By Sean Kelly
It may be a cliché, but the golden rule of the international monetary order is still, “He who has the gold makes the rules!”
As far as most people know, the US is still the world’s gold hegemon: we have more gold than anyone else.
Or so most believe. We are sorry to report it is no longer true.
Investopedia reports the conventional wisdom: “The United States holds the largest stockpile of gold reserves in the world by a considerable margin. In fact, the U.S. government has almost as many reserves as the next three largest countries combined (Germany, Italy, and France). Russia rounds out the top five.”
Here are the official numbers in metric tons of gold:
- United States: 8,133.5 tons
- Germany: 3,362.4 tons
- Italy: 2,451.8 tons.
- France: 2,436.2 tons.
- Russia: 2,295.4 tons.
China’s official gold reserves are listed as 1,948 tons. But that understates its position. By a lot.
Gold is big business in China.
It is now the world’s largest gold producer. China has more than twice the annual gold production of the US. It is the world’s largest gold refiner. Knowing what gold means to China’s economic might, it has aggressively encouraged its people to own gold.
Multiple researchers now suggest China’s actual government gold holdings may be ten times the size it officially reports, an amount almost 2.5 times those of the US!
According to gold economist Alasdair Macleod, China has huge hidden reserves. Macleod has confirmed from “quasi-intelligence sources” that China has something like 20,000 tons of gold spread over accounts other than its central bank, accounts such as those of the Communist Party, the People’s Liberation Army, and the Communist Youth League. Other investigators appear to have confirmed this order of magnitude.
China has always been cagey about reporting its gold holdings.
But for years we have been watching and talking about an almost subterranean flow of gold from the West to the East.
China’s growing dominance of the gold world market has not happened by mere coincidence or happenstance. It is the result of a conscious policy. A wise policy.
We reported to you recently on China’s development of a cyber yuan, a government-sponsored digital currency, not linked to the global dollar reserve system or the global trade settlement system under the de facto control of the US government. It is widely believed that China intends to have the cyber yuan up and running in time for the 2022 Beijing Olympics. Introducing a new digital currency with a statutory gold backing would be nothing less than a monetary coup.
A gold-backed digital yuan would sweep the world, relegating the debt-backed US dollar to second place.
It would result in a global demonstration of Gresham’s law, as commercial interests and central banks accrue and hold the gold-backed currency, and dishoard depreciating unbacked currency.
This will impact you in two ways. It will kick the props out from under the value of the dollar – yes, your dollars and dollar-denominate assets. The dollars reserve status has long privileged the dollar with a higher exchange rate than it would otherwise have. That special privilege will begin to unwind and everything will cost more.
The US government must borrow trillions of dollars from foreign lenders to keep the lights on.
It will be forced to offer much higher interest rates to borrow that money. As interest rates normalize, US debt, already unpayable, will compound faster and faster.
It is a poor prognosis for the value of the dollar. Your dollars. But it is all fact-based. China has supplanted the US in the gold spaces. It is on the road to begin displacing the dollar as the lone world reserve and sole global commercial currency.
It is too bad that this has happened.
It would not have happened except that America’s governing classes promised that the government could print its way to prosperity. But that was never true. Anybody can print something and call it money.
But he who has the gold makes the rules.
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