Archive for January 31, 2012

Americans to become sharecroppers in their own country as printed money boomerangs back to the developed world to buy up companies

A few comments on the story below.

This is just the start of a wave of acquisitions by Chinese firms in the West as the FX reserves accumulated in the Asian Central Banks wash back up on the shores of the developed world.

Geely, a Chinese car company worth $200m USD bought out Volvo for $2 Billion USD. The money of course was fronted by the local government. The former parts units of GM, which still operates several manufacturing sites in Michigan and Ohio are now owned by the Beijing city government. One of these companies, the former Saginaw Steering Gear made machine guns for the American army in WW2, now they have been bought by Beijing.

Everyone is aware that China is rolling over their trade surplus money as well as the printed money they create to keep the USD/RMB peg and buying hard assets.  But there is not enough investment to wash up all of this cash, the next focus will be buying real companies in the West with IP. They will convert these reserves ever so slowly into real assets in the developed world, not just commodities.

For decades , Asia has performed the role of diligent worker bee. Without a history of Adam Smith and free trade they saw how easy it was to game the free trade system. To this day, Koreans do not buy Japanese goods and Japanese do not buy Korean goods. Neither one will buy U.S. goods. The stuff they do want , like Hollywood movies, they just take. The U.S. took the brunt of the free trade economic carnage as over 50,000 factories have closed down in only the last ten years. No one can labor arbitrage and transfer price their taxes away like corporate America. We are still #1  in that game.

As the Fed printed money, giant speculative asset pricing bubbles occurred. The U.S. got lazy on their housing bubble and focused on the military industrial complex. Once mighty titans GE and GM became housing lenders with “old world” businesses attached to provide cash-flow for the financing sides of the business. Everyone drank the kool-aid.

Now drink this kool-aid, even printing money is no longer an option for the U.S. government. China will print to keep the RMB peg…and combined with the $3.2 trillion in FX reserves they could buy most of the S&P 500 companies. Japan is also printing money like there is no tomorrow. Facing economic carnage in their own country, they are bound to start acquiring Western firms to compete with China. The U.S. now faces defaulting on their debt quickly or becoming a sharecropper to Asia.

China Has Begun Buying Up Germany’s Family-Owned Industrial Backbone

German concrete pump-maker Putzmeister looks set to be bought by Chinese firm Sany for 360 million euros ($473 million), Reuters reports.

You may have heard of Sany, run by China’s richest man, Liang Wengen, but it’s probably unlikely you’ve heard of Putzmeister (outside of, perhaps, their involvement in last year’s Fukushima disaster) — but to Germans, this is a big deal.

Putzmeister, a family owned firm with revenues of around €570 million ($753 million), is part of Germany’s “Mittelstand”—a number of small- and medium-sized firms, often family-run, that are said to be the backbone of Germany’s economy.

While far from the first Chinese deal in the area, as the FT’s Chris Byrant notes, it is noticably large and certainly surprising, given the family nature of the firm. Hundreds of workers are protesting the move today, and many more are probably watching, anxiously.

Read more: http://www.businessinsider.com/putzmeister-sany-takeover-mittelstand-2012-1#ixzz1l0YD3K2s

China’s investable assets expected to grow 328% to $65 trillion by 2020

Sometimes….even I am shocked by the numbers out of China.

From a MicKinsey report linked below…

China’s investable assets are expected to soar 328% from $19.8 trillion to $65 trillion by 2020. That will make it one of the world’s largest markets for investment products in a very short time. Major firms, like Morgan Stanley, Goldman Sachs, JP Morgan, Sogen, and UBS have already made massive investments in the region to boost business there.

http://www.mckinsey.com/Insights/MGI/Research/Financial_Markets/

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China Market Wrap- 30JAN2012

