Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

The New Great Wall of China : Gold

IMG Auteur
Published : May 23rd, 2013
521 words - Reading time : 1 - 2 minutes
( 1 vote, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...


When the crisis hit in 2008, China�s reaction was very communist-like : instead of turning to money printing in the hope that credit and investment would pick up ( which is still the dream of Western central banks), both the central power and the regional ones have launched gigantic infrastructure plans while forcing banks to lend them money. Credit, as a result, has effectively picked up : orders from Beijing! While credit was going down in Europe and the United States, China�s total credit went from 100% of GDP in 2008 to 125% of GDP in 2010. Large infrastructure works have been started in China and growth has maintained its rythm in 2009 and 2010.

Of course, the problem with this kind of socialist policy is investing without any return on investment. Whole suburbs and cities are empty, the high-speed train network is oversized etc. At the end, all of that affects growth, which is far from the 10% it used to be, while generating unrecoverable debts, thus fragilizing the whole financial system. A dangerous situation.

In the end, China is ending up with almost the same problems as those who have chosen to print but, at least, it�s left with a fine network of high-speed trains instead of a stock market bubble. We know the railroads will remain, but what about Wall Street�s records?

But, furthermost, the Chinese were smart enough not to bet everything on monetary and banking policies. While all of this is happening, China is buying important quantities of gold. China�s central bank is buying gold, and citizens are encouraged to do the same. Official numbers are not available, they remain State secrets, but it can be estimated that, between their internal production (400 tonnes) and imports (800 tonnes), China holds around 4,000 tonnes of gold (one of the highest holdings in the world), and maybe much more. In 2009, a group of bureaucrats and economists got together to discuss necessary measures to increase the country�s gold reserves, and they suggested that they should reach 6,000 tonnes within three to five years, and maybe 10,000 tonnes within eight to ten years.

A little known fact is that the world�s oldest paper money was created in China by Gengis Khan�s grand-son, Kubilai Khan (1215-1294), whom Marco Polo, incidentally, met during his voyages. That first experience ended in bankruptcy, just as John Law�s would in France, many centuries later. China did experience other monetary bankruptcies in its history, notably in the 20th century (when the Communists took power), so it knows about it (as does Germany, by the way).

In any case, China knows it has created a credit bubble. But its effects are subsiding and, contrary to the Western governments who keep printing and printing, China has put in place an emergency strategy that is the exact opposite of the actual bubble-creating policies. All bubbles can explode, in China and elsewhere, and of course the economy will suffer, but Beijing will be able to hang on to the ultimate asset, the one asset that is unalterable and trusted worldwide. Not too many will be in the same situation...


Data and Statistics for these countries : China | France | Germany | All
Gold and Silver Prices for these countries : China | France | Germany | All
<< Previous article
Rate : Average note :5 (1 vote)
>> Next article
Philippe Herlin is a researcher in finance and a junior lecturer at the Conservatoire National des Arts et Métiers in Paris. A proponent of extreme-risk thinkers of the Austrian School of Economics, he brings his own views on the actual crisis, the Eurozone, the public debts and the banking system. He is also contributor at www.Goldbroker.com
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Gold coins: the United Kingdom´s...
08 Decflup
I think that Estonia is VAT free for legal tender silver.
The Deepening Deep State
03:24Jim C.
Kunstler wasn't concerned about 'The Deep State' when he voted for Obama...since Obama's agenda seemed to coincide initially with Kunstler's own. ...
Documents Prove Massive Rigging ...
09 DecThe Recusant
Yes, yes. the PMs are manipulated. Perhaps some bank will have its wrist slapped. Then everything will return to normal. More price fixing and bank...
Silver Demand Ready To Explode
09 DecThe Recusant
Sorry Andy, but I don't believe in Santa anymore either. Believing silver "must" explode is no different than the market "must" implode. I've been ...
Guest Post: How to Trigger a Sil...
09 DecThe Recusant
Well, there you have it. Blatant manipulation and cover up by the CFTC and DOJ. So, what else is new? Let's see what Trump will do to stop this! [s...
Indian demonetization effect: 15...
09 DecJ T.
From reading the comments at the end of the article mentioned above in economictimes.indiatimes, the people who read it, if they actually did, are ...
India Confiscates Gold, Even Jew...
09 DecJ T.
Hopefully the naive, or ignorant, or worse, willfully ignorant, who have swallowed (once again) the MOP's lie (that's the Ministry of Propaganda......
The Rediscovery of Men
07 Decaccording-1
and now bernie has a brand new house. i smelled that the fix was in when he said he was running against filthy hillery. then at the perfect moment...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS