 The
Chinese need a Gold Gorge
Why encouraging the population of
China to import gold makes sense
Hugo Salinas Price
Sep 11, 2009
The big news in gold is that
there are signs that the Chinese government is now inviting the
Chinese to buy gold and silver.
Some good reasons for China
to favor gold purchases by its population:
China has trade surpluses which
bring in unwanted additional amounts of foreign currencies and
swell China's already enormous Reserves.
The Chinese are well aware
that the foreign currencies with which their exports are paid,
are only fiat money payments and that the Reserves to which they
give rise are nothing more than shaky investments whose value
is at risk - 60 to 70% of China's Reserves are dollars which
are being savagely debased and the euro is not in much better
condition.
At the same time, China does
not want to undermine its present industry with a revaluation
of the Yuan, in order to make its products more expensive in
the foreign markets and stem the inflow of foreign currencies
by slowing down exports. It absolutely must keep its factories
running in order to provide desperately needed employment for
millions of Chinese.
China is also averse to importing
manufactured goods. It wants to do the manufacturing itself;
revaluing the Yuan to make imports more affordable or bringing
down trade barriers are not policies it wants to implement.
But importing gold - that's
another matter!
If the Chinese population goes
in for importing gold, here are some of the benefits:
China's favorable trade balance
will contract. China's government likes that - it means less
accumulation of unwanted Reserves.
Chinese manufacturing will
be untouched by the competition of foreign made goods no matter
how much gold comes into China.
As China's persistent favorable
trade balance diminishes, the world will have less reason to
complain about an undervalued Yuan. However, China's exports
will continue to thrive because China will leave its exchange
rate untouched.
Politically, the Chinese government
cannot easily go into the gold market directly to turn its Reserves
into gold. This would be considered hostile behavior by the U.S.
Government, as undermining the dollar. However, if the people
of China go ahead and buy massive amounts of gold and drive the
price skyward, the Chinese government can just shrug its shoulders
and say, "Sorry, it's the people who are buying, not us.
There is nothing we can do about it."
Driving the price of gold to
the moon does not mean that the dollar, in which that price is
expressed, will be devalued all by itself. A rising price of
gold means that all the currencies of the world, including the
Yuan, are going down in value, not just the dollar.
Adrian Ash, in his article
"Galloping Consumption" at The
Bullion Vault on August 26, 2009, adds one more reason, given
by the McKinsey consultants:
The Chinese have to rely on
personal savings for their retirement; they have no social "safety
net" to protect them, either Social Security or Pension
Plans. This need to provide for the future is very naturally
holding back consumption, and China needs a consuming public
to absorb production from its factories, which are feeling the
slow-down in the rest of the world.
Allowing the Chinese to gorge
themselves on gold and build up their savings is the best way
to prepare China for future consumption of its own production.
8 Sep, 2009
 Hugo Salinas Price, President
Asociación Cívica Mexicana Pro Plata, A.C.
Mexico City
email: plata@plata.com.mx
website: http://www.plata.com.mx
321gold Ltd
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