Gold Backed Yaun as Global Reserve Currency? Germany advising UAE and China on currency and gold matters. Global Currency Basket forthcoming?

The Dollar and Bonds are imploding.

I believe we've reached critical mass. What do you think?

Very interesting article that is well worth the read.

[link to news.goldseek.com]

Loud Paradigm Shift Rumblings


Numerous events have taken place of global importance. Alone, each story seems of some significance. Together, they paint a mosaic of extreme change in a very dangerous sequence of events that fit together. The greater aggregate story is that a tremendous paradigm shift is underway, with early steps and major moves by global players in clear view. The Western analysts and pundits and mavens are missing it. A PARADIGM SHIFT HAS BEGUN, WITH BANKING POWER SHIFTING TO THE CREDITOR NATIONS AS THE USDOLLAR IS SUPPLANTED, MADE POSSIBLE BY SEVERAL NEW INSTITUTIONAL PILLARS AS WELL AS NEWLY FORGED ALLIANCES. The consequences are significant and will change the face of global banking and commerce. The Hat Trick Letter has described the various steps and their importance all along the way. Much more detail is provided for each major point to follow in the HTLetter reports. Some in the United States and England believe that a return to normalcy comes. They are wrong by 180 degrees. The G20 Meeting of finance ministers and heads of state was the warning. The message from that meeting in London has been long forgotten, a call made in my public article immediately after its conclusion. This article provides an outline of events that have occurred only in the last few weeks, as the pace is accelerating for transformation that begins at the foundation. Piece it all together, use some mental power, sprinkle with only a little imagination, connect some dots easily, and take a look at the global picture that is emerging. Yesterday came the crowning blow, as the United Arab Emirates rejected the Saudis in the Gulf monetary union. My belief is that the rising power in the UAE wants Russia instead of the Saudis, who are tied at the US hip.



EVENTS STEEPED IN SYSTEMIC CHANGE
Numerous events mark major milestones. They should be viewed in aggregate. The major media networks have no vested interest in enabling more than trivial perceptions toward each story. Paradigm Shifts are magnificent processes, not easily made possible, which require great and steady powerful forces behind them. Cooperation must be present from most global players of importance. Here is a list of events. To be honest, if after reading them in entirety, a deep sense of tectonic changes is not sensed, then at best a sleepy state prevails in the cerebrum and at worst a compromised state dominates.



1) The US-UK banking systems are shattered by deep bond asset losses, shrouded in fraud, deep with leverage, teeming with collusion, which renders them as insolvent and in need of transfusions. The reality is that Wall Street firms remain in control of the USGovt financial operations despite their responsibility for both the collapse and clear legal violations. The USDollar image is badly tarnished.



2) Incredible volumes of money have been committed by the US Federal Reserve and the USGovt, much already delivered, with staggering future rescues, bailouts, and stimulus packages assured. The sums total $12.8 trillion at last count. The undermine, if not debauchery, to the USDollar and its vehicle the USTreasury Bond is vividly clear, a palpable threat to foreign creditors.



3) Foreigners have begun to worry openly about the onset of profound price inflation. What normally had been less than 4% in excess bank reserves is now 92%. US banks will channel the bulk of their excess reserves into loans and investments, when considered safe. The baseless ‘All Clear’ signal can be witnessed, orchestrated and phony. For political and credit market reasons, do not expect any noticeable central bank drain. Price inflation awaits the landscape on a path of least resistance. The USTBond yield would rise, and lose colossal sums of money for foreign bondholders.



4) Foreign creditors have owned over half the US$-based government and mortgage agency bonds for almost a decade. With the dependence upon foreign institutions (central banks and sovereign wealth funds), the United States has quietly lost control of its fate. It can no longer make decisions without consulting major creditors.



5)The USMilitary has tacitly been supporting the value of the USDollar. By pressuring the Saudis on a regular basis, they have maintained the Petro-Dollar standard without a peep of objection for a few decades. When South Korea expressed interest in diversifying out of USTreasury Bonds a few years ago, suddenly some US naval exercises occurred off their coast. The pattern is clear to foreigners.



