tag:blogger.com,1999:blog-6245381193993153721.post7855877708806913373..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Could China back its Currency with Gold?Lord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-6245381193993153721.post-4657689698376956472014-03-27T07:58:57.750-07:002014-03-27T07:58:57.750-07:00"This would wreck havoc on trying to maintain..."This would wreck havoc on trying to maintain exchange rates though and they want to keep the value down to support employment, not up to support capitalists."<br />How does currency devaluation create employment? Jovanhttps://www.blogger.com/profile/03612283775792707516noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-38161190071003259672014-03-27T03:26:56.251-07:002014-03-27T03:26:56.251-07:00Speaking of China's role in the history of mon...Speaking of China's role in the history of money...Lord Keynes, have you read Niv Horesh's latest book, <i>Chinese Money in Global Context: Historic Junctures Between 600 BCE and 2012</i>? If not, please see the following links.<br /><br />http://www.amazon.com/Chinese-Money-Global-Context-Junctures/dp/0804787190/<br /><br />http://www.sup.org/book.cgi?id=22655Blue Aurorahttps://www.blogger.com/profile/02044362251868221897noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-56196193774016113392014-03-26T03:47:48.047-07:002014-03-26T03:47:48.047-07:00Being tha China is the world biggest gold producer...Being tha China is the world biggest gold producer and importer and I would not be surprised if China is quietly buying cheap miners as we speak, any increase in gold price resulting from China's mere announcement to monetize gold would have to result in a rapid increase in price. This can be done in a span of few years thereby allowing for the next "permanent" price base formation. At that point Chana could make a final decision on 100% or less backing of the Yuan, but even if they abandon the backing they would stand to benefit from increase price in their gold holdings. It would be interesting speculation as to where the gold price would stabilized if China announced her intention to monetize in some unspecified future time. Jovanhttps://www.blogger.com/profile/03612283775792707516noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-36955659837966495462014-03-24T04:05:08.721-07:002014-03-24T04:05:08.721-07:00"What is so special about gold?"
It'..."What is so special about gold?"<br /><br />It's really really special. And shiny, and stuff like that. Philippenoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-32230794786680527222014-03-23T23:58:15.614-07:002014-03-23T23:58:15.614-07:00I just told you: first, to stop troublesome supply...I just told you: first, to stop troublesome supply problems and distortions in the price of metals/commodities.<br /><br />Secondly, it would be straight power politics and strategic interests.<br /><br />Any nation that would attempt to corner a commodity market would be a matter of concern. If. e.g., Russian tried the same thing, it would no doubt provoke a response from the West too.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-40855002231380244712014-03-23T23:30:06.857-07:002014-03-23T23:30:06.857-07:00How would China cornering the gold market harm the...How would China cornering the gold market harm the West's strategic interests?John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-16030019557414167962014-03-23T21:48:49.777-07:002014-03-23T21:48:49.777-07:00You've missed the main point of what I said:
...You've missed the main point of what I said:<br /><br /><i>"For the same reasons that <b>an attempt to corner the oil market, or copper market or rare earth metal markets would be opposed if any nation attempted it: first, as a matter of strategic policy</b>, and "</i>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-34557278957884502272014-03-23T20:44:32.588-07:002014-03-23T20:44:32.588-07:00So your belief that Western nations would act in c...So your belief that Western nations would act in concert to prevent China from dramatically increasing its gold holdings, for the purpose of securing national supplies for industrial usage, isn't persuasive. And gold prices have been highly volatile over the last few years, so smoothing out price fluctuations also doesn't seem to be a high priority for Western governments or central banks.<br /><br />The industrial use argument isn't convincing, so again I ask: why should Western central banks be reluctant to sell part or all of their gold holdings to China?John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-60746028152955739382014-03-23T20:33:11.705-07:002014-03-23T20:33:11.705-07:00Gold differs from those commodities in that indust...Gold differs from those commodities in that industrial usage comprises only a small fraction of annual demand. Assuming these statistics are correct, annual industrial demand (8%) is dwarfed by jewellery (44%) and investment (36%) demand (and around 10% of industrial demand is dental-related, for which gold substitutes are readily available).<br /><br />http://www.exchangetradedgold.com/media/ETG/file/GDT_Q4_2012.pdf (PDF p. 17)<br /><br />The annual gold production of the US and its close allies (e.g. Aus, Can), at over 600 tons, exceeds annual global industrial demand for gold (428 tons in 2012).<br /><br />http://www.bloomberg.com/news/2012-04-05/top-10-gold-producing-countries-in-2011-table-.html<br /><br />The stock of privately held gold jewellery, at around 70-80,000 tons, would be diverted to industrial usage if the price were high enough. This far exceeds annual industrial demand.<br /><br />http://www.bullionmark.com.au/how-much-gold-is-thereJohn Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-59906879761124120052014-03-23T17:32:06.100-07:002014-03-23T17:32:06.100-07:00They could set a value on gold of four times its c...They could set a value on gold of four times its current price and hope few would want to sell theirs to them. The price would jump to that level without much changing hands. This would wreck havoc on trying to maintain exchange rates though and they want to keep the value down to support employment, not up to support capitalists. Lordhttps://www.blogger.com/profile/06747994571555237739noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-46934545228159327372014-03-23T08:05:31.429-07:002014-03-23T08:05:31.429-07:00I took a closer look a the discussion.
