China to pull the plug on the USD, switch to gold

[Irish Liberty Forum]

This marks another major milestone along the bankruptcy of the US economy. The widely predicted collapse of the Federal Reserve dollar grows ever closer now as US creditor nations have finally had enough.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Iran is quoted as having also just begun the process of converting its financial reserves (tip: Max Keiser).

Iranian newspapers are quoting Mojtaba Hashemi Samareh, a top advisor to President Mahmoud Ahmadinejad, as saying the country has converted its financial reserves into gold.

The papers did not specify how much of Iran's estimated $120 billion in reserves would actually be converted into gold.

This is happening precisely as Peter Schiff predicted.

(Cross-posted)

[wombat]

If true, its great news for Western Australia but I have my doubts.

[Catalpa]

This one keeps on resurfacing but until the Chinese officially announce it I wouldn't hold my breath....

Anyway hasn't Paulson backpedalled on buying up US Banks 'toxic' debts?

[Conor]

This one keeps on resurfacing but until the Chinese officially announce it I wouldn't hold my breath....

They could do it without ever announcing it.

[Catalpa]

They could do it without ever announcing it.

For sure but how long would it remain a Chinese Puzzle?

It would be apparent within weeks on the International financial grapevine that the Chinese were 'up to something' so it could only be a very short term thing.

They might well do it of course but they seem unable to quite take the plunge just yet.

[rhonda15]

I don't think the Chinese will do anything rash - they'll stop buying T-bills and slowly get out of the dollar. Then they will focus on making Asia the replacement economic engine of the world - cities in Asia are like Chicago in the thirties - a friend of mine was in Shanghai recently, no sign of a slowdown - it looked like they were building New York from scratch. Meanwhile the middle class in India and China is expanding at an ever accelerating pace.

[Irish Liberty Forum]

Thanks rhonda, fixed the link. I agree with you, by the way: I think the middle classes around Asia and the Middle East will continue to expand impressively and that their standards of living will rise rapidly as they start to outbid bankrupt Americans for consumer products.

[youngdan]

Well the quaterly refunding last week went fairly well considering the futher supplies so somebody is buying debt.

[Destiny's Soldier]

How many times can you print 700 billion dollars before people eventually lose confidence in the currency?

Isn't it more like $5 Trillion with $ 2 Trillion of that we don't know where it's going. The Fed has actually pumped 5 Trillion into the system.
And if the US has a licence to print money from thin air and we accept it, then the Europeans and the rest of the world are subsidising the US economy.

Youngdan what do you say?

[Squire Allworthy]

I don't think the Chinese will do anything rash - they'll stop buying T-bills and slowly get out of the dollar. Then they will focus on making Asia the replacement economic engine of the world - cities in Asia are like Chicago in the thirties - a friend of mine was in Shanghai recently, no sign of a slowdown - it looked like they were building New York from scratch. Meanwhile the middle class in India and China is expanding at an ever accelerating pace.

I agree with that. Many Western economies are either uncompetitive or plain broke. That could be turned round but it would take 10 years and harder times for many people.

If China were about to buy up gold I would imagine the last thing they would do would be to announce that intent. This is either poor reporting, disinformation or China playing mischief. What we have to consider is why the Chinese would put such a story about? Is it part of some political game?