6) Some recognition has come that the aggressive USMilitary of recent years depends heavily upon USTreasury Bond sales in order to continue their adventures. As long as the USDollar is pre-eminent, the USMilitary will continue to play in neighbor’s back yards doing whatever.



7) The Chinese have been taking numerous steps to establish the yuan currency more as a global currency for international commerce. The more important step has been to set up numerous yuan swap facilities across the globe, the latest being in Argentina and Brazil. Others are across Europe and Asia. Such facilities make easier trade in high volumes, without need for settlement in US$ denomination, as has been the custom for a few decades.



8) The Chinese have begun to switch from a US$ basis to a yuan basis in their banking system domestically. They also have given a giant assist to the new emergency fund for the extended ASEAN group of SouthEast nations. My belief is that the fund, based in yuan currency, will morph into a regional development fund. Conversation already has lead in that direction.



9) The Chinese gave authorization to two banks outside the Middle Kingdom proper to sell yuan-based government bonds. The HSBC (based in London) and Bank of East Asia (based in Hong Kong) have been given permission to do so, with details to follow. More broad-based formal trading of Chinese Govt bonds is coming soon to a nation near you.



10) Watch their moves toward creation of the Chinese yuan as a global reserve currency. Watch their simultaneous moves away from the USDollar and toward gold for reserves management. The merger of the two important strategic initiatives is a gold-backed yuan currency. In fact, that is precisely what was stated openly by Zheng Lianghao, managing director of the World Gold Council’s Far East division. That news came out this week. The Chinese are clearly the spearhead to dethrone the USDollar as global reserve currency.



11) Numerous nations have stated publicly that they regard the USDollar as inadequate and unqualified to serve any longer as the sole global reserve currency. The isolated revolt has turned into a uniformly global revolt. They are blaming the US$ for their internal crises.



12) Russia demanded an alternative to the USDollar before the G20 Meeting in London, at the G20, and after the G20. Russia and China endorsed the IMFund plan to create a basket currency as a global reserve alternative. My personal view is that the concept was and is a Straw Man device that will pave the way to a new global reserve currency, or set of currencies later. The motive was to direct attention away from the USDollar, and heap some disgrace at it.



13) The Arabs have been planning for over two years an asset-backed new currency for the Gulf region. New crude oil purchases would ostensibly be conducted in the new dinar denomination, bringing an end to the Petro-Dollar standard. In early May, the decision was made to locate their new central bank in Riyadh. NOW THE EXIT FROM THE MONETARY UNION BY THE UNITED ARAB EMIRATES SIGNALS SOMETHING BIGGER. MY BELIEF IS THAT THE U.A.E. REJECTED THE SAUDIS DUE TO TIGHT USGOVT BEDFELLOW RELATIONS. THE U.A.E. WILL NEXT COURT A GRANDIOSE ACCORD WITH RUSSIA. THE NEW ALLIANCE WILL INCORPORATE A NEW CURRENCY, NEW PLEDGES OF SECURITY PROTECTION, AND A COORDINATION OF CREDITOR ACTIONS. The Creditor Nations will soon tighten the noose around the necks of Debtor Nations, and force a global banking shift of power. It will be astonishing in its effect.



14) The Germans have demanded all of their gold held in custodial accounts inside the United States to be returned to German soil. The story is not public, but details have come to me from a private source close to the action. The Germans have also given counsel for Dubai to demand all of their gold held in custodial accounts inside London to be returned to Dubai, where a new gold trading center will spring up. In my view, THIS IS THE BIGGEST NEWS FOR GOLD THIS ENTIRE YEAR. The hidden arch-enemy for the US-UK on all matters pertaining to gold bullion is Germany. This is not a well-known concept. Insults were hurled at the US delegation during the London G20 by their ministers. Germany is also advising the Chinese on currency and gold matters. Can one detect some coordination?



15) Venezuela has followed the Chinese and Russian pattern to lock up the majority of domestic gold mining output. They will keep most gold output in domestic hands, primarily with the government, which will have first crack at buying it.



