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ChiGold - prospecting & nation-building for fun and profit

By JY896 | Friday, November 8, 2013 at 4:33 am

There is always a considerable amount of discussion in ‘our part of the internet’ about the role China is playing, and will play, in the monetary system. Currently China holds (or more accurately, is believed to hold) $3.66T in foreign reserves – assumed to be primarily in US Treasuries. While the total comes from PBOC, the composition of the assets held is speculative. There is also, of course, the ever-popular 1,054.1 metric tons of Chinese gold reserve:

"China hasn’t announced any changes to state gold reserves since authorities in 2009 said bullion holdings totaled 1,054.1 metric tons." -- though the Bloomberg article does grudgingly acknowledge that there 'may be some discrepancy' between the reported end-2008 figure and current reality...

So, what’s up? Is China content to ride the status quo, keep buying foreign currencies to keep the yuan down? Is it moving to advance the cause of the SDR by pushing for inclusion in it, along with Russia? What, if anything do the above have to do with the buildout of Chinese gold production capability, and in-country reserves?

As I started digging further, I came up against what any average investor faces on a daily basis – it is extremely difficult to find specific, current, reliable information that is presented in just the way one is seeking it. If it HAPPENS to be available, it is an expensive report to acquire. The questions I was seeking answers for:

I was not able to find all of the answers, but will try to share the breadcrumb trail that I eventually traced, and the data sources I stumbled upon. They present (what was to me) a remarkable sketch of the lengths China is going to in order to secure resources around the world.

Here’s a Forbes/Kitco article where Jim Rickards and our very own house favorite Jeffrey Christian agree on something:

“What the Chinese want is to have the Yuan in the SDR basket but not open up their capital account,” he said. “That is a backdoor way for the Yuan to be a de facto reserve currency without having to give up control.” - Rickards They BOTH insist that:

"The two analysts also agree that expectations the Yuan will become a reserve currency on its own are extremely overblown."

What is brilliant about THIS particular Forbes article is that it presents quite enough half-truths to completely confuse and mislead interested investors, WITHOUT being a flat-out lie.

“Rickards said he thinks China has not updated its reserves because they continue to buy gold. He said China has a pattern announcing their reserves every six years, after the bank has reached its target. […] On the contrary, Christian said that he suspects that one of the reasons why the bank hasn’t updated its reserves is because it’s not buying that much gold or as much gold as people expect.”


OK, onto another option: China is working in conjunction with the other BRICS nations and to a degree with the Eurozone to construct the fabled gold-based trade settlement system that the Jackass is always going on about? One of the indicators, the extensive and growing network of yuan-based trade settlement swaps with nearly all major Chinese trading partners is well established. The other indicator  of massive gold inflows into China has also been thoroughly documented. But what I was really interested in stems from this table from the USGS (reserves being deposits in ground):

Note that China is the largest producer of gold in the world (has been for 7 years running now – estimated in italics my addition from reports below) -- but at current rate set to exhaust its reserves in 4-5 years.

Some other good starting points:

PriceWaterhouseCoopers has a global Gold Price Report, and Thomson Reuters GFMS publishes an annual report (I am not sure they meant to share it, but here it is: Gold Survey 2013). The former is compiled from a survey of gold mining companies, and has the following passage:

"China is keen on gold for two main reasons:

The report has interesting, if anecdotal, examples of Chinese mining expansion, and both gold and silver data.

The other, GFMS report is more comprehensive, tackling everything from cost of production, composition and direction of imports/exports from major producing regions, GOFO and much more. Definitely worth a look. It includes this table:

It has another, completely unintentionally hilarious table on page 5 of the report, which is an apt illustration of the absurdity of our circumstance: between 2012 and 2013, global supply and demand each expanded by 1.6% (nevermind the doubt that might arise from how the components are calculated) – but during the same period gold price dropped by 13.4% in USD/oz terms. Yeah, and these are open and fairly traded markets, and the USD has gained over 13% in purchasing power in the last year.

But returning to our story – take a moment to go back up and compare these lists of gold-producing countries with the map below.

There is this interesting little infographic from Stratfor (along with a brief report on the topic of China and African investments) -- open in new tab for full size: "Chinese Investment in Africa is republished with permission of Stratfor."

There appears to be strategic, long-term and quite extensive project underway for the ‘benevolent colonization’ of Africa – and wherever else has resources:

“Meanwhile, trade data shows that just three commodities - iron ore, oil and soy - and their derivatives - still account for 80 percent of Brazil's exports to China. […]

Derek Scissors, an expert on Chinese outward investment at the American Enterprise Institute, a Washington think tank, said the sudden spurt in investment, followed by a backlash and then a withdrawal, was "absolutely classic Chinese behavior" that also occurred in sub-Saharan Africa in recent years.

"What happens," Scissors said, "is you start getting people saying 'Wait a minute, we are running a huge trade deficit with China. They are investing $20 billion and grabbing up all our resources. Are we a colony?'" – Reuters

Wherever one turns, it seems like Chinese corporations are trying to buy resources, some of more interest to us here than others:

“China National Gold Group Corp. is considering investing in mines owned by Robert Friedland’s Ivanhoe Mines Ltd., including the Platreef project in South Africa, a person with knowledge of the situation said. […]

State-owned China National Gold has also looked at other Ivanhoe projects located in the Democratic Republic of Congo and Gabon, though prefers more developed countries like South Africa, the person said. No terms for a purchase of Platreef have been finalized, and China National Gold could instead consider buying a stake in Vancouver-based Ivanhoe itself, the person said.” – Vancouver Sun

Australia also happens to have a relatively low population density as a country, and lots of resources:

"Australia's business-friendly conditions make it a priority for Chinese outward direct investment, according to a recent HSBC survey. The survey reveals a large proportion of Chinese companies are expanding offshore into the manufacturing and retail trade sectors - rather than mining as expected; and are prioritising markets like Australia that have favourable business and political conditions.

These insights are drawn from a survey by HSBC1 based on responses from more than 250 Chinese companies that have built or are considering building a presence overseas. Amongst those surveyed, 17% were large conglomerates with the remainder being of a corporate or middle market size." -- our very good friends at HSBC

The Chinese media like to portray it thus (there are some who say not all parties involved agree with the depiction): There is a crucial paragraph from People's Daily article that struck me:

"People don't understand the mathematical mechanics of compound interest. China's growth might have slowed slightly but the base is huge. Last year China added another Australia to its GDP, by 2018 this will be another Germany and by 2021, another Japan and that will be every year. The volume demand for resources will not decline," he says.” – People’s Daily

Is it possible the Chinese have finally truly mastered this understanding of the exponential function? Could it be they are preparing for the next “doubling of the bacteria in the soda bottle”? Are the ghost cities in China and elsewhere (Angola) truly follies of central planning and an overflow of excess capacity? Or do they represent a decades-spanning plan to increase Chinese Lebensraum?

Some examples of how this is playing out across the continent (again, refer to Africa map above):

“"The Chinese have changed Zambia," said Nelson Mwendabai, a retired civil servant who ticked off Chinese-backed projects: a railway between Tanzania and Zambia, new roads, schools, clinics and stadiums. Mwendabai said: "We should just accept that they are our friends."

Zambian President Michael Sata criticized the Chinese presence as an opposition leader, seeking to harness nationalist unhappiness with Chinese accused of taking jobs from Zambians by engaging in low-pay jobs such as pushing wheelbarrows at construction sites. He changed his tune after his Patriotic Front party won elections in 2011. In April, Sata went to China on an 11-day state visit, soon after new Chinese ruler Xi Jinping took office.

"I have come to say 'thank you' for the work the Chinese are doing in Zambia," Sata told Xi.” – ABC News

See, campaign contributions and “other contributions” are a very strategic and lucrative investment everywhere in the world…

“Tanzania has signed contracts worth $1.7 billion with Chinese companies to construct power plants and housing units in east Africa's second-largest economy. […]Tanzania signed a framework agreement in May with China Merchants Holdings (International) Co Ltd for the construction of a new port, special economic zone and railway network that could involve more than $10 billion.

China, which built a railway linking Tanzania and Zambia in the 1960s and 1970s, is also financing a $1.2 billion 532-km (330-mile) natural gas pipeline from the south east of the country to the commercial capital Dar es Salaam.

In 2011 China's Sichuan Hongda Co. Ltd signed a $3 billion deal with Tanzania to mine coal and iron ore.

Chinese companies are also eyeing Tanzania's natural gas reserves and are expected to bid for oil and gas blocks in the country, according to the African country's energy ministry.” -- Reuters

It has come to a point where Chinese gold prospectors are swarming African goldfields in a 19th- century-like gold rush:

“Ghana has been inundated with migrant gold miners in recent years and the vast majority — an estimated 50,000 — are Chinese from Shanglin county. The Chinese miners claim they were operating in legal partnership with local Ghanaian landowners (although many admit to not having valid documentation). Hundreds of miners, including Yang, were rounded up and deported a couple of weeks ago.” -- TIME

There is a reasonably well-rounded landscape report from the Economist here – while dated, it contains a nice quote from W.H. Auden (no, I had no idea who that was, either*):

“I'll love you, dear, I'll love you

Till China and Africa meet,

And the river jumps over the mountain

And the salmon sing in the street.”

Apparently, hell has frozen over and W.H. Auden has now left his paramour. * - http://en.m.wikipedia.org/wiki/W._H._Auden

In an interview on Bullionvault, Matt Badiali of Stansberry & Associates gives the following, in my opinion very astute, summary of China’s approach:

“We have been watching China's investments in Africa for a while now. China is spending billions of Dollars in Africa in very specific ways: financing power plants, building railroads and developing other infrastructure plays.

Why? If you want to build a mine, you need electric power. You need to be able to get ore from the mine to a port. China is laying the groundwork for mine development all over Africa.

Look also at what China is buying: one of the world's largest undeveloped uranium deposits, bullion and shares in African gold miners, from major mining companies to partnerships with juniors and exploration projects.

At the Mines and Money Conference in Hong Kong, I asked representatives of major Chinese investment banks and funds if gold is a major target for Chinese investment in Africa. Across the board, they all said yes.”

It’s not JUST gold, you understand – from building solar plants in Chile, to becoming the primary trade partner of seemingly all resource-rich countries developing/developed alike, China has been busily weaving its web. The game afoot is on larger scale and for larger stakes than most people seem to realize:

“an estimated 259,000 Chinese nationals in Angola are mainly construction workers helping to rebuild the country after a devastating 27-year civil war that ruined much of its infrastructure” – Ghanaweb (also an interesting, longer article on Chinese involvement in Ghana)

When an economy can just point, and send nearly 300K workers to the middle of Africa in the space of a few years, one has to wonder a bit as to whether their planning and execution is really as flawed as Western analysts are often prone to thinking. The millions of empty apartments/offices built in the ghost cities COULD be an example of the irrational excesses of central planning gone wrong. But even if they WERE,  they could now become outposts, forts on hills, trading posts in native country. Inside China, they could be meant to support the continued migration of rural workers to the cities (or massive in-migration of population from elsewhere?), in places like Angola they can serve as stakes in the ground. A more optimistic viewpoint might be the expectation of the Chinese planners that in the future, raw materials and resources will become significantly more valuable, creating the jobs and thus income necessary for large masses of people to move to such environments. And if you have 300K citizens in another country, are you not then bound to ensure the safety and security of that expatriate community, at some point – with all the options available to a nascent global power?

