China Cranks up the Heat on DC, with a Blistering Summer Offensive
Well, brothers, it never fails, does it? I leave the interwebz for roughly 10 days…and everything blows sky high(some things, quite literally)! That’s ok though, it’s given me time to sort through the debris, and formulate a few thoughts on what’s going on.
Ya know how each year, when autumn rolls around, you can feel the air literally change? You can’t see the change early on, but yet you feel it, that certain “crispness” on the wind…you just know everything has changed. Well, I’ll say this right now: something is up. Something has changed in the last few weeks, quite profoundly, particularly in China. I’ve been thinking about the current progression of events there, trying to pinpoint when I think this change began, and I really think it all began around this particular moment…
What Set it All in Motion
On July 17th(one month ago, today), the People’s Bank of China finally, after over half a decade, came out and updated their “gold holdings” to 1,658 tonnes, up nearly 15 million ounces. Friends, there is no doubt that this seems to be the event which immediately influenced everything else which quickly followed.
Now, while that actual number was a bogus accounting of what total gold the Chinese state actually owns(in all sources), it was an extremely pivotal event. It had a profound effect on both: 1) Chinese investors, and 2) the gold market. As you’ll remember, just shortly after that announcement, the banksters used this “disappointing figure” as excuse to crater gold’s price in the second half of July. Though correlation doesn’t always equal causation, there can be no doubt that things have been ramping up ever since that moment. For soon the next interesting event transpired…
On August 4th(roughly two weeks after the gold update), the IMF came out and stated that there was still “much work to be done” regarding the inclusion of the Chinese Yuan as part of the SDR. Furthermore, they stated that such further review wouldn’t occur until at least September. That was a big deal, because, you’ll recall that Jim Willie has said for awhile, that China has sought to take over the IMF, and occupy it, in order to restrain the US strongman in the room. By doing so, they could help ensure that DC’s great debt platform was neutralized, until such time as the Yuan was ready for prime-time: for world reserve currency status.
Some had felt that China had intentionally understated their gold reserves in order to “help out” the US government, by buying them just a little more time. Think about it: if China had come out and said, “oh, by the way, our reserves are now…4,000 tonnes”(or much higher), a move they could’ve made…it would’ve sent shockwaves into the broader markets, not just in precious metals, but by extension, into sovereign bond markets as well. It would’ve caused angst and ill-will to those very parties who control the IMF, which China is seeking to absorb into its sphere of influence.
China, by announcing a mere 1,650 tonnes, instead of a much larger number, had let DC off the hook(as well as Wall Street and London banksters) extremely easily. After all, they had a golden guantlet they could’ve crushed those parties with at any moment…but instead, chose to use “kid glove”.
So, when the IMF announced that they still weren’t ready to greenlight the inclusion of China’s currency into the SDR, even after China had done the IMF(and its owners) an enormous favor…..it seems that policy deciders in Beijing concluded that DC needed….extra “stimulants”, or “reminders” of the need to take action on the Yuan’s inclusion. Which led to the next step…
On August 10th(less than a week later) the PBOC shocked markets again by announcing a devaluation of the Yuan, by roughly 2%. This was an enormous move…because it was the opposite of what many Western policy makers had expected….and wanted.
On August 11th, the PBOC followed that “left jab”, with a quick “right hook”, by devaluing the Yuan again, and at nearly the same rate…clocking forex and equities squarely on the cheekbone.
Then, on August 12th, the PBOC threw the “haymaker”, devaluing the Yuan for a third time in as many days….and reducing its exchange rate to the US Dollar by nearly 5%! Here’s what it looked like on the long-term chart:
There you have it, the lowest CNY in nearly 5 years. What was this devaluation about? Well, others have mentioned several things, like the Chinese economic slowdown, or Beijing’s need to boost exports, and I believe those things are true to an extent.
First and foremost however, I believe those Yuan devaluations were about sending a message. You see, for years, many loudmouths, like Democrat Senator Chuck Schumer(pictured beneath), had made an enormous deal about China’s need to “fairly value the Yuan”. They’d mentioned that such things were required, and hinted that if China jumped through certain hoops that were placed before them, then DC would “allow” them to have a larger role in institutions like the IMF.
Well, for 10 years, China did precisely that….they allowed the semi-fixed/semi-floating Yuan to appreciate more and more, until it had reached closer parity to the US Dollar(as you can see in the chart above). Now, after having done all this and much more…China was being told they “still had much work to do” to be included in the SDR?!