A shares
- Chinese group Sany Heavy Industry <600031.SS> is to pay 360 million euros ($473 million) for privately owned German concrete pump maker Putzmeister Holding, a source with direct knowledge of the matter said on Monday.
Metallurgical Corporation of China Limited (MCC) <601618.SS> said on Monday it expects net profits for 2011 to fall 20 to 30 percent compared with 2010, in an announcement on the Hong Kong Stock Exchange.
Aluminum Corporation of China Limited (Chalco) <601600.SS> <2600.HK> said on Monday it estimates profits for 2011 will decrease over 50 percent from the year earlier, in an announcement to the Hong Kong Stock Exchange.
- China’s Angang Steel Company Limited <000898.SZ> on Monday estimated it would record a net loss of around 2.2 billion yuan ($347 million) for 2011 as an increase in the prices of raw materials and fuels exceeded the increase in the price of steel products.
Huaneng Power International Inc <0902.HK><600011.SS>, China’s largest independent power producer, on Monday warned it expects its 2011 profit to fall more tan 50 percent from a year ago, according to a statement to the Hong Kong Stock Exchange.
- Chinese construction equipment maker Zoomlion Heavy Industry Science and Technology Development Co <000157.SZ> estimated its net profit for 2011 to increase by between 55 and 75 percent as compared with a year ago period due to a substantial increase in sales.
• H shares
-  China Communications Construction Co Ltd <1800.HK>, the country’s largest builder of ports, said it aimed to raise up to 5 billion yuan ($789.76 million) in its Shanghai initial public offering, slashing the planned size of the offering by 75 percent.
- Brazil’s Vale <VALE5.SA><VALE.N>, the world’s largest iron ore miner, has secured a court injunction suspending the application of several billion reais in taxes that the government says the company owes, a market filing said on Monday.
Fosun International <0656.HK>, China’s top private conglomerate, said on Monday it expected 2011 profit at its Nanjing Iron & Steel <600282.SS> subsidiary to fall more than 50 percent. Nanjing Iron & Steel’s net profit for 2010 was around 919 million yuan ($145 million).
- Apple Inc <AAPL.O> may add China Telecom Corp Ltd <0728.HK> and China Mobile Ltd <0941.HK> as iPhone distributors over the next year, Morgan Stanley said.
Maanshan Iron & Steel Co Ltd <0323.HK> estimated its 2011 net profit to fall over 50 percent from a year ago period due to an increases in fuel and raw materials prices and weakened demand for steel products.
- French cosmetics group L’Occitane International S.A. <0973.HK> said its net sales grew 16.4 percnet year on year to 681.4 million euros for nine months to December 31, while local currency growth was 17.5 percent. Overall Same Store Sales Growth was at 6.2 percent. China sales grew by 58 percent in local currency with 19.9 percent Same Store Sales Growth.

Gold overtakes housing as favorite gift of Chinese New Year

Translated from the Beijing Daily..

 

Gold became Beijinger’s new favorite New Years present. The first 7 days from the Chinese New Years day , 600 million RMB of gold was sold in Beijing, a 49.7% increase over 2011.

From 8-9 o’clock, people lined up outside the gold store. The line stretched over 10 meters. Every salesperson had to handle hundreds of clients everyday. The sales associates did not drink water for an entire day in the fear that they would need to go to the bathroom and the lines outside the store would get restless.

On the other hand….not one house was sold in Beijing during this time.

 

China’s Raw Economic Power

Production statistics don’t lie. National GDP numbers on the other hand are a running joke. The U.S. claims to have the world’s largest economy with a $15 trillion GDP. That would make the economy twice as large as China’s which has a $7.5 trillion GDP. The U.S. had to go into $5 trillion in GAAP adjusted debt in 2011 to produce that GDP number. The world needs a new economic health index which would deduct printed and borrowed money and focus on real economic growth.

Take a look at these numbers and tell me the U.S. economy is twice as large as China’s.

Year:              China          U.S.

Steel Production:        2010          627 m/tons      80 m/tons

Cotton                      2011           7.3 m/tons      3.4 m/tons

Auto’s                       2010          18.3 m/units    7.8 m/units

Tobacco                    2010           3.0 m/tons     0.3 m/tons

Beer                         2010          443.8 m          227.8 m/ hectoliters

Coal                          2010           3.2 b/tons      .985 b/tons

High tech Exports        2009           $438 Billion    $142 Billion

IPO’S                         2011            $73 Billion     $30.7 Billion

 

 

Japan: A bug looking for a windshield

Japan is on life support. The largest buyers of its debt are now sellers.  Japan Post Holdings holds almost 3 trillion dollars of JGB’s and GPIF, the retirement fund, holds over $1 Trillion of JGB’s. Japan Post is the largest financial institution in the world and has 75% of assets in JGB’s and now wants to diversify. The retirement fund is liquidating $80+ billion per year to pay out benefits. I just read that the banks across Japan have 25% of assets in JGB’s. If rates were to move 1% (double), what would be the impact to the capital of the banks?

