Market analyst Grant Williams' presentation at the Mines and Money
conference in London in November, posted in the clear at Zero Hedge tonight,
sees the end of the petrodollar system and its gradual replacement, already
underway, with a Chinese yuan convertible into gold, transferring the gold
pricing system to Asia:
http://www.zerohedge.com/news/2017-02-09/gran...h-petrodolla...
Williams, publisher of the "Things That Make You Go Hmmm. ..."
letter, writes:
"If you are an oil producing country, do you:
"-- Minimize your production in order to maximize your holdings of one
of the most abundant and easily-produced commodities in the world -- U.S.
treasuries -- as has been the case for the last 40 years, knowing full well
that, with the level of entitlements due in the next decade, more will need
to be printed like crazy? Or do you...
"-- Maximize your production to gain the largest possible market
share in the biggest oil market in the world and, through the ability to buy
gold for yuan, thereby maximize your reserves of a scarce, physical commodity
that is impossible to produce from thin air and that happens to be not only
the most undervalued asset on the planet, but is trading at its most
undervalued relative to U.S. treasuries in living memory?"
The problem with Williams' conclusion is that gold is not really
"impossible to produce from thin air." Rather, central banks lease,
swap, and sell gold nearly every day, causing it to be hypothecated and
rehypothecated, creating vast imaginary supply, just as vast imaginary supply
is created every day on futures exchanges.
Oil-producing governments acquiring gold should know this and should
be insisting on delivery of real metal. But even if they are, they may be
cooperating with the Western central banks that long have been undertaking
leases, swaps, and sales to restrain the gold price, moderating and timing
their acquisitions so a free-market price is delayed until the major
governments and central banks are ready to transition as a group to a new
world currency system.
Maybe, as Williams suggests, pricing oil in gold will be part of such a
system. But that won't be the key to such a system. The key will be the
inability of governments, central banks, and their agents to keep producing
the monetary metal "from thin air."
What will cause that inability? If not international agreement -- that is,
the changed interests of governments and central banks -- then only the
wising up of gold investors and gold mining companies, which, as you may have
noticed, has been taking quite a while.