This sort of shameful “stiffing” is what Beijing officials simply would not allow to abide. Thusly, in 3 days, they erased nearly 5 years’ worth of those “controlled appreciations”…telling DC, in crystal clear terms:
“We are in full control here, and you will play ball by the rules, or we’ll take our ball and go home”.
DC instantly got the message too, as Senator Chuck Schumer released a statement to the press, saying:
“For years, China has rigged the rules and played games with its currency. Rather than changing their ways, the Chinese government seems to be doubling down.”
Hilarious! Washington DC, the largest, dirtiest market market rigger in human history, is calling China a dirty, rotten currency rigger! This is the “black hole” calling the kettle black!
Of course, flunkies like Schumer et al, are truly upset because this move by the PBOC in devaluing the Yuan has now made the Federal Reserve’s own talk of rate hikes a far more difficult proposition to carry out, and the banks know it. For the past year, the only things sustaining the dollar….have been huge weaknesses in the Euro and Yen, and the narrative that Fed officials intended to “raise rates sometime later” in 2015….2016 or whenever!
With this new devaluation though, China has just pulled one of those key pillars out from under the Fed, and the dollar. Now, the Fed may not be able to drag their feet on that sort of decision any longer. Beijing’s action seemed intended on forcing the Fed to respond, and it seems to have hit the bullseye.
Ah, but then, just to make sure that DC and London got the message loud and clear, Beijing followed up with another seminal event..
New Golden Strategy
For years, China had only updated its gold holding information every 5 or 6 years. There never seemed like there was a “method to the madness”, and that Beijing simply released new info whenever they felt it suited them.
Well, those times of multi-year long periods of golden silence may now be over forever.
For on August 14th, Beijing stunned everyone yet again, by announcing another gold reserve update…just a mere 29 days after its last update. This time, the reserves had increased nearly 20 tonnes, resting at over 1,677.
Now, having “returned to the beginning” of the article, and come full circle….we see Beijing sending another message.
It appears that, slowly, China is impressing upon DC, the IMF, and world market participants, that its gold acquisitions, rather than happenstance or serendipity, are a core part of public policy, which it intends to be far more “timely” and transparent with, concerning what reserves it may be holding(at least the ones counted in the PBOC gold tranche).
Brothers hear me well, though: if this is true, and Beijing intends to report these PBOC acquisitions monthly, as Russia does, then that could very well be an indicator that China has likely reached long-term gold accumulation goals that they’re comfortable with.
And if that is true, then it follows that China could easily go with a “Plan B”, if certain folks don’t get really serious about SDR inclusion, and quickly. In other words, it’s another careful message to DC policymakers.
Apparently I’m not the only one who thinks this either, for as Bloomberg reported recently:
Georgette Boele, ‘a currency and precious metals strategist at ABN Amro Bank NV, said by e-mail from Amsterdam’:
“Publishing their gold reserve data for the second month in a row shows they’re becoming more transparent…This will likely help in their wish to have their currency included in the SDR basket.”
Understand, this has been perfectly timed, and is not occurring by accident. Beijing possesses multiples of the LOL’tastic 1,677 tonnes of gold they say they have…and this move seems to telegraph that the ball is now in DC’s court.
They’re saying, “either make a move to allow your IMF, your apparatus for great black-budget criminality…to be overtaken and co-opted by us….or we’ll take matters into our own hands.”
If DC fails to take action in September, then believe me, Beijing will.
Oh, and one last question:
If China really has, in fact, achieved the gold reserve targets it had set….do you think they’re likely also now ready for a gold revaluation…in whatever fashion or time which that may occur?
The Western banksters had better watch themselves, and toe the line carefully here. I’ve no doubt in my mind that Beijing, and their allies, own enough gold to back the Yuan in such percentages, that would evoke weeping and gnashing of teeth on Wall Street.
For far too long, folks have mistakenly thought that DC, with its debt institutions, was in the driver’s seat.
Rather than the IMF and DC though, it is actually China & Russia which have full control of the situation.
They have “all the gold”…
They have all the forex reserves…
And they have all the institutions needed(AIIB, New Development Bank, Shanghai Cooperation Organization etc)…
In order to “flip the switch”, reset the system, flip the chessboard, and inflict severe pain upon their rivals, if it comes to that.
They are literally holding DC by the…..well, you know what…and let’s just say that if I was a DC policy maker, I’d consider my next move on SDR inclusion very, very carefully….lest I find Beijing squeezing my…*ahem* rather delicate assets, very tightly indeed.
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