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China Market Wrap- 28JAN2012

A shares
Industrial and Commercial Bank of China (ICBC) <601398.SS>, one of the world’s biggest lenders, will open a local unit in Peru in the first half of 2012, Peru’s banking regulator said on Wednesday. Bank of China <601988.SS> has also initiated a process to enter the fast-growing economy, the regulator said.
- German carmaker Opel, part of General Motors Co GM.N, is in talks with China’s Shanghai Automotive Industry Corporation (SAIC)<600104.SS> over a sales cooperation, a German newspaper reported.
- China’s Sinopec <600028.SS> <0386.HK> will pay $1.1. billion to take an additional 10 percent interest in the $20 billion Australia Pacific LNG project, bringing the total equity it has in it to 25 percent, Australia’s Origin Energy <ORG.AX> said on Monday.
- U.S. private equity fund Carlyle Group <CYL.UL> sold 18 million shares in China Pacific Insurance <601601.SS>, reducing its holding to less than 5 percent, CPIC said in a statement. Based on Thursday’s closing price, Carlyle raised about HK$438 million ($57 million) from the sale, taking total proceeds from four sales since December 2010 to about $3.6 billion. 

 
H shares
- China’s Comtec Solar <0712.HK> said on Wednesday it would pay private equity firm TPG Capital <TPG.UL> 491 million yuan ($77 million) to repurchase its convertible bonds as the solar firm looks to reduce its debt levels.
- U.S energy giant ConocoPhillips COP.N and China National Offshore Oil Corp (CNOOC) <0883.HK> said they reached a settlement with the Chinese government with regards to the oil spill at China’s Bohai Bay and will pay about $160 million as compensation.said it planned to issue convertible bonds totalling around 750 million yuan ($115 million) to private equity firm TPG and GIC Investor, with trading in its shares set to resume on Friday.

Davos leaders focusing on China

WHEN the global economy nearly choked on toxic debt three years ago, China and its massive investment stimulus was hailed as a savior that helped avert a disaster.

Fast forward to 2012 and business and economic leaders gathering in Davos have a more sober take on the Asian juggernaut, now seen as a source of hope and opportunity but also possible unpleasant surprises.

The world’s second-largest economy is still expected to grow this year at a pace that would make most of the world jealous, but concern that China may mismanage a soft landing gets mentioned in the same breath as other risks, such as the deepening of the eurozone crisis or weak recovery in the United States.

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Gold for Oil: India and Iran Ditch Dollar – Report

According to a new and yet unconfirmed report, India bought oil from Iran using gold. India certainly has the gold resources to fund the oil, while Iran is under pressure by the West, due the continuation of its nuclear program.

There were reports that officials have been floating this idea for some time, and now, as the EU finally decided upon an oil embargo on Iran, more details became available, yet still pend confirmation.

Oil is priced in US dollars, and bypassing the greenback posed challenges for both parties. Two banks are reportedly involved in this deal: India’s state owned UCO Bank and Turkey’s state owned Halkbank.

Both banks don’t have any business with the US and therefore are less vulnerable to sanctions. According to the report, an Indian delegation has spent time in Tehran and finalized the details of the transactions.

The annual capacity of trade between these two countries is 12 billion dollars. With gold trading at around $1668, that is around 7.2 million ounces of gold.

The step joins Russia and Iran’s announcement to begin trading in their own domestic currencies rather than use the US dollar – a reserve currency.

These details about the gold for oil deal come on the day that EU officials announce an oil embargo on Iran starting on July 1st. Tensions between Iran and the West are mounting and oil is already on the up.

The time it took the EU to reach the decision, and the late implementation date make it very easy for Iran to enlarge exports to oil hungry and fast growing Asian countries.

The use of gold for buying the No. 1 commodity, will likely have positive implications for the precious metal, if this report is confirmed and especially if the use of gold widens to China – the world’s No. 2 economy.

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China’s New Strategic Target: Arctic Minerals

As policymakers in Washington focus on China’s expanding presence in Africa and growing assertiveness in the South China Sea and Indian Ocean region, Danish diplomatic assistance is opening the gate for China to establish a strategic foothold in the Arctic.

Denmark has made a strategic decision to prioritize its economic relationship with China and is now becoming the key gateway for Beijing’s commercial and strategic entrée into the Arctic. Denmark advocates giving China a seat at the Arctic policy table. Friis Arne Peterson, the Danish ambassador to China, stated in October that China has “natural and legitimate economic and scientific interests in the Arctic.” Copenhagen likewise supports giving China permanent membership on the Arctic Council, the eight-nation forum that includes the five Arctic Ocean coastal states (the U.S., Canada, Denmark, Norway and Russia) as well as Sweden, Iceland and Finland.

