Once again, I turn over in my mind the Chinese plan regarding their
imported oil, which consists in convincing their oil suppliers to accept yuan
in payment (and thus re-directing their sales outside the orbit of the US
dollar) with an additional sweetener in case the oil exporters do not wish to
hold assets denominated in yuan: the sweetener consists in offering to
exchange the yuan received by the oil exporters, for gold purchased on the
world markets – and not out of Chinese reserves.
Again, I mention that for the first time in 46 years – ever since that
fateful date, August 15th, 1971, when Nixon took the US “off gold” – gold is
once again mentioned as part of a commercial deal – and one of great
importance.
“There is more than one way to skin a cat” says an old proverb. And there
is another way to bring the US to its knees, besides using hydrogen bombs or
EMPs.
If the US cannot stop China from implementing its “oil – for yuan – for
gold” program, then the fate of the US is at hand.
Once the oil exporters accept the deal, they will all be permanently
caught. The price of gold will begin to rise, and rise and rise as more and
more oil income is exchanged for gold. Thus, the gold income received from
prior oil sales will become much more valueable for the oil exporters. I do
not see the price of oil going up in terms of yuan. The first sellers of oil
to China in exchange for yuan, and then exchangeable for gold, will get a lot
of gold for their oil. As the scheme progresses, the oil exporters will get
progressively smaller amounts of gold for their oil.
As gold commences a historic rise, the dollar will suffer a historic
decline in acceptability, because higher gold means a lower dollar – more
dollars will be needed to purchase gold.
Here I pose a question: once the oil exporters get a good deal, receiving
gold for their exports to China, what will the other major exporters of
commodities to China be thinking? Think of iron ore, copper and all the other
commodities that make up the recently recorded $1.817 Trillion of yearly
imports by China.
I think we can expect that other exporters to China will also want to get
in on the deal – their commodities sold to China for gold – not dollars. The
sooner they decide to ask for this, the more gold they will receive, initially.
It may be that we are on the verge of a monetary revolution in the
world. One which will end the predominance of the US dollar, and with it, its
world empire. The dollar may swiftly become worthless in terms of gold. As a
world power, the US would be effectively castrated.
All the countries that hold US dollars as Reserves will be aghast as they
see the value of their Reserves collapse in terms of gold. Too late, they
will hasten to acquire more gold for their Reserves, adding to the rush for
gold.
The implications I see for the Chinese move are vast. We may
witness the return of the gold standard, not as we had imagined, but simply
as the result of a spontaneous turn to gold as a means of trade initiated by
the Chinese measure.
Practically all of us, who are aware of the disastrous consequences of
abandoning gold as the world’s money, brought about by Nixon’s decision to
suspend redemption of dollars held abroad for US gold at $35 dollars an
ounce, have thought that it would require a conference of the Great Powers to
come to an agreement to restore the gold standard. That has been a forlorn
hope, increasingly so in recent years.
After the fact, it may become clear that the only route to a return to
gold as the world’s money had to be through a decisive action on the part of
a single entity. In this case, by China’s decision to bait the yuan hook
offered to the oil exporters, with a gold worm.