16) A near default was averted at the Eleventh Hour when Deutsche Bank found almost a million ounces of gold to cover its (naked) short in gold futures at the COMEX at the end of March. Thanks to the Euro Central Bank, which happened to sell over a million ounces for some reason. My conjecture is that the Germans decided the time was not right to bust the COMEX. From sources, that date might be this September in a coordinated attack that requires preparations to remove the levers and kick out the pillars that support the COMEX.



17) Germany has been the broker in creating a Russian-German barter deal involving billion$ in trade between the two nations. Credits will be gained from delivery of a raft of commodities, led by energy products from Russia. In turn, Russia will receive finished products, equipment, and consumer staples. Germany has been the broker in a similar barter accord between Russia and China under similar terms. These barter deals will create entire systems that bypass the US$-denominated trade settlement.



18) The Chinese announced an increase in their gold reserves from 400 tonnes to 1050 tonnes in the last five years. At the same time, they have been harping on the extreme risk to their $2000 billion in savings, held in USTreasury Bonds, USAgency Mortgage Bonds, and USCorporate Bonds. They openly complain about US$ mismanagement, unbridled USGovt spending (for numerous crisis projects), and the resulting risk to the US$ exchange rate. They have engaged a war of words, precursor to trade war, with USDept Treasury officials, one that has lasted for at least two years. The Chinese have openly talked about a covert USTreasury Bond default, which is a very serious accusation to make.


19) The Chinese Business News (CBN) has made several queries with the GATA group, the US-based outfit challenging the USGovt on the legitimacy of the USDollar on a Constitutional basis, and challenging the USGovt on its illegal naked shorting of gold futures contracts in a long-running gold price suppression scheme. The Chinese might be building a weapon to challenge the USDollar’s legitimacy, in response to stupid currency manipulation charges lodged by the hack USGovt bureaucrats in high offices.



20) Either lawsuits or Congressional Bills have begun against the US Federal Reserve to force a formal accounting of their balance sheet, and of the gold contents at Fort Knox. A surprise would await them, to learn no gold exists at Fort Knox. Another lawsuit has begun to force the USFed to reveal the spending of the T.A.R.P. funds. Foreigners must watch the Wall Street syndicate with some degree of disgust. Watch the Supreme Court enter the picture.



21) Meanwhile, the big US banks are maneuvering themselves to return T.A.R.P. funds when their insolvency is obvious, their balance sheet accounting is phony, and numerous events have begun or are planned to raise equity capital. They are rectifying their capital inadequacy and vanished loan loss reserves. The real reason they plan to return USGovt funds is to put an end to the extreme risk of underlings at the USDept Treasury, Congressional Budget Office, Govt Accountability Office, and various Congressional Banking Committees who have had access to records, the paper trails. Eight months have passed since TARP funds were injected into big banks, giving way too many eyes too much access. The situation is not manageable, an unexpected grand intrusion after fund confiscation. The financial (crime) syndicate must be protected. Quite a contrast event, in view of foreign actions listed above.



PARADIGM SHIFT STATED PLAINLY
The Chinese strategy remains hidden, to execute a grand paradigm shift that will take tacit control of the United States, which is now in disarray. Its leadership is too busy being coopted by the Wall Street banksters. The objective by Beijing leaders is to avoid violence and military actions altogether. Sun Tzu would be proud. Beijing is gradually subjugating the USGovt as a vassal in debt, the risk to the US being a transition toward servitude to their credit master. We are in the midst of an historical global paradigm shift, to date a quiet process. Power is shifting from WashingtonDC and New York City and London directly to Beijing.



The United States has little choice but to acquiesce and comply with Beijing wishes. The insolvent indebted nation with little industry left and a destroyed banking system can endure the shameful process of bankruptcy receivership, forced by the creditors, or the nation can permit a ‘New Alliance’ with China that involves obedient hidden directives. The US possesses a powerful defense contractor industry, half the world’s agricultural output, and many spectacular locations for residence. The practical consequence of the US ‘listening’ to Beijing wishes on a regular basis will be for the European Union to be pushed into a ‘New Alliance’ with Russia. Such a deal is practical, due to distances and supply lines. The United Kingdom is in all likelihood to be left out in the cold.

