Tuesday, March 10, 2015

Don't Mind China

The dollar keeps going up! The recovery is in year six! Houses are selling and mortgage rates are at insane lows! Take some cash out in a refi and get butt implants. It is the latest thing. Our financial media is part of the casino game that is American finance, and it seems to get sicker by the day. There are nice big picture stories that could be discussed, with full follow up on the ramifications of said storyline and why it might be important to pay attention. Some Americans are anxious about China's economic rise, and they have good reason to be. They might be well aware of the declining living standards of the USA, and how a Chinese catbird position could make them even worse. What has been happening recently that should keep Yanks up at night.

Small little piece of news was released per Reuters on Monday. It involves the infrastructure to the parallel world system the Chinese-Russia axis are trying to set up, but no need for alarm Americans. Keep focused on Iran-Israel-Kardashians in some order. China has been working on a system that would allow international yuan transactions, and now the timetable is for a start near the end of 2015. It is in testing mode, and looks to be launch in 3rd quarter 2015. Here is a fun tidbit tucked into the end of the short Reuters blurb, 

"China's yuan became one of the world's top five payment currencies in November 2014, overtaking the Canadian dollar and the Australian dollar, according to global transaction services organization SWIFT". 
Hey, wait a second. Who is building an alternative to SWIFT so that the USG regime cannot perform financial warfare on opponents. Oh that's right. Silly old Russia. I should not mock the mainstream media too hard about their odd coverage of this. At least the Wall Street Journal is concerned.

Another item that should cause people to scratch their heads is the massive gold import story in China. Koos Jansen is probably the best of the China gold watchers, and he has noticed the same strong demand for gold that is underreported in China. This is not like the COMEX that is a paper market; these are gold deliveries. This is on top of internal gold production that they keep in-house. This story is interesting enough on its own for the sheer size of imports, but the next question is, where is it coming from? Who is their supplier? Another question is: if they are delivering 20+ tonnes a day in Shanghai, how come Germany cannot get its 700 tonnes in under seven years from the FED? That does not pass the smell test. If Germany wants to prepare for a post-euro financial regime, they might as well start swapping their gold claims from FED custodial holdings for actual deliveries in Shanghai.

The last item, and there is no link since it is obvious, is how long will China import deflation or at least disinflation from the US? Because of its yuan-dollar peg, as the US dollar strengthens so has the yuan. This helps with purchases of raw materials, but it causes quite the strain on China with all the debt floating around there. Do they announce gold holdings, causing a shock and then drop in the dollar's value? Do they sit tight and amass gold and oil before the dollar breaks, or euro, which will boost the dollar temporarily? Do they pull the rug out from the dollar due to their unique position with all of those US Treasuries? I don't know, but I do think silence and amassing gold only benefits them for now. I wish I saw someone in the mainstream media tackling this issue.

Gold plays into the Sun-Tzu approach. Fight your enemy on battlefields you choose and avoid fighting when overmatched. Maybe they know they cannot take Uncle Sam on head on, but if they take a different route, they do not have to fire a shot. It is pretty clear that the Russian-Chinese axis sees the dollar as the key, and they are trying their best to build around it and weaken its dominance. The Chinese most likely have their own version of the Golden Rule. I do not know it, but my grandfather told me our version when he explained why I needed to listen to him. He who has the gold makes the rules.


罗臻 said...

This dollar rally will likely turn into the first or second largest bull market in history. It is coming because of credit bubbles overseas and the failure of central banks. What should have happened in 2008 is happening now. In percentage terms, we've already seen a move that exceeds 2008. This bull market will destroy the non-US dollar market, unleash global deflation and wreck emerging market currencies. The dollar will be at its weakest point and most vulnerable at the end of this. The dollar dies via hyperdeflation; the flip side is hyperinflation overseas. Everyone will be in USD at the end.

One point on China: they can't take the deflation, which is why they will devalue the yuan. The gold is there to prevent a collapse and for post crisis. They might have thought it was for protection from the dollar, but it will end up saving the yuan from the mistakes made from assuming the dollar was already dead, pouring hundreds of billions into commodities and emerging markets about to collapse.

mlaurel said...

Very true. The Russians and the Chinese are beginning to integrate their economies and cover each others backs. The deals over the last few years climb into the many hundreds of billions of dollars. And who knows what secret deals are made behind closed doors?

This is understandable though. Both China and Russia are almost completely encircled. Both know that their only chance for survival is to bring down the hegemon and while neither can do it alone together they are exponentially more capable of pulling it off.

And exciting few years to come!

Son of Brock Landers said...

Mlaurel - I think their deal is also to secure that long shared zone so Russia can concentrate westerward while China can concentrate into the near ocean.

China also knows that if russia goes down, they are next. They will not repeat the Rhodesia-South Africa debacle.

Anonymous said...

A relative of mine, who is in the US Army in Germany, recently pinged me ( a very minor goldbug ) about gold. His friend reports of seeing massive gold extraction infrastructure in Northern Africa. So.... Northern Africa is where a lot of gold is coming from?

PRCD said...

Take some cash out in a refi and get butt implants"


nikcrit said...

I grew up in Maine in the ‘80s and ‘90s. We had actual town hall meetings about things. Was this stupid? Maybe, but there were times where everyone came together to tackle a problem. Maine was about as close as one can get to an ethnostate since it was 99% white. Almost everyone’s heritage was British Isles or France, and mostly through Canada.

Replace 'British Isles or France" with "of Scandinavian descent" and you describe the ethnicity and social milieu of Northern Wisconsin or Minnesota north of Minneapolis.

Did Maine go for Obama in '08 and '12? I know it went for GWB in at least one of his terms

Corn said...

Maine voted for H.W. in '88 but hasn't gone red in a presidential election since.