Stepping away from Gold, and going back to the observation you have on other metals. Metals prices in CNY have firmed since early Jan, despite the economic activity slowdown news flow from China and SEA. Do you think there is an element of raw material price 'inflation' - meaning domestic merchants hoarding metals supplies in anticipation of future weakness in the CNY? Partly telegraphing that the CNY may be weaker than the print on the screen
I think communist theory is about supporting all commodity prices (labour is seen as a commodity as well) - where as capitalism is about getting commodity prices as low as possible. So pro-commodity view is in part a view on the world turning more socialist (or less capitalist) and this is a political view, not an economic view...
And the CCP obsession with sound money to promote RMB internationalization means that household income will remain weak with little stimulus forthcoming
I’ve seen a few macro people I think are good making the case that it is Chinese consumers buying gold because of the deflation in the property market. And that Chinese stocks are worse. So the appropriate chart would be gold/chinese property prices.
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...
Stepping away from Gold, and going back to the observation you have on other metals. Metals prices in CNY have firmed since early Jan, despite the economic activity slowdown news flow from China and SEA. Do you think there is an element of raw material price 'inflation' - meaning domestic merchants hoarding metals supplies in anticipation of future weakness in the CNY? Partly telegraphing that the CNY may be weaker than the print on the screen
I think communist theory is about supporting all commodity prices (labour is seen as a commodity as well) - where as capitalism is about getting commodity prices as low as possible. So pro-commodity view is in part a view on the world turning more socialist (or less capitalist) and this is a political view, not an economic view...
Chinese bond yields are headed structurally lower due to a deflating property market.
I really don't see any way they avoid hitting 1%
And the CCP obsession with sound money to promote RMB internationalization means that household income will remain weak with little stimulus forthcoming
Well for years they were advised to quit their property addiction - and so now they are...
The problem is that in trying to solve one problem (property) it has created another (under consumption)
Unless BRI capital outflows can pick up the slack, China is stuck in a liquidity trap
Japanese capital exports helped immensely in the 1990s & 2000s yet they were mired in deflation
All policies have winners and losers... that's why elections are useful
There are no "elections" in the Sino-Russian sphere
I’ve seen a few macro people I think are good making the case that it is Chinese consumers buying gold because of the deflation in the property market. And that Chinese stocks are worse. So the appropriate chart would be gold/chinese property prices.
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...