I wouldn't say we are at critical mass yet. But the warning buttons on the control panel are lighting up red and the status quo has been replaced with dilligent concern.

A lot of great material here Diet. Thanks for putting this together. I'm not sure I agree with you about Americans abandoning their own currency but that is the partiot in me saying this. Other countries for decades have long abandoned their own currencies in favor of the U.S. dollar so the precedence of abandonment of national currency is well established.

Now here is some food for thought. What if the U.S. government goes into protection mode and make it illegal to trade goods and services in the United States with anyhting other then the U.S. dollar? While we are discussing the possibilities I think this certainly could be one. What do you think?

talking about it at silverbear cafe too

[link to www.silverbearcafe.com]

thread please

What would happen if the dollar crashed? Would the stock market drop because of it? becaus now it seems the other way around. hmm?

I never really thought about this possibility but I sure the clowns in congress could be easily persuaded to pass such a measure and the president more than eager to sign it. Has to make you wonder if there were not constitutional ramifications though.

the US dollar is a token of a debt so large it can never be repaid. Eventually it will be priced correctly, and that pricing will be like a GM bond....nearly worthless.

Inflation or hyperinflation because of a dollar collapse doesn't mean the stock market will collapse, because it is denominated in increasingly worthless currency, so that has the effect of inflating the value of the asset.

As Zimbabwe melted down, the share market there did ok priced in zimbabwean dollars until the currency finally met it's death.

Exactly! Debt is so large that we do not have the means to service it anymore.

The Dallas FED Governor estimated total liabilities of the
US government at exceeding 99 trillion dollars.

The US tax revenues are off 34% to about 1.7 trillion dollars a year.

This is roughly equivalent to you making a salary of 170,000 a year and having a debt of 10 million dollars.

There is no way this debt can ever possibly be repaid and the markets know it.

Now THAT puts things into perspective!

More and more people that see the truth are coming out of the woodwork. The charade won't continue too much longer.
Thanks for the link Avian.

Got silver?

Jenn++

me gots both...thanks Jenn++

Yes, I think that the numbers are so large, they lose meaning...but when you bring them down to a recognizable size, it really hits you over the head that there is no possible way to repay this debt.

In the example I gave, if you figure 5% interest, the interest alone on your 10 million dollar debt is 500,000 a year, and you are making only 170,000.

You can't change the laws of math. You can spin it and propagandize the people, but sooner or later you have the irreconcilable math to deal with.

This is why people like Marc Faber will say they are 100% certain there will be hyperinflation. It is simply a reflection of the underlying math.

Honestly does the stock market have any relevance anymore? The market is so blatantly manipulated that only fools would be in it now. Then again what is that saying? 'A suckers born every minute'!

Avian,

Thanks for posting this link!
I strongly urge people to read this.
The writing on the wall is becoming more and more legible. The pieces of the endgame puzzle are starting to come together so we can visualize how it is going to happen.

The fact that the Germans and UAE are taking delivery of their gold is ominous for people who understand the degree of rigging of the gold market and why that has been important to maintain the status quo.

[link to www.midasletter.com]

The liabilities of the enemy have increased, and the short positions in the COMEX market are sufficiently stacked that the big bank defenders simply cannot allow gold to win decisively. G7 governments are allied against gold to a man, while emerging economic behemoths China and Russia stand in opposition.

In particular, China’s revelations that it has been in a continuous accumulation mode for the last several years and is now the fifth largest sovereign reserve of gold has created an impetus in the gold camp that has been seen lacking in the past. Institutional and sovereign investment entities now perceive a floor in the gold price based on this information, and one must beg the question as to why China would make such a revelation when it threatens to undermine the value of its $2 trillion in U.S. debt holdings.

