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 Replies: 32 / Views: 3,641 |
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Pillar of the Community
United States
863 Posts |
So, many are saying that China and Asian countries are buyong gold and silver. What happens when China is no longer able to buy more physical gold.
Will the price continue to climb as they keep purchasing and that skyrocket once people realize that there is no physical metal to own?
Are they also hoarding silver? I think I read that China is encouraging its citizens to invest their money in silver. If so this may cal for some major changes very soon. The Chinese middle class is known for saving 40% of their salary.
Just looking for the thoughts of those who are wiser than me on this topic.
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Bedrock of the Community
United States
36575 Posts |
China has been trying to convert as much of that U.S. paper they have accumulated into tangible assets for the past couple years. They will continue to buy gold and silver even with rising prices. China is not the only country doing that right now. Many central banks and countries are net buyers of gold.
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Valued Member
United States
64 Posts |
China is also buying up huge amounts of farmland in Africa with US treasury bonds, just fast enough not to crash our currency (as is my understanding.)
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Pillar of the Community
United States
808 Posts |
China is poised to become the world's largest consumer of gold. Additionally, China is already the world's largest producer of gold. Quote:
What happens when China is no longer able to buy more physical gold. Barring some miraculous and nearly universal recovery of the global economy and an equally miraculous elimination of global debt, I doubt that China's desire to accumulate gold will abate any time soon. |
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Pillar of the Community
United Kingdom
2624 Posts |
I too was going to mention the buying of land by foriegn governments (in order to grow produce to export back to the original country and serving the purpose of getting rid of possibly soon to be worthless dollars)
China is not stupid to be doing this...America owes more than it can repay and one way to lessen this debt burden is to devalue the currency it is owed in; China knows that and so lessening it's exposure is only sensible.
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Pillar of the Community
United States
808 Posts |
This issue was covered here earlier this year, but it's worth bringing up again. While China's gold consumption is important, the real country to watch is the United States.
Why?
If the Federal Reserve carries through on proposed changes to their regulatory capital risk weighting framework, as soon as next year gold held by US banks will be assigned a zero risk weight. Bottom line is that US Banks may begin buying and holding gold as easily as they hold cash.
Edited by coinwatch
09/09/2012 2:35 pm
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Pillar of the Community
 United States
2448 Posts |
But, will they at today's prices? While it's possible to see a general surge is gold prices due to hoarding, the volatility of the metal markets won't help in determining a financial organization's reserve requirements...will it?  At these prices, I can assume gold takes up much less storage space than currency. With the credit market as it is, that's the only advantage I see in holding gold in large quantities. Unless, of course, we're forced back into a gold standard of business exchange. OK, I'm confused, other than an increase in gold prices, and gold or silver coins being priced out of the average collector's reach, how will this affect the lives of average consumers?  |
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Pillar of the Community
United States
4008 Posts |
Something that should be considered is "why is China accumulating gold and perhaps silver as well?". China is both the #1 producer and buyer of gold in the world. Not only that but the amount of gold that they are buying is probably more than they are admitting. This is typical Chinese government behavior, keeping their cards close to the vest as it were.
My thought is that the Chinese are highly intelligent people who have studied capitalism inside and out. They know its strengths and its weaknesses and are fully prepared to thoroughly exploit both to their advantage and to the West's detriment. This too is typical Chinese government behavior.
That said, they are stock-piling HUGE amounts of PMs, probably because they know that the paper fiat Ponzi scheme is doomed and they want to be at the top of the heap AFTER it all collapses. What better way to do that than to develop an international trade currency that is based on PMs, that is a true store of value, and that does not inflate away to nothing? Note that when the paper Ponzi scheme does collapse, it will take the Chinese fiat currency along with it. They know this and accept it as part of the cost of what they will attain afterwards.
China has a VERY long and venerable history. They consider anything that has occurred in the past 800 years as "recent history". When dealing with people who think this way, it would be in our best interests to be very careful observers of their activities so that we can analyze what their motives might be. Understanding them is key to dealing with them on an equal basis and that is key to maintaining some sort of relatively high position in the world, both before the paper Ponzi scheme collapses and afterwards.
As to the effect of all this on PMs, they will become much more valuable as time passes.
