A recent poll showed that Americans now consider China to be the second greatest enemy and threat to America now and for the future, with only Iran ranking as a greater danger to the nation. If you are in the significant majority of people who fear the rise of the dragon, then you have good reason for such justifiable fears.
From an economically practical sense of self preservation, the Chinese have already begun to take steps to protect their assets that will bankrupt millions of Americans and the U.S. government in the horrible process. In the paragraphs that follow, you will learn the details of this dastardly plot that is already well underway.
China’s Conclusions Since Last Decade and Especially Since the Financial Crisis
The Chinese did not get to be the wealthiest foreign reserve holders in the world through stupidity. They have watched with both fascination and muted horror as almost every nation in the world has both fallen into massive debt and begun to print money at alarming rates, especially since the financial crisis wrecked the world economy from 2007 to date.
The Chinese then logically reached the conclusion that the only thing that can protect their three trillion dollars of foreign currency assets is gold. They also gain a great advantage as they acquire gold reserves in place of especially dollars and also Euros.
They build confidence in their Yuan that will allow them to float it one day soon as a new and potent world reserve currency that competes against the dollar, even as most of the major currencies in the world are literally printed to the point of no value. Because of this, the Chinese have decided in the last ten years to corner the largest share of the global gold market that they can.
A hundred years ago the Chinese saved their financially and politically failed nation by going on to a silver standard where they backed up their paper currency with the other precious metal. Now, they are ready to gain the title of financial super power of the world, and they plan to do it when they back up their paper Yuan with gold. Famed historian Richard Russel recently opined that China plans to back up the currency with an enormous amount of gold so that they can make it into the most respected, trusted, and valuable currency on earth.
What is Their Plan to Increase their Gold Reserves Today?
China has several mandates in pursuit of this enormous goal. First, they plan to diversify the greatest amount of their three trillion dollars in reserves out of debased U.S. dollars and into hard assets like the ultimate precious metal. Then, they will launch their Yuan as a gold standard currency, and promote it as a competitor to the greenback in international trade and finance.
If you do not believe that a gold backing will dramatically strengthen the Chinese currency, just look at the Swiss Franc today, which is presently the only major currency in the world that is still backed by gold in vaults. The Chinese have studied this and know that what has worked for hundreds of years for Switzerland can similarly produce results for them.
How The Chinese Put Their Gold Plan Into Action
The Chinese have a three pronged strategy with which they advance their quest for gold. Their first and probably most effective way is that they both mine and buy gold bullion outright. You may not know that the law in China requires every ounce of gold that any firm or outfit produces in the country to be sold back to the government at prevailing market prices.
This is more significant today than ever as China has leaped into the envied position of world’s largest gold producer in recent years. They now mine for themselves over three hundred tons of gold per year at home, practically fifty percent more gold than does Australia as number two producer. Since no gold is permitted to leave China for any reason, regardless of who mines it, you can be sure that China’s proven gold reserves rise by a hefty three hundred million ounces each and every year.
China has also chosen to purchase enormous quantities of gold from both close to home and abroad. They secretly bought so much gold from the years 2003 to 2009 that they announced their gold reserves had risen more than 75%.
On January 11, 2012 Bloomberg reported that China purchased 3.6 million ounces of gold from Hong Kong. Reuters has also detailed that among the 130 tons of gold that the IMF sold to anonymous buyers, China was the most likely potential buyer. Thanks to these acquisitions, China is now the sixth largest national holder of gold on earth. Yet this amount of gold only adds up to a paltry two percent of their enormous foreign reserves.
Compare that to Germany and the U.S. who hold 70% of their reserves in gold bullion. Forbes has gone so far as to argue that China will accumulate an incredible 5,000 tons of gold throughout the next five years, which would be five times as much as their official total today.
The second point of attack on gold from the Chinese is their aggressive purchase of shares in numerous foreign based gold mining companies. Even now, the Chinese are engaged in the buyout of all or part of literally dozens of the premier gold mining outfits on earth.
Among these are a 40% holding in Canadian listed China Gold International Resources Corporation, a buyout of Mundoro Mining, 100,00 shares of gold major Anglogold Ashanti, 350,000 shares of Goldfields Limited, 250,000 shares of Kinross Gold Corporation, 101 million shares of Teck Resources, a buyout of Jaguar Mining, a purchase of Jinshi Mining, a 17% stake in Australian based Norton Gold Fields and a 60% holding of Altynken LLC.
Add this to their other large stakes in companies from a few years ago that include Gold Eagle Mining, Long Province Resources, and Inter-Citic Gold. In the future when gold becomes central to paper currencies once again, those who own gold miners will be stake holders in the new central banks of the world.
China aims to be the largest such stake holder, and they are well on their way already.
Finally, China is launching its own competitor to the London Bullion Exchange in June of 2012 called the PAGE, or Pan Asian Gold Exchange. Their biggest advantage over the London based center of the bullion world and even the Chicago based COMEX exchange lies in the fact that their new PAGE will be backed by far more than the standard 10% of gold ratio that backs up the two major precious metals centers. This exciting new gold exchange based in China will be an enormous step forward towards the Communist country backing up its entire currency with real gold.
Why Will China’s Gold Quest Bankrupt Millions of Americans?
By now you may be convinced that China aims to become a major gold broker of the world, and even that they wish to back up their paper currency with gold in order to make it a significant force in the international financial and monetary world. Why should this be so bad for America? Is it not beneficial to the U.S. that its largest trading partner and ultimately debt financier do well and be respectable financially?
The problem is that there can only truly be one world reserve currency at a time. If the Chinese Yuan becomes enough of a competitor to the Greenback, then the Dollar will cease to be the one reserve currency of the world. When the dollar loses its status as world reserve currency, it will profoundly impact everything about the U.S. and your standard of living.
This is because for the last more than fifty years, the U.S. has been able to buy and consume anything that it wanted even if we lacked the money to purchase it. The reason that we could get away with this is because the dollar was in such high demand the world over that we could simply float debt and print money as we needed more of it. This means that we did not need to produce or sell anything at home to anyone abroad, since we could simply make more money.
When China as our largest creditor one day suddenly announces that it will no longer accept settlement for the trade deficit and interest payments on the debt in U.S. dollars, then your proverbial goose is cooked. The whole American society will be drastically impacted for the worse.
How much worse? Imagine your ATM machine refusing to give you money, your social security or disability check not arriving anymore, and your bank not making you any type of loans for a viable interest rate ever again. The consequences go far beyond these horrible results.
All import costs would soar, from oil and gasoline, to food, clothing, and furniture.
The end game will be a shocking decline in the American standard of living within only a few weeks. Sam Zell is among the richest of Americans. He believes that the United States, and all American people who are not protected by gold holdings, will witness a 25% drop in their entire standard of living, if the dollar ceases to be the reserve currency of the world.