While building a megapolis in the middle of Inner Mongolia (think Nevada, only the desert is much bigger) might seem eccentric, look at these pictures and tell me this was done as a budget-consuming, megalomaniacal, insane scheme of a few local party officials desperate to generate tangible growth, no matter the irrationality (courtesy of TIME photographer Michael C. Brown, see link above): As another photo essay (regrettably of lower resolution, but more extensive in pictures) on ghost cities notes:

“China wants to move more than 400 million people from the countryside to the city in the next 10 years. […] "social engineering on the grandest of scales." ” – Business Insider

So, what’s the take-away here? That “the Chinese are coming” is something everyone should have realized by now – their speed and impact is what is in question. My view is that insofar as they are able to pull off a social transformation and internal development akin to what has already been demonstrated several times (with tragic side-effects, alas) in the history of central planning from Lenin onward, they are in fact positioning themselves to be able to vault to a position of true global leadership in a relatively rapid timeframe. Whether or not they are waiting for (or waiting to initiate) any global monetary reset, it could be argued that they are certainly PREPARING FOR it. While we all (should) know the officially maintained figure of ~1000 ton gold reserve on record for China is bogus, how much really IS in China proper, or in ‘deep storage’ (aka minable deposits) under direct or indirect Chinese control today? With production in China itself making up 14.4% of the global supply in 2012, what is the true figure today – and what is it when including the amounts shipped back from territories further afield?

I didn’t have a chance to fully get the answers to all of these questions, but I’m hoping there are some among you who can round out the tale. But I would say, we will be getting used to images like these -- not just in Africa (note the differential color-coding of hardhats [workers] vs. [foreman/engineer/manager]...): I have been left with the impression that, given the opportunity and the right set of conditions (which the Chinese leadership seems very diligent in working to bring about), this setup will allow China to turn on afterburners and switch its (now more distributed) economy to even higher gear at a 'moment's notice' (relatively speaking). And of course, that there seems to be zero confusion on the part of China and her people (as a whole) on what represents wealth and real money.

As always, keep stacking. Eye-candy on the above topics:

Infographic on Global Gold Mines and Deposits Ranking 2012 from Visual Capitalist

Infographic on the evolution of modern Chinese relationship with gold (ZH blurb here, original from The Real Asset Co. here)

Some older maps:

- Chinese oil and mineral rights in Africa, ca. 2008 (click here for article & larger map) - Hydroelectric projects in Africa, ca. 2010 (click here for full-size image) Extensive report on Chinese hydroelectric projects worldwide, from International Rivers (Oct., 2012)

Logistics project of the century the Nicaragua Canal: More details/background here: "Nicaragua has awarded a Chinese company a 100-year concession to build an alternative to the Panama Canal, in a step that looks set to have profound geopolitical ramifications." -- The Guardian, June 2013

Some resources for silver (forgive the Silver Institute links – sometimes the gatekeepers can have useful data):

Global silver supply/demand tables

World Silver Survey 2013: A Summary produced for The Silver Institute by Thomson Reuters GFMS

The Chinese Silver Market (produced for The Silver Institute by Thomson Reuters GFMS) In searching for illustrations for this post, I started out by looking for images from Looper (worth a look if you are a fan of time-travel sci-fi and/or are a diehard Bruce Willis fan -- hitmen in the future get paid with silver & gold bars from an even more distant future. Talk about pulling future wealth/demand into the present...). It turned out I couldn’t find one of the protagonist’s floor safe filled with silver bars so these will have to do: However, I stumbled upon something much better – a short film from our very own fellow Turdite and resident YouTube star -- Beinki (watch the trailer linked above, if you have not heard of the movie): (Beinki, you totally forgot to drop the package into the incinerator… Tsk, tsk, tsk. Getting sloppy there, champ.)
 China's gold

Submitted by bronsuchecki on November 8, 2013 - 4:56am.

I did this analysis in Sep 2012 on how much gold is held in China that you may find of interest http://www.perthmintbullion.com/blog/blog/12-09-19/How_Much_Gold_Does_China_Have.aspx

"We therefore assume that by 1980, when Chinese gold production began its rise, there was little gold held in China. An estimate of Chinese gold stocks can then be made by adding accumulated gold production since 1980 of 5,255 tonnes to our net import estimate of 1,100 tonnes, giving 6,355 tonnes.

