Thursday, September 18, 2014

It's All About The Currencies

While Bloomberg's Western spin on the opening of the SGE to global trade is showing (yet another image of gold as "jewelry" and comparing volumes of dollar denoiminated paper gold to yuan denominated physical) they at least got this part right:
Foreign investors will trade the gold in offshore yuan while those on the mainland will use the onshore currency. While the two rates typically diverge because of controls over the flow of capital, the government is testing the possibility of convergence, implying parity between the rates, according to Shi Chenbing, chief investment officer at Everbright Prestige Capital Management Co. in Beijing. 
“Gold trading is seen by many as the latest attempt by the Chinese authorities to test currency liberalization,” Shi said. “This is the first time offshore yuan and onshore yuan will be treated as the same currency trading in the same pool and at parity.”
China's massive stealth (for some) accumulation of physical gold is all about the CNY, but not so much as a "reserve" currency - rather more so as a viable currency for trade of all things non-debt, non-derivative, including food, metals and energy sources.

Yes their banks have a derivative/debt problem, but they had to adopt that problem to engage in commerce under the global debt-based trade settlement system, in order to get to where they are today. What does it matter? All debt will fail equally in the end.

While opinions among China's monetary policy strategists may differ (as they do among all such types in every country) the rationale behind their actions has more to do with long term FX liberalization than merely a test of CNY liberation.

And "liberation" is a fitting choice of words here, as it implies freedom from ... the current debt based dollar reserve system. This includes the liberation of gold from being "priced in debt" (which of course allows it to be manipulated by the issuers of debt).

The strategy here is to price gold FREELY in Yuan (can you say freegold?) thereby liberating the FX market from dollar dominance (all fiat currencies tied to the dollar for relative value).

As more and more real world, non-debt, non-derivative commodities are traded in Ruble, Rupee, Renminbi, Real and other BRIC Bloc currencies, the objective is to have all currencies tied to GOLD for relative FX value, with the SGE / YUAN as a means toward that end - an emerging equity based global monetary system, replacing the aging debt based system.

Perhaps one can see the writing on the wall from this article more clearly than those who have stubbornly rebuked the Flower of Understanding elsewhere ?? Time does prove all.

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