European gold: Sold? Pledged! Safe.

A socialist Europe is deep in debt – but still has substantial gold reserves with various central banks. At least as per official records.

24 types of Statism. Currency mismanagement is part of Statist systems | Popular cartoon based on original by Barry Deutsch; modification source and author not known | Click for original Barry Deutsch cartoon.

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Printing presses – all systems go

As Governments across the world, print more and more money, the 20th century idea of Trustworthy State is on its last legs. Increasingly, the (undeserved) trust that the State enjoyed with the masses in the 20th century, is now close to breaking point.

We may very soon see a situation, where people will accept only gold – and no paper currency. The entire structure of 20th century monetary system after WWII, was built on paper. In the last 60 years, people (except a few) have gradually forgotten the link between gold as a store of value.

A memory lapse of a link that is too important to forget.

Currency mismanagement is dead. Long live currency manipulation. | Cartoonist – Michael Ramirez in April 16th 2009; source & courtesy – townhall.com | Click for larger source image.

Few people realize it, but Italy holds the world’s fourth biggest stockpile of gold, at 2,452 tonnes. That’s even more than France, and more than twice as much as China.

Only the U.S., Germany and the International Monetary Fund hold more.

The question here is whether some of the troubled European countries — such as Italy and France — are going to have to start selling off the national gold pile to meet their bills.

Some wonder if they already have.

Italy’s gold has a street value of about $123 billion — easily enough to cover this year’s $80 billion budget shortfall. Portugal’s $19 billion in bullion more than covers its $13 billion deficit. France has $122 billion worth of bullion, enough to make a massive dent in its $150 billion deficit.

Meanwhile, look at the people who actually have a lot of money — namely, the Chinese. I continue to suspect that, sooner or later, China is going to move some of its massive $3 trillion-plus reserves into gold, the only currency that no other country controls. At the moment, the richest Western countries, including the United States, Germany, Italy, and the Netherlands, hold between 60% and 80% of their entire reserves in gold.

The figure for China: Less than 2%. No, that isn’t a misprint.

When that bullion changes hands, it may be the moment when power shifts from the rulers of yesterday to the rulers of tomorrow. This is what happened a century ago, when plenty of that French, German and British gold ended up in the hands of the United States.

In the very short term, this may keep downward pressure on gold. The people who hold the world’s gold at the moment need cash, and may have to sell.

In the medium to longer term, it ought to be bullish. (via Will the Europeans have to sell their gold? – Portfolio Insights by Brett Arends – MarketWatch).

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‘Opportunist’ China’s Help Rejected By EU

China finds that its US$3 trillion forex hoard cannot buy what it wants.

China's US$3 trillion are not enough to make European defense purchases. | Image source and courtesy - dantomozei.files.wordpress.com; first published at http://en.cnci.gov.cn//HtmlFiles/News/2011-2-25/13348.html in China Daily on 2011-2-25 | Click for larger image.

European policymakers are irked by what they call the opportunism of China’s apparent wish to trade some of its vast foreign wealth for increased influence.

“The idea that Europe is desperate for China’s money is wrong,” one senior euro zone monetary official said this week, speaking on condition of anonymity.

“I don’t like all this talk of Europe begging China for help, because Europe has the resources to solve its own problems if it can find the political will,” the source said.

China’s leaders, meanwhile, must show their citizens that giving some of the country’s $3.2 trillion in foreign exchange reserves to Europe is a good thing — especially given the country’s exposure to the 36 percent decline in the nominal value of the U.S. dollar over the last decade.

China had offered help in return for European support to grant it either more influence at the International Monetary Fund, market economy status in the World Trade Organization, or the lifting of a European arms embargo, said the sources, both of whom have direct knowledge of the matter, including one who has ties to the leadership in Beijing.

Granting China market economy status that would, under WTO rules, make it harder for Europe to apply trade sanctions against Chinese imports. China accepted its designation as a non-market economy when joining the WTO in 2001.

And China has been relatively restrained in not demanding publicly that Europe scrap an arms embargo against China — introduced after the 1989 military crackdown on student-led, pro-democracy protests centred on Beijing’s Tiananmen Square — in return for financial assistance to end the debt crisis.

China fears that the euro zone’s sovereign debt crisis could trigger trade friction with its biggest export market and hurt its exports and economy. (via Exclusive: Politics stymie China’s EU aid offer: sources | Reuters).

Pot calling a kettle black

A text book case.

What makes the EU act pricey – while country after country is going down the bankruptcy route? What is making the EU feel superior?

Is a two-party democracy much superior or better than 1-party democracy?

Just because the heads of EU countries are selected from two sets of power-mongers (what else is a political party?) – instead of one as in (Communist Party) China, does not make EU any better or superior. Try as much as I can, there is little difference I can see between China and the EU.

Except gloss and polish.

View from China | Cartoon by Illustration: Liu Rui; Source and courtesy - globaltimes.cn; Published on 08:23 December 28 2010 | Click for source image.

West is the Best

The West does have more skills when it comes to ‘settling’ rivals.

You only have to look at the way in which Sweden has fixed a rape case against Julian Assange. China is still a few decades behind EU and USA in mounting an operation – such as the Swedish ‘Trojan’.

None of China’s three demands are either bad in principle or prudence. But it does make me wonder. China’s US$3 trillion of foreign exchange reserves is not enough if it wants to buy EU defence products.

Compare this with the US and EU eagerness to sell defence items to India.

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