Greenland’s substantial deposits of minerals including rare earths, uranium, iron ore, lead, zinc, petroleum, and gemstones make the Arctic island a key bargaining chip as Denmark cultivates Beijing. Copenhagen administers Greenland’s foreign policy and will likely dangle the island’s rich geological potential in front of Beijing as it works to bolster the China-Denmark trade relationship. Indeed, Greenland’s minister for minerals, industry, and labor traveled to China for a trade mission in November that included participation in a major mining and minerals trade show in Tianjin.

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Marc Faber: Mongolia Could Be The “Saudi Arabia Of Asia”

Marc Faber spoke with CNBC about the state of emerging markets and, notably, frontier markets. He mainly focused on the potential of Mongolia and Ivanhoe Mines, of which he is a director.

  • 0:30 Frontier markets offer a lot of potential now that many emerging markets are becoming developed.
  • 1:10 Mongolia is seeing very strong growth, and could be the “Saudi Arabia of Asia”, with 2 million people, massive area, and a tremendous amount of resources.
  • 2:20 There are several funds emerging to invest in Mongolia and Ivanhoe Mines also offer opportunity.
  • 3:00 Ivanhoe has three risks: Mongolian risks, commodity collapse risks, and its relationship with Rio Tinto

marc-faber-mongolia-could-be-the-saudi-arabia-of-asia-2010-8#ixzz1kNoU9JCa

Students in Mongolia protest against the government giving them money arguing it is an inefficient use of state resources and will promote laziness

One more reason why you want to invest in this country. The young people of Mongolia are smart and hungry.

 

Students and teachers from the National University of Mongolia’s Economic and Finance Department held a press conference on Wednesday to urge students to refuse their monthly MNT 70,000 ($51) allowance from the state.

They said the allowance, along with the monthly MNT 21,000 allowance that each citizen receives from the state, will raise inflation and hurt the country’s economy. They said the allowances are an inefficient use of state resources and promote laziness.

The Government has decided to grant allowances to 160,000 students at a cost of about MNT 100 billion. The students at the press conference said that money should instead be used to create jobs, which would reduce poverty in the country. They said their research found that 22 percent of students will spend their allowance on transportation, 28 percent will save it.

The students said the allowances could push inflation up to 20 percent

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China Loans Ecuador $1 Billion as Correa Plans First Bond Sale Since 2005

Ecuador received a loan commitment from China last month for at least $1 billion, helping finance a budget deficit that’s projected to reach $4.23 billion this year, central bank President Pedro Delgado said.

The South American country also plans to tap international debt markets this year, Delgado said yesterday in an interview at his offices in Quito, in what would be the first global sale since it defaulted on $3.2 billion of bonds three years ago. The government is seeking yields of no more than 7 percent, he said. The yield on Ecuador’s 9.375 percent bonds maturing in 2015 have fallen 105 basis points, or 1.05 percentage point, to 9.29 percent in the past year through yesterday, according to JPMorgan Chase & Co.

“At least $1 billion is covered with financing that was obtained from China at the end of the year,” said Delgado, a 49-year-old economist.

Since Ecuador’s default, the government has borrowed about $7.25 billion from China in exchange for future oil exports, tapped the nation’s public pension fund and raised taxes on companies including oil producers and banks to finance the budget.

ecuador-borrows-from-china-seeks-bond-sale.html

National Savings Rates- China Still #1

Recently reported numbers on national savings rates. National savings rates normally propel local stock markets. Here are the winners:

(1) China 38%  

(2) India, 34.7%

(3) Turkey 19.5%

Switzerland 14.3%Ireland 12.3% Germany 11.7%  Britain 7.0% Brazil 6.8% USA 3.9% Japan 2.8%  Australia 2.5%


Toyota, Japanese government continue to plant bogus stories on rare earth in the global press

This story, which originates from Kyodo news service cities a Toyota spokeswomen and was then picked up globally.

The story makes the insane proclamation that Toyota has a secret technology that will allow them not to use RE in their vehicles. Somehow, they have figured out how to engineer out the RE found in the window motors, wiper motors, seat motors, assorted other micro motors, window glass, headlight glass, electronics, cat. converter, parts of the engine management system, the generator , and batteries which all need RE materials.

This mis-information piece reminds me of the large cache of RE found 5,000 meters under the ocean.