This figure is confirmed by the Sang Shang article, which states that “the total amount of gold held by both private citizens and the government reserves amounts to between 4000-5000 tons of gold.” This article was from 2007. Gold production and imports from 2008 onwards is 2,436 tonnes, giving a figure of between 6,436 to 7,436 tonnes.

For comparison, Indians are said to hold 18,000 tonnes. With comparable populations, this means China’s per capita gold stocks are well below India’s: 0.1516 ounces per person versus 0.4782 ounces." Estimating China's Gold & Blindly Accepting U.S. Gold Reserves.

Submitted by Spartacus Rex on November 8, 2013 - 5:07am.

Better Keep Stacking Those Red Monster Boxes Or Else! Unrelated but i Just had to laugh

Submitted by Hammer on November 8, 2013 - 5:20am.

Unrelated but I just had to laugh when I saw this..........


oh.....and Turd as in Thurd - finally after two firsts and a yellow hat I get the coveted Turd place :) Fascinating article. You

Submitted by Vermilion on November 8, 2013 - 5:36am.

Fascinating article.

You mention its foreign reserves, estimated at $3.66T - but, as with their gold holdings, the real total is unknown.

How does China pay African countries for its mineral rights? Well, partly by building infrastructure (not as altruistic as it seems), but also in cash. And what more trustworthy payment vehicle than handing over genuine US Treasury notes.

I reckon their reserves are considerably less than $3.66T, and their gold holdings (both in hand and 'deep storage') are considerably north of 2,000 tonnes - could they be 2nd behind the US, with more than 8,000 tonnes? Perhaps not now, but soon.

Gold's share of Reserves in China is a pitifully low 1% using official stats - their target ratio must be 10%+ Submitted by ivars on November 8, 2013 - 6:03am.

Way to grow per capita.

You seem to act as expert in all things gold. I would be interested to hear what is your estimate of current gold lending ( volume outstanding= lent, rolled over) via LBMA?

Prior to 1999 Washington agreement it was about 5000 tons. In 2006, it was estimated by Blanchard to be close to 3000 t as Europian CBs withdrew from the market, leaving limited amounts per 5 year period to be lent ( and sold) .

I can not find any analysis or data after 2006, except one book "Gold Lending Market" by Bohm in 2010, but that one You can not read in Google, or Amazon, so i did not get to volumes if they were estimated there.

The conclusion in the thesis - the book was that GOFO is set by CBs ( plus UST who owns gold) as they please, similarly to e.g. FED money rates, and does not depend on demand. In that sense, setting GOFO by CBs is a policy tool as is FED rate setting etc. Question is , what policy? It is known that European CBs require Positive GOFO to lend their gold. Nothing is known about those who did not sign Washington agreement , also extension in 2009 ( USA, UK, Japan). Who controls IMF gold lending ( prohibited by statutes, but).

I would suggest that with USA , UK controlled ( may be not their own) and Japanese gold available for lending and LENT has grown again at least to 6000 tons.

Your estimate for year 2012- 2013? and meat too

Submitted by transplanted baby on November 8, 2013 - 6:43am.

Recently an acquaintance pointed out how China was buying a very large pork processing company in the US. Do they just want to own a profitable business or do they have other motives? Who knows? I don't (but the buyers do)
Top five to boot. Yeah. Great observations

Submitted by gazzmann on November 8, 2013 - 6:53am.

This is why I check this site out every day. Always something to chew on of significance. Beware the darkside of the

Submitted by Hammer on November 8, 2013 - 8:49am.

Beware the darkside of the metal market force Izabella Kaminska Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

Goldman Sachs launched a spirited defence of warehouse queues last week, arguing that they don’t have an unwarranted effect on physical prices because the hoarding is justified by curve dynamics.