China has also been careful to avoid buying gold on the international market, for fear, it says, of creating a stampede into the precious metals that would immediately increase the cost of its stated intention to continue accumulating gold towards the backing of the yuan (renmibi) as a global reserve currency

Yet that is precisely what has happened. Ostensibly, the justification for tipping their hand exists in the fact that they’ve resigned themselves to the fact that selling poison toys and pet foods to Americans in exchange for a currency that loses value like light into a black hole is an acceptable if imperfect transaction. With $50 billion a year in interest payments from the U.S., they can hedge the risk buy using it to buy gold.

With the perceived floor arguably at $850, downside risk is limited in gold far more so than in U.S. treasuries, which, if mainstream media is to be taken as remotely credible, is the current favorite of safe haven investors.

‘Safe Haven’ is about to get painted with same fragrant brush as ‘AAA-rated’ investments.

Goldbugs are salivating at the prospect of vindication, but seasoned veterans of the war know that the governments and central banks arrayed against gold are not fair fighters. Since the largest players in the futures market occupy both sides of the contract, and never take delivery of the physical gold, they can orchestrate a perpetual negative sentiment towards gold by driving the future price downward by simply amping up the short positions, thus making gold appear poised for a sell-off. This has been standard operating procedure for the last decade, and it is interesting to note that ever-bigger short positions are having less influence over shorter durations before the bulls shrug off the flimsy performance and take gold higher.

Critics and observers of this U.S. Dollar image management program point to the fact that such activity, while shoring up demand for U.S. Dollar debt in the short terms, effectively undermines the entire global economy, and is among the fundamental causes of financial crises such as the housing collapse and the whole current global financial fiasco.

Proponents of this manipulation, who are increasingly legion in number, correctly predict an inevitable bursting of the damn catalyzed by investment demand overwhelming the short positions, forcing them to buy and cover to limit losses, which will, in itself, stimulate the gold price even further.

With the limited oversight and feeble reporting standards of the CFTC, the ploy is facilitated by complicit (or ignorant) regulators who ensure data is obfuscated and disclosure limited. It has been this collective effort on the part of the Dollar Defenders that continuously defeats gold’s advances, repeatedly castrating the bulls and sending them whimpering to lick their wounds and regroup.

But China is now leading the charge, and the bet is that they’re willing to forgo the lost value of their USD holdings to decisively undermine the global reserve currency once and for all and replace it with the Yuan, a move that would effectively mark the beginning in the shift of the global balance of power from west to east.

The United States, overextended militarily across the Middle East and Asia, with new fronts threatening to open in Iran and Pakistan, is perilously close to an international nervous breakdown. China’s opportunity is to ride to the rescue bearing smiles and steamed pork buns while dividing up what is left of the American industrial asset pool.

Our leadership of the last decade (or more accurately, absence thereof), eager to lubricate the workings of multinational financial interests, have inadvertently played into the patient hands of their biggest creditor by prostituting the national currency shamelessly to the point where every nation in the world can see what used up piece of spent jet trash the old USD has become.

While mainstream media dismisses the idea of the Yuan replacing the dollar as the international monetary standard, those of us who have tuned out at the perception management program on CNN recognize the event as halfway accomplished.

The truly explosive moment for gold will occur when the Chinese, at their discretion, decide to spring the trap, and abandon USD completely in favor of gold, suddenly spiking the price of gold straight north in tandem with the complete collapse of the U.S. dollar.

Don’t pay any attention to the second rate hacks trying to claim credit for predicting the fall…its been predicted repeatedly throughout history from Nostradamus to Roubini. Any student of economic history with 20/20 vision could see this coming, and here it is. “I told you so” is a waste of time. Who’s offering a solution?

Whether or not this particular battle at the Great Wall of $1,000 an ounce is the mother of all battles remains to be seen. Desperate times call for desperate measures, and while G7 governments collude to retain power, the unforeseeable is the greatest threat to gold.

That being said, veteran observers are optimistic, to say the least.

According to Bill Murphy, intrepid soldier of gold wars and standard bearer for the Gold Anti-trust Action Committee,


"The Gold Cartel is giving it all they have no, as evidenced by the sharply rising gold open interest on the Comex ... up some 23,000 contracts on Wednesday and Thursday. They are doing all they can to counter new spec buying.
My hunch is the next time we see $1,000, and that could be very soon, gold ought to take off from there, giving us more upside dynamic daily moves. The reasons to own physical gold are off the charts ... HUGE investment demand, shrinking visible central bank supply (unrelated to the cabal), shrinking mine supply, shrinking dollar, concerns over sovereign wealth debt, a horrible US economy, and a US printing press that is going flat out and will have to for some time to come.