Two weeks before a Japan delegation visits China to discuss RE pricing, all of a sudden Japanese scientists discover the mother lode of rare earths stocks in the bottom of the ocean. Its picked up by the press globally, RE stocks go down. No one mentions that the RE stocks are found 5,000 meters under sea level. Most deep sea oil rigs operate at 1,500 meters and the world record is only 3,000 meters.

 

The story……

(Reuters) – Toyota Motor Corp has developed a way to make hybrid and electric vehicles without the use of expensive rare earth metals, in which China has a near-monopoly, Japan’s Kyodo News reported.

Toyota, the world’s top producer of fuel-saving hybrid cars such as the Prius, could bring the technology to market in two years if the price of rare earths does not come down, Kyodo said, citing a source familiar with the matter.

A Toyota spokeswoman said the company continues to research ways to reduce rare earth usage and has no time frame yet for commercialization.

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China Unicom Adds Record 3G Customers Undercutting IPhone: Tech

China Unicom Hong Kong Ltd. (762), the nation’s No. 2 carrier, is adding a record number of high-speed wireless subscribers and gaining market share by pushing smartphones that cost 80 percent less than Apple Inc. (AAPL)’s iPhone.

China Unicom started winning customers from market leader China Mobile Ltd. (941) after it switched focus from high-end users of the iPhone to those who can’t afford the device. China Unicom started selling handsets from local manufacturers Huawei Technologies Co. and ZTE Corp. (000063) that cost less than 1,000 yuan ($158), or about half a month’s salary for an urban worker.

The strategy helped make China Unicom the best-performing stock on the benchmark Hang Seng Index last year with a 47 percent increase. It also accelerated the shift to high-speed networks in China, putting the nation on course to surpass the U.S. in smartphone users and enabling Huawei and ZTE to compete against Apple in their home market.

“People aspire to own an iPhone, but they can’t afford it,” said Teck Zhung Wong, a Beijing-based analyst at IDC China. “If a vendor offers a phone that can do most of the things a high-end device can do, there’s no reason people won’t bite.”

IPhones continue to be popular among those who have the money. China Unicom, the only carrier offering the device with a service contract, is down 11 percent this year after customers frustrated by not being able to buy the new iPhone 4S pelted Apple’s main Beijing store with eggs, prompting the handset maker to pull all phones from its store

china-unicom-adds-record-3g-subscribers-undercutting-iphone-by-80-tech.html

UAE, China sign $35 Billion Yuan swap agreement

The UAE and China have signed several agreements to strengthen their strategic partnership and bilateral trade. These agreements will not only boost the economies of both countries, but also have the potential to change the flow and structure of regional and international trade.

One of the most important agreements is the announcement that the UAE and China have signed a currency swap worth 35 billion yuan. This is part of an ongoing effort by China to make its currency one of the mediums of international trade. Given the continued political and economic mismanagement of the dollar by the US, the strengthening of alternative currencies for international trade is necessary.

By taking part in the currency swap, at a time when the yuan is increasingly being used in international trade, the UAE is stating its commitment to expanding trade and commerce with the second biggest economy in the world.

To better insulate itself from the financial turmoil in Europe and the economic problems in the US, it is necessary that the UAE build commercial and political relationships with new international powers. Despite the global financial turmoil, the Chinese economy is still expanding at an impressive rate, with 8.9 per cent growth reported for the last quarter of 2011. While there are some concerns about the Chinese economy, for now its problems are those of success.

http://gulfnews.com/opinions/editorials/uae-will-gain-from-building-ties-with-china-1.967773

China’s US Treasury stock at 16-month low

BEJING - China cut its holdings of United States Treasury bonds to the lowest level  in 16month in  November in a step that analysts said was meant to continue the  diversification of the country’s foreign exchange reserves amid global uncertainties.

According to data from the US Treasury Department, China’s holdings of US Treasury      bonds stood at $1.1326 trillion by the end of November 2011, $1.5 billion down from the  previous month. It was the second successive month that the amount had declines, and the  lowest reserve level seen since July 2010.

 

 

 

 

 

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The World Continues Preparations for the End of the Global Dollar Based Ecosystem

By Dan Collins

Editor/The China Money Report

 

As the Western world enjoyed their Christmas holidays news broke in Asia of something that was reported in the media but received very little attention.

History may treat this event as something all together of much larger importance than is currently understood. Future Americans will ask why the U.S government could not see the writing on the wall? The writing on that wall is says tools are being put in place that will end the global Dollar based ecosystem.