The view, in short, is that because the curve is rewarding the market to store, these supplies are not coming at the cost of supply to the market. In fact, in their eyes, the hoards provide a balancing mechanism to what would otherwise be an oversupplied market. Yay for warehouses! They’re just keeping prices balanced!


and the background Good money, danger galore in Colombia gold rush settlement

Submitted by DeaconBenjamin on November 8, 2013 - 8:52am.

08 November 2013 - 13H22 - Hernan Pineda risks his life daily digging for gold, toiling in a dangerous, unlicensed mine in Colombia, in a crude settlement that has sprung up in a sort of modern-day gold rush.

Many here in San Antonio, located in the country's northwest, live in shacks made of plastic or wood. But the money to be made is irresistible. And there are now amenities to ease the rough life in this two-year-old encampment -- barber shops, nightclubs, cell phone stores, and gold trading stores.

Colombia has more than 14,000 mines, 56 percent of which are unlicensed, the government says. From January 2012 to June of this year, 86 people died in mining accidents and 39 were injured, according to the mining ministry.

Pineda, aged 40 and the father of eight kids, is one of 4,000 people, including women and children, that work scratching gold out of the side of a mountain in Antioquia department. He has worked in illegal mines since he was 13.

In San Antonio, he started off earning a percentage of what he mined each day. He has done well. "I invested the money I earned in a drill, and became a partner in a mine," he said, adding that part of his revenue also goes to buying explosives for his work.His job is to set off detonations to loosen earth, set up reinforcing beams to try to make things safe, and direct a team of 20 miners.

The gold fever has drawn many people from other parts of Antioquia, all zealously hunting for the shiny precious metal. Life is hard but the money is indeed good. Some days people can make as much as the equivalent of $265, about 30-40 percent of the value of what they mine.

Pineda is much better off than grunt miners. He say he can earn up to $13,000 a month. He lives in a rented apartment about 30 kilometers (20 miles) from the mine, and each week travels to Medellin to see his girlfriend. 'The lure of gold is great'

But he is under no illusions. The job is dangerous, and he says his working life will be short because of the precarious safety conditions in the mines. "It is always this way in illegal mining. The idea is to get as much as you can, and with people trying to mine more and do it faster and faster, it is chaotic," Pineda told AFP.

He said there is also the risk the government will shut everything down. Indeed, authorities have declared the zone dangerous and plan to get the miners out. "It is an area with a lot of seismic activity. It is steep, and has geological faults.

The more people work the mountain, the weaker it gets and there is a greater risk of landslides," said Cesar Hernandez, the Antioquia risk management director. The settlements that have sprung up in San Antonio have no water management infrastructure so the earth is soaked and that makes thing worse, he added.

After 27 years working down in the earth's bowels, Pineda says he has witnessed every kind of accident and seen colleagues killed, blinded or crippled. Pineda says he himself has serious lung problems. Now that he has turned 40, he is considering giving up mining and going to work in a store he bought in Medellin with money he has earned. But it is a tough decision to make, he says, because "the lure of gold is great." 
Submitted by Orange on November 8, 2013 - 9:04am.

Are you ready for the 8 am smack down! Submitted by Orange on November 8, 2013 - 9:16am.

Looks like a FUBM is starting BLSBS leaked?

Submitted by Turd Ferguson on November 8, 2013 - 9:22am.
 
Submitted by Keg on November 8, 2013 - 9:32am.

Obviously. Hammer down 5 minutes before release. Economy booming

Submitted by Keg on November 8, 2013 - 9:34am.

GDP yesterday 2.8%.  Over 200K new jobs.  Economy is booming.

Zandi saying these numbers will be revised down.  Even he does not believe them.  But the other guys are beating him up.  Hard to believe, but I think Zandi is right. Did anyone else see...

Submitted by Turd Ferguson on November 8, 2013 - 9:39am.