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Pillar of the Community
United States
2448 Posts |
Quote:
paper Ponzi scheme We are doing away with currency and coinage requirements at an incredible rate. Sorry, I don't believe the world or the USA is going back to the gold standard anytime soon. The whole world is courting electronic payments. How does your theory of "King Gold" fit in? Don't get me wrong, I want to make money on my PMs too. But what you're alluding to, does not compute. Please...give me insight. |
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Bedrock of the Community
United States
36575 Posts |
Money that is not backed by anything is only good as long as people are willing to accept it. Digital money is also backed by nothing and can be created with a key stroke, so nothing has changed other than someone else will now control all of your cash assets. What value does it really have? If you think inflation is bad with the old system, wait until a pure cashless system is put in place.
Politicians will do what they can to prevent a gold back currency as it ties their hands. No more creating money out of thin air to buy votes with.
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Bedrock of the Community
Australia
21786 Posts |
It is quite logical that China should buy physical gold.
They have bought a huge amount of Government bonds (debt instruments) from the U.S. and Europe, and it becomes essentilal that they balance against those huge bond holdings.
National debt is also one of the main reasons why most people see gold as a good hedge against inflation.
Gold per se is not a good REAL investment, where you can expect to make REAL nett profit in the long term.
The actual purchasing power remains much the same with inflation. The only difference is that you buy physical goods and services with increasing fiat money prices.
In this finacilal climate, where bond yields are low, and inflation threatens to be high, the physical holding of PM's seems to be more attractive to some.
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Pillar of the Community
United States
2448 Posts |
Quote:
If you think inflation is bad with the old system, wait until a pure cashless system is put in place. Electronically, how will gold stop inflation? What is there to stop the merchant from saying "today that suit is worth 20 pieces of gold as apposed to 10 pieces"? Or the farmer from telling you that a bunch of carrots is now worth 80 grains of gold instead of 40 pieces of silver? Any form of "money" is only worth what the market will bear. Please, enlighten me. Just my humble opinion though.    |
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Pillar of the Community
United States
808 Posts |
There's very little chance that any of the world's central banks will voluntarily return to a metals standard. Here in the US, forty plus years of fiat currency acceptance combined with the modern convenience and popularity of digital transactions means there is substantial inertia supporting the current monetary status quo by both business and the public at large.
So, what's going to upset the monetary cart? Well, we hear about the most likely culprits almost every day in the media: Massive sovereign debt and ongoing deficit spending. The ongoing threat of more and more Quantitative Easing debasing the value of our currency. Risks of inflation (been to the grocery store lately?), deflation(the greater threat), and worse.
IMHO, THE gold "play" is as a hedge against the current monetary system. This assumes that political considerations will continue to trump rational economic thinking. Unpopular budget cuts will continue to be delayed, entitlements will expand, and more and more money will be "printed" to pay for it all. The very fact that we're now at 16 trillion in debt almost seems to be encouraging new spending. And, I mean, why not? To certain groups, there's seemingly no limit to how much we can borrow, right? So, why not spend, spend, spend! Utter madness, of course. But the fact that this is really happening is indisputable. Gold and PMs in general, farmland and other real estate, in fact almost any tangible asset with intrinsic value will eventually be worth far more than the fiat money used for it's acquisition.
Edited by coinwatch
09/10/2012 01:02 am
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Bedrock of the Community
Australia
21786 Posts |
Sweden looks likey to become the first Country in the World to go completely cashless. Should happen within two years according to one Swedish comment I heard in a radio documentry program.
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Bedrock of the Community
United States
36575 Posts |
Gold does not "make" you money, it preserves what you have, it is financial insurance. Gold holds value and keeps up with inflation, it does not stop inflation. Fiat money loses value through inflation. If you want to speculate, play the stock market game.
Dig back through the history books and see how constant the value of the dollar remained until the Civil War when Federal paper money started to circulate. It drove hard money out of circulation because those coins were worth far more to people than what the paper currency was. Merchants charged more if you used paper for the same items. Coin collectors more than anyone else can see how the dollar was devalued. We once had 1/2 Cents and Large Cents that had real purchasing power.
Another thing to remember is that gold and silver have remained "money" for thousands of years. It has out lasted any currency that man has used as a substitute.
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Pillar of the Community
United States
1903 Posts |
On this same theme....how has the government been able to keep the wool pulled over everyone's eyes recently when our national debt exceeds our country's GDP? The GDP is what our currency is backed with...so if by this measure...if we owe more than we make....doesn't that mean our money is worthless? It is the same as you telling your buddy you will pay him $500 this month knowing good and well you can only earn $400....there is no way you can pay your buddy back. That makes your promise worthless...which is all our paper currency is...a promise.
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Replies: 32 / Views: 3,641 |
Posted 09/09/2012 12:46 pm