Asian Nations Start Currency Reforms to End their Use of Dollars

On December 25, 2011 it was reported that the world’s second and third largest economies will open currency swap lines in a move to side-step the U.S dollar and conduct trade in their own currencies. In a meeting between Japanese Prime Minister Yoshihiko Noda and Chinese Premier Wen Jianbao they officially announced their governments intentions to conduct bilateral trade in Yuan-Yen without using U.S. dollars. The Japanese government said direct yen- yuan settlement should reduce currency risks and trading costs. Japan also announced it will start buying Renminbi bonds to hold as a reserve currency.

China and Japan, long time adversaries who disagree on most issues with regards to foreign policy can agree on one thing…to stop using dollars. Japan also topped off a busy week by signing a currency swap agreement with India with the same stated goal of moving bilateral trade between the two countries out of the USD.

Chinese Yuan Continues Toward Convertibility

James Rickards in his fantastic new book, Currency Wars, writes that the next currency war will be fought between the Dollar and Yuan.

At the China Money Report, we believe that the Chinese Renminbi will become the only major competitor to the U.S. Dollar. China is now the world’s largest trading nation and the world’s largest creditor. The IMF predicts that the Chinese economy will surpass the U.S. by 2016.

We believe the world highly underestimates Chinese economic power and the Chinese economy is already much larger than the U.S. economy. The U.S. has a $15 Trillion GDP where as China’s GDP just passed $7.5 Trillion in 2011. This would mean according to standard GDP calculations that the U.S. economy is twice as large as China’s. Yet, China produces 10 times the amount of steel that the U.S. produces. China produced 20 million cars in 2011 with a market heading toward 35 million per annum. In 2011, the U.S. sold 12 million vehicles but only actually produced 7 million vehicles domestically. Virtually everything an American buys is made in China. The Chinese computer, cell phones, and luxury goods markets are now multiples of the size of the U.S.

This raw economic power wielded by China will bring the Chinese Yuan to global reserve currency status quicker than anyone can imagine. A recent report by the U.S China Economic and Security review Commision’s reported to the U.S. Congress and said “it is no longer inconceivable that the RMB could mount a challenge to the dollar, perhaps in the next five to ten years.”

Central Banks Across the World Scramble for Gold Led by China

Central Banks across the world are buying gold, none more than China.

China is cash rich and gold poor. They know that and are in process of changing that status. China has been doing clandestine gold purchases for years through their banks and sovereign wealth fund but now the numbers and speed of purchases will start to shock. In October of 2011, Gold import into China through Hong Kong grew 484%. November numbers just released grew 20% on top of that.

Recently in Beijing, Zhang Jianhua, director of the research bureau affiliated with the People’s Bank of China (PBOC) declared that China should further diversify its foreign-exchange portfolio and make more gold purchases when the metal’s price dips. He added, that the Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation. He also said that gold had become the only “safe haven” for risk-averse investors. “No asset is safe now. The only choice to hedge risks is to hold hard currency – gold.”

How much Gold will China buy?

As of December, China ranked sixth worldwide in gold holdings, with about 1,054 tons, says a report released by the World Gold Council. They have only 1.8% of their reserves in gold. The U.S on the other hand has 77% of its reserves in Gold holding more than 8,133 tons of Gold. Germany holds 73.7% of its reserves in Gold with 3,396 tons.

How much Gold might China buy if they are serious in building up their gold reserves? Well, at present they have $3.2 Trillion in foreign currency reserves. Assuming continued growth in their reserves China would need to purchase well over $1 Trillion USD in Gold just to get 25% of their reserves into gold by 2020. How much Gold will China buy? Try a Trillion with a capital T.

Foreign Countries Move Out of Treasuries with Russia at the Forefront

The final signpost on the end of road for the U.S. Dollar is foreign central banks selling U.S. treasuries. Indeed, we believe the main reason for Federal Reserve buying of treasuries is not to provide stimulus to the economy but to cover up the fact that there are no other buyers outside of the Fed and U.S. commercial institutions who take printed money from the Fed discount window and stuff it back into treasuries. In only a few years the Fed has gone from not participating in this market EVER to becoming the largest holder of U.S. government debt.

In November, China saw its treasury holdings down to $1.13 Trillion, the lowest level in the past 12 months. Russia however, is trying to make an even bolder statement and has dumped its holdings in half over the last 12 months from $176 billion to $80 billion.

Reserve currencies don’t collapse overnight and neither will the dollar. But if people lose confidence in a currency after years and years of debasement and neglect… the end can come with horrifying speed and destruction.

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