Gold puked a full 15 seconds before the BLSBS was released. Clearly, obviously leaked. On another note, lost in the NFP bliss is this: The Labor Force Participation Rate fell to 62.8% from 63.2% and is now the lowest since March of 1978...35years! Given the fact that there

Submitted by ivars on November 8, 2013 - 9:52am.

Given the fact that there seems to be a push ( e.g. by ECB decision to reduce Eurozone interest rates, ) of the USA into deflationary scare, I kind of expected such unexpected payroll number- as this move the value of USD higher as well as interest rates. The increasing GDP number yesterday also pointed to that direction.

I wonder.. if the push towards deflation is coming from USG (stats) and ECB ( Europe- Draghi) then with what aim? Or just to prolong USD value myth? Too many coincidences for just 2 days, all in the same direction.

Was this a retaliation-no its a move in the same direction- to strengthen the USD-> increase rates..

LOS ANGELES (MarketWatch) -- Standard & Poor's on Friday cut France's sovereign rating, citing concerns about the country's growth prospects as reason for the move. The long-term ratings were downgraded by one notch, to AA from AA+, with S&P saying it believes the French government's reforms to taxation, as well to labor and other markets, won't substantially raise the country's medium-term growth prospects Silver Money Flow Action Chart

Submitted by ag1969 on November 8, 2013 - 9:58am.

By Morris Hubbartt Submitted by Dr Jerome on November 8, 2013 - 10:02am.

I guess I am surprised that gold did not drop further this morning on that "positive report" for jobs. And how can job creation "soar" when the employment rate is rising? Sure seems that the figures ought to be balanced: job creation vs unemployment claims. but the algos just read the good news...

On other news... I signed up to trade options with Comisky's firm and we bought a futures put option on AU that made a bit of fiat this morning. My new broker has walked me all the way through the process and provided good advice that mostly corresponds with Turd's predictions. 10 yr

Submitted by Orange on November 8, 2013 - 10:03am.

Pops from 2.62 to 2.73 From GATA 2001 via Ed Steers

Submitted by murphy on November 8, 2013 - 10:05am.

British economist Peter Warburton's three most famous paragraphs


Peter Warburton: From his April 2001 essay "The debasement of world currency: It is inflation, but not as we know it".

"It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November, I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

"Central banks, and particularly the US Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade. The smack down does not surprise me,

Submitted by Mr. Fix on November 8, 2013 - 10:09am.

And completely contrived bogus numbers speak for themselves, the only thing the United States produces now is fraud. The above article on China was very insightful, I knew that they were working towards future goals, with the intent of becoming a genuine superpower, but I was completely unaware as to the full extent of their reach.

The thought that occurred to me while reading, was how the United States appears to use its military to destroy infrastructure on a global scale, while China is using its populace and its economic surplus to build infrastructure on a global scale, and in the end, it will benefit China massively.

I see this as good news, it doesn't look like a China is playing the same “one world order scam”. While Western civilization appears to be doing everything it can to commit suicide as a group, Eastern civilization is doing everything it can to build truly sustainable growth, and to enrich its civilization in the process.

If there is to be a “new world order,” it's becoming increasingly clear that the United States will have no say in it whatsoever, and its only real options for control over it is to just “kill people and break things” since the US military is our only remaining show of strength.

A truly excellent article JY896, although you may not have the exact figures you were looking for, you have most certainly pointed out how things are trending, and certain predictions can be based on your work here today.
 Wow 10 year

Submitted by MrOnline on November 8, 2013 - 10:15am.

Well, now that economy is healthy again the FED will have no problem with strongly growing 10 year rate...right? Strong economy means higher rates. All the numbers are telling us that economy is getting stronger again. 10 year up, PM down, jobs up, GDP up. Sooo.....the FED can now let 10 year go to 3%, 4% 6%. Right??? Riiiiight....let`s get popcorn, wait and see! Where to from here?

Submitted by Keg on November 8, 2013 - 10:21am.

If we don't regain and hold 1300/22.50 quickly will we see more downside today? Submitted by tyberious on November 8, 2013 - 10:22am.