In my opinion, all gold has to do is to stay over $1,000 for a few days, and then all kinds of bells and whistles go off."

Bill is not the only one who thinks the breakthrough is at hand. Bob Moriarty of 321gold.com, himself a historically prescient oracle of market crashes agrees and warns that the stock market will be the first casualty of the new financial reality.


“If you take a look at the dollar and the long bond, it looks as if they jumped off a cliff. This isn’t gold going up, it’s the dollar and bonds going down. When the market wakes up the stock market is going to take a giant dump. No more fake rally.”Investors by now should be well equipped to read the writing on the wall. Whether gold breaks through $1,000 and holds there, charts new territory at much higher levels, or is beaten back down through the offices of JP Morgan, HSBC and Goldman Sachs, is irrelevant.

Gold producer stocks are up, on average, over 22% this year in the Midas Model Portfolios, while intermediate producers and close-to-production juniors have piled on gains ranging from 20 to 200%, all since January this year.

You won’t hear anybody pointing that fact out on television, and you won’t hear that from your broker, in most cases. But the lesson is clear. Gold bullion is the place to be for wealth preservation, and gold producers and explorers is where risk capital is going to see utterly stupendous gains this year.

If you buy the hype of Wall Street and Washington and wade into the general equities markets, you have nobody to blame but yourself for the heavy losses you will surely sustain.

Great post!
While eveyone is waiting for the Chinese to do something diabolical with their reserve holdings of US $$$ the act is beig played out. They don't have to do anything other than quit buying US treasuries. It's that simple. The dollar falls into the toilet and the flight will be to a currency backed by gold.

Sometimes the simple answer is the least obvious one.

others will follow , could put COMEX into default

It's bigger than just the Comex. The Central Banks who are holding the gold which has now been reclaimed have lent this gold in the forward and interbank markets many times over.

The fact that countries are taking delivery of their physical gold indicates a complete loss of confidence in the continued existence of the financial status quo.

THE ONLY THING SUPPORTING THE STATUS QUO IS CONFIDENCE.

And the Consumer Confidence number were up higher than expected for last month. Looks like the MSM and idiot politicians con job is woking with the sheep.

The confidence required is that of financial market participants. The US population is already collectively bankrupt along with the government. It is inconsequential what the US government says the confidence of it's citizens is. What matters is the confidence of the people managing the assets.

Inflation here we come....

I wish it were going to be just inflation. Unfortunately the dynamics are clearly in place to put the word 'hyper' in front of inflation.

So, guys, what does this mean for the average guy?

I love your posts Diet, but I think you maybe bit a little out in left field on this one. The idea of a gold backed currency is wonderful but there isn't enough physical to do it. Maybe another metal (copper?). Not to mention that I don't know of any banking system in the world who would want to tie up it's PM reserves for backing a currency. It's much more lucrative to buy/sell and lease it and play the currency hedging game.

It is interesting about making a component of a currency basket gold/gold backed. However, this doesn't mean a particular currency would be backed by gold unless the currency basket itself was a unit of trade. (i.e. a pseudo currency in and of itself.)

I do agree the metals (at least physical - won't even touch the topic of COMEX - too many variables) and soon other commodities will be worth more as time goes on. We have diluted, or should I say, we have allowed those in power to dilute the USD so that it won't usable. As you pointed out Diet, the debt is unserviceable.

The only question is if we'll find out about default on the national debt this year or next. I believe the interest payment is due at the end of September. Can anyone confirm this? Also be aware that default may not come as a news headline, but as a roll out of a new US currency, etc. Very interesting times indeed.

Basically your income will not be able to keep up with the cost of goods and sevices! Tough choices will have to be made and many people will gladly lay down thier civil liberties in exchange for governemnt aid.

Someone answer this question, please.