yuan (and thus dont have to take a loan) and be able to get our goods and services without going into debt to us.

    As far as I know (and that is a bit dated knowledge) Russia really does not promote gold ownership with its population. It actually makes it hard. Not jewellery but bullion that is. What Russia experienced during the the oil price drop and sanctions was a dramatic decline in the price of the Ruble vs other currencies. That resulted in a big rise in inflation and I think they want a means to prevent that in the future.

    So what is a logical way to do that, make Rubles held by foreign powers fully confertable in gold! How do you do that, via the external SGE. Since the price of gold is floating freely, they can use gold as an absorber of excess Rubles and thus prevent a huge spike in inflation in their country.

    I think an important data point to look for is the announcement they will also accept payment in Rubles and not only Yuan.

    Hope this made sense.

    Regards, Hugo

    (and it seems links are blocked)

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