Owe Back Taxes Or Talk Bad About Government? No Travel for You Anymore

by FreePatriot, ZenGardner.com

Planning on flying anywhere for the holidays? If you owe back taxes, are a frequent flyer, or own a blog that is critical of the government, you might want to rethink your plans. Under the radar in October, the TSA tightened their screening guide lines to include these in their “screenings”. In fact they want a full background check.

The Transportation Security Agency (TSA) is stepping up its screenings to include even more information into your personal life before you can even board a plane. Before they will even “allow” you to travel to your next destination, they are going even further into the warrant-less search process and violating the Bill of Rights. While the majority of public in the United States will accept this as “routine” to “prevent terrorism”, the new checks may be anything but.

Read More @ ZenGardner.com Jim Willie: Gold Fever:

Submitted by tyberious on November 8, 2013 - 10:25am. In Honor of the Cartel Beatdown today...

Submitted by Cleburne61 on November 8, 2013 - 10:34am.

I locked in a tube of Silver Pegasus rounds just minutes ago!

By the way, if you happen to want some Pegasus rounds.....right now goldsilver.com is offering free shipping on your domestic order.  Code for free shipping is: freeship611

Two of my favorite bullion dealers whom I regularly buy from are goldsilver.com(love me some Mike Maloney), and SDbullion.com  But for this round, you'll have to order exclusively there.

On the heels of the views expressed yesterday regarding the elite(I mean the trillionaires, the Rockefellers, Rothschilds, etc)....may I offer this great hip-hop anthem of a free man? Submitted by Gramp on November 8, 2013 - 10:37am.

gasoline at the pumps here in the NE have dropped to $3.30/gal. range... lowest i can recall for well over a year, maybe several years.

... But if you want the REAL stuff, no ethanol, (because of so many boats having issues with the ethanol causing trouble with their engines), a local marina offers High test, no ethanol, $4.80 per gal!

So if you wonder y you might have trouble with your lawn mower starting after it sits the winter, it's often now attributed to the wonderful blended pump gas we have. Another form of hidden inflation, where, in order to maintain a 'reasonable' price for items, the quality is discreetly diminished over time. More on the corruption

Submitted by Turd Ferguson on November 8, 2013 - 10:44am.

This isn't just a "lucky guess". This is someone having the information BEFORE everyone else.

From the ZH link: http://www.zerohedge.com/news/2013-11-08/another-jobs-report-another-leak-gold-plunges-treasuries-halted

Here's the chart, courtesy of Nanex: Response to: Did anyone else see... Excellent article JY

Submitted by Pining 4 the Fjords on November 8, 2013 - 11:02am.

Top notch research and a fine job connecting the dots.  As usual, your article causes me to think about some things in a bit of a different way, and I want to run a few of these thoughts past the board and see if this makes sense to anyone (or if I am just having a brain cramp).

What this makes me think of is that China is essentially investing for a pre-1913 mode of organizing an economy... they are positioning themselves for the world as it worked prior to the creation of the Federal Reserve.  Think about it-  in the US (and the industrialized world, really) you had basically three major concentrations of capital-  Agricultural capital (spread widely among large numbers of small farm owners), Industrial capital (concentrated among the owners of big factories and industries that produced tangible goods) and Financial capital (banksters).  The creation of the Fed basically has meant that Financial capital has kicked Ag capital and Industrial capital's asses for the last hundred years.  Lending has been far more profitable than producing.

China is betting that this is going to change.  They are going back to an almost 19th century method of organizing an economy, where productive assets and actually producing things trumps monetary tricks and lending.  It seems as though Ag capital and Industrial capital are about to stage a major comeback in terms of power and wealth, and China is getting on the right side of this shift. 4 Arguments Against Gold & Why They’re Wrong

Submitted by hai on November 8, 2013 - 11:10am. Comments for "ChiGold - prospecting & nation-building for fun and profit"

Unquiet Musings