Subnostr

I don't hold any CNY, but I also don't import stuff directly from China.

Telling people to keep their reserves in CNY while preventing them from investing in China or taking their currency abroad is indeed difficult.

If you have too much CNY because you're one of the few countries that runs a trade surpluss with China (e.g. Saudi), you can show up in Shanghai, Hong Kong or London with offshore CNY and demand physical gold settlement which largely solves this problem.

The gold is then sourced from 2 places most of the time (The US or the UK) because mainland China gold cannot leave China.

The US can then deliver the gold and:

1. Not let the price of gold rise by allowing paper gold market leverage to rise in London and NYC (Deliver the gold but sell more paper gold to keep gold's price from rising). This prevents gold purchases from devaluing the USD in gold terms.

2. Deliver the gold and let gold's price rise as a result of the purchases. This devalues the USD via a rising gold price.

If the US/UK refuse to deliver the gold or run out, then China and Russia can reset the gold price to a higher level and devlue the USD.

It seems to me like when gold rises in USD terms, it makes it more and more obvious that the currency is being debased and the US' creditors won't get repaid in real terms.

As greenspan said: "Gold is the canary in the coal mine. It signals problems with respect to currency markets."

The US exports mostly dollars, bonds and weapons, whereas China exports a lot more stuff.

Gold is recognized as a store of value (money), whereas USD and CNY are currencies (medium of exchange but not store of value).

The big gold inventory thus lends a lot of credibility to their currency.

However, it is indeed true that they don't audit their gold holdings and the reports and underestimates.

sms 2y ago

This all sounds reasonable, but argues in favour of #gold, not #CNY credibility.

Neither is there evidence that Americans , UK, or Chinese still care about their curency value in real gold terms:

http://pricedingold.com/china/

http://pricedingold.com/pound-sterling/

http://pricedingold.com/us-dollar/

The Americans clearly don’t care!

Speaking of oil exporters and Asia gold exchanges, probably the most honest physical gold delivery contract in the world - #Dubai Shariah Gold - is still denominated and settled in USD - not even local AED, which is also still pegged to USD!

https://www.dgcx.ae/products/shariah-gold

Just a week ago, at Dubai airport, i could pay with #AED or #USD. Even though they could take the CNY to #Shanghai and get physical gold, CNY notes not an option. Same everywhere else i go in the world.

The most revealing observation to me is that anyone I encounter making the case for growing credibility of BRICS currencies through gold, upon inquiry, turns out not to be holding ANY of those currencies, much less government bonds from which those fiat originate!

That’s after BRICS currency has been threatened at least 14 years now, including gold backing.

If i believed the argument, i would be frontrunning markets through long duration BRICS bonds! Yet, they don’t risk leading by example.

Suggests that they are just repeating popular YouTube/podcast click-bait narratives, which they don’t actually believe enough to have skin in the game.

I live in Asia. From Dubai to Philippines, there’s not a hint of dedollarisation here, and rather a USD shortage, though not as critical as in Africa. I see more JPY exchanged , than CNY.

No one i know is even talking about going to Shanghai to buy, much less store gold, given how credible , transparent and trustworthy the Chinese leadership, CNY, capital control and gold export ban system are.

That’s what #Singapore is for now, even for mainland Chinese.

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Discussion

Buck Fonds 2y ago

Maybe I'm misunderstanding this. I'm just learning.

But it seems to me that China doesn't care about the Yuan being used in airports. They care about them being about to buy oil and commodities using the CNY to reduce their dependence on the dollar.

Saudi's finance minister said in 2023 WEF clip in January that they are open to dealing in currencies other than the USD for the first time in 48 years.

It would be interesting if Saudi and the OPEC sell oil in different currencies so the world doesn't have to hoard dollars for their energy consumption.

The US seizing Russian assets and removing them from SWIFT seems like something that would make you hedge your bets if you're not on America's good political side.

Explaining to BRICS countries how you want to phase out fossil fuels in Dubai probably also doesn't help.

If I want to front-run this, I would be buying physical gold and bitcoin and not government paper. I think a substantial chunk of what sits currently in bonds will find itself in either physical gold or bitcoin eventually.

sms 2y ago

I don’t know as much about Saudi kingdom, because my associates, i and many others see Dubai as the place to base business, make investments, trade and store metal, et cetera.

It’s the next Singapore, because particularly the Emir of Dubai and his sons - among UAE emirs - are creating the most reasonable business environment in Asia, in our opinion.

It’s a monarchy, but a relatively enlightened and honourable one, compared to the CCP empire of China.

Not every visitor to the Emirates visits every place there, but almost every visitor passes through the Dubai airports. And it’s a rather impressive gateway and face of the Emirates.

Nothing significant happens in such a business in an absolute monarchy on local discretion, especially regarding money.

If CNY and China trade connection portended some special new PBoC product credibility, CNY would be a payment option there, as paper USD is. I can use Chinese UnionPay there, but that’s completely fake, digital nonsense, like all digital fiat.

On opposite end of Asia, more companies are moving from China just over the border to neighbouring Vietnam, and other SEA territories.

If you come to Vietnam as a foreigner who needs a visa in advance, when they issue it at the airport, the only fiat accepted as payment is USD!

The owners of that totalitarian, socialist territory, don’t even accept their own currency for that, much less of the neighbouring China!

Clearly, Western sanctions and even stealing Russian assets have been completely ineffective in reaching their goals. That has been obvious everywhere except Warshington and Brussels , since sanctions on Cuba and Iran began.

Therefore, any new statements about being open to hedging through other fiat seems just the latest BRICS currency hot air tiger and posturing.

Most governments and major institutions have been willing to hold long duration bonds with negative real yields since years ago.

So, predictions of substantial global sovereign bond demise in favour of gold, much less Bitcoin, also seems overly optimistic.

Regarding Bitcoin, PBoC practically admitted that their fiat is still uncompetitive, untrustworthy , digital, domestic rubbish, unfit for global trade, when they effectively banned Bitcoin years ago.

If gold holdings mattered in their fiat credibility and trade use, there was no reason to do that.

Even the Americans, who stand to lose the most power and credibility from Bitcoin, and likely have insufficient gold since 1971, have yet to ban Bitcoin!