Only problem with that is that Chinese consumers have always bought gold. But China selling treasuries to buy gold would help explain a big change in price action
Only problem with that is that Chinese consumers have always bought gold. But China selling treasuries to buy gold would help explain a big change in price action
How does gold work as a reserve currency if you have a completely imbalanced economy? I guess it’s a desperation reserve in that you could send it overseas to buy fuel and food but how could China’s economy function at anything like its normal rate primarily using gold? I don’t quite get it.
You always need a medium that you trust to trade. The US dollar is no longer trustworthy, so its got to be something. Given that the US has weaponised its currency, all countries will likely be wary of relying on one currency, or any currency. Gold is a good enough alternative. Could be cigarettes or conch shells, as long as both parties accept it. Chinese and Indians have a long history of using gold, so how can 3bn people be wrong?
Understood but are they going to load up planes and ship it back and forth? Is India going to trust China when China says we have x amount of gold? Are they going to use third parties for verification? Wouldn’t the only trusted ones be in the West? What happens after all the gold ends up in China and Saudi? Seems like that will force massive economic adjustments in those imbalanced countries. Can’t dump all your goods in US, UK, and Oz under that system.
In my view, the US has been subsidizing export driven economies as part of the Cold War. Screwing our middle classes to get allies. That built a class of rent seekers on Wall St that have kept it going after the system outlived its purpose. It’s all about to change. I think it’ll force a collapse in asset prices in the States but help rebuild our middle classes so net positive. China? Yikes, I think those adjustments result in breakdown.
I think it was a political plan that voters loves - lower prices, and breaking the power of unions. But now the voters want to break the power of corporates or at least give more power to workers, so everything is going in reverse - including bond yields...
Only problem with that is that Chinese consumers have always bought gold. But China selling treasuries to buy gold would help explain a big change in price action
How does gold work as a reserve currency if you have a completely imbalanced economy? I guess it’s a desperation reserve in that you could send it overseas to buy fuel and food but how could China’s economy function at anything like its normal rate primarily using gold? I don’t quite get it.
You always need a medium that you trust to trade. The US dollar is no longer trustworthy, so its got to be something. Given that the US has weaponised its currency, all countries will likely be wary of relying on one currency, or any currency. Gold is a good enough alternative. Could be cigarettes or conch shells, as long as both parties accept it. Chinese and Indians have a long history of using gold, so how can 3bn people be wrong?
Understood but are they going to load up planes and ship it back and forth? Is India going to trust China when China says we have x amount of gold? Are they going to use third parties for verification? Wouldn’t the only trusted ones be in the West? What happens after all the gold ends up in China and Saudi? Seems like that will force massive economic adjustments in those imbalanced countries. Can’t dump all your goods in US, UK, and Oz under that system.
No - you are forced to pump up domestic demand by raising wages. Hence bond yields are rising everywhere
In my view, the US has been subsidizing export driven economies as part of the Cold War. Screwing our middle classes to get allies. That built a class of rent seekers on Wall St that have kept it going after the system outlived its purpose. It’s all about to change. I think it’ll force a collapse in asset prices in the States but help rebuild our middle classes so net positive. China? Yikes, I think those adjustments result in breakdown.
I think it was a political plan that voters loves - lower prices, and breaking the power of unions. But now the voters want to break the power of corporates or at least give more power to workers, so everything is going in reverse - including bond yields...
Exactly. Thanks for the response.