I don'...I took a closer look a the discussion.<br /><br />I don't think its really about China creating a "convertible RMB gold standard", so much as about China moving to replace the dollar as international reserve currency. This would still leave the Yuan as a floating currency but would involve selling some or all of its dollar holding for gold plus other commodities and financial assets. <br /><br />I have no idea how likely this scenario is, but it's clearly different from China moving to a gold standard where it has to cover all its base money with gold.<br />Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-52986451374915797142014-03-23T07:46:33.909-07:002014-03-23T07:46:33.909-07:00Such a system would still be far from any gold sta...Such a system would still be far from any gold standard imagined by the die hard Rothbardians I link to above. And any significant run on high-powered money (read gold) would destroy the system or force suspension, as we know from the past.<br /><br />It would also cause ridiculous economic problems in needing to cover all base money growth with gold: that would lead to an inflexible and chaotic monetary system. It's highly unlikely Chinese policy makers are as stupid as that.<br /><br />Other Chinese money supply aggregates as of January 2014:<br /><br />M1 ( cash in circulation plus current corporate deposits):<br />33.73 trillion yuan = about $33.73 trillion US<br /><br />M0 (cash in circulation):<br />5.86 trillion yuan = about $941 billion US<br /><br />http://www.china.org.cn/business/2014-01/15/content_31203711.htm<br />-------------<br />Given official government holdings of gold might be only about $110 billion US, it has a long way to go even to cover base money!Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-44786173271744184292014-03-23T07:14:48.964-07:002014-03-23T07:14:48.964-07:00'Nevertheless, even at the August 2013 gold pr...'Nevertheless, even at the August 2013 gold price, China would have to buy up every single piece of gold in the world, including bullion, gold coins, and gold jewellery, to back just 49.50% of its total broad money supply."<br /><br />I agree it seems highly unlikely that China will adapt a gold standard. But if they did they would probably not also adapt 100% reserve banking. Therefore it is only the base that needs to be covered by gold. not the whole of broad money.Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-6001359239760815992014-03-23T06:45:39.120-07:002014-03-23T06:45:39.120-07:00For the same reasons that an attempt to corner the...For the same reasons that an attempt to corner the oil market, or copper market or rare earth metal markets would be opposed if any nation attempted it: first, as a matter of strategic policy, and practically to stop troublesome supply problems and distortions in the price of metals/commodities used for industrial purposes.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-90395136753108866232014-03-23T06:35:27.121-07:002014-03-23T06:35:27.121-07:00if China really made a move to start buying up mas...<i>if China really made a move to start buying up massive supplies of gold, it is likely that a concerted Western foreign and strategic policy (probably including Japan) would quickly counter it.</i><br /><br />Why? What is so special about gold that Western central banks want to 1) maintain their dominance of the global supply and 2) prevent China from accumulating a significant portion of that supply?John Snoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-63732206580122327902014-03-23T05:46:59.919-07:002014-03-23T05:46:59.919-07:00Even if China could do so, it's very unlikely ...Even if China could do so, it's very unlikely that they would do so. Given that the PRP as a state capitalist system is pretty much the opposite of the libertarian ideal, what non-libertarian motive could the Chinese authorities have to back their money supply with gold?<br /><br />On a second note advocates of silver-backed currency will probably use this as an argument for a silver standard. Though I heavily doubt whether there's enough silver for just backing China.Mordanicushttps://www.blogger.com/profile/02555552511541697014noreply@blogger.com