Home » Blog » Political Analysis » China US Currency War : China Hides a Weapon More Dangerous Than Nuclear

China Hides a Weapon More Dangerous Than Nuclear, Which Will Bring Down America

In the article “Chinese Secrets of Gold Operations,” I wrote that the figures on the size of China’s gold reserves in official documents are very underestimated.

According to the latest data from the People’s Bank of China, gold reserves (part of China’s international reserves) amount to 2.33 thousand tons (sixth place in the world after the USA, Germany, Italy, France, and Russia).

However, for many years, Chinese gold reserves have been partially replenished through so-called “unregistered” transactions. This gold is not reflected in official statistics; these are reserves in the shadows.

Since the second half of last year, the volume of gold purchases through unregistered transactions has significantly increased. Consequently, the share of shadow reserves in total gold reserves is growing.

China US Currency War

According to the most conservative estimates, the total volume of Chinese gold reserves has already exceeded 5 thousand tons, and according to other estimates, it has long surpassed 10 thousand tons, making China the first in the world, surpassing the USA (officially reported gold reserves of 8133.5 tons).

Experts estimate that China increases its gold reserves through domestic production of the precious metal (ranking first in the world in gold production) as well as imports. Moreover, imports exceed domestic production 2-3 times, despite China not exporting gold.

No other country in the world has such a gigantic influx of gold accumulating within the country like China.

The question arises: why is China so intensively accumulating its gold reserves? The common answer is that gold is a strategic resource, gold is “emergency money.”

In the case of any serious global disorder, when the US dollar unexpectedly collapses (not for economic but military and political reasons) along with other reserve currencies (euro, British pound, Japanese yen, etc.), gold will remain the only means of payment for vital Chinese imports. The logic is clear.

Many countries explain why they retained gold reserves after the decision to demonetize gold at the International Conference in Jamaica in 1976.

Gold was then degraded to ordinary goods, and the US dollar was recognized as a means of payment. However, you never know what will happen; what if it disappears in the event of a third world war? We may have to revert to gold as “emergency money.”

However, over time, another version of the reasons for gold accumulation in Beijing came to the fore—reducing dependence on the US dollar.

In 2015, when the yuan gained reserve currency status in the IMF, Beijing had ambitions to make the yuan a truly international currency and even replace the yuan’s place in international finance.

Gold should be the means by which Beijing will dethrone the dollar as the world’s currency. Gold in the hands of Beijing began to transform from defensive weapons into offensive ones.

In China, monetary authorities (central bank and finance ministry) do not convert yuan into the precious metal. So far, there have been no statements or even hints from Chinese authorities that the yuan could become a gold currency.

However, there are enough rumors that such a metamorphosis with the Chinese currency could happen. There is a presumption that Beijing benefits from such rumors (and allegedly even encourages them) because it increases foreigners’ interest in the yuan. Non-residents are psychologically preparing for the fact that the yuan will inevitably become the world’s currency.

Can China introduce the gold standard? The “Celestial Empire” has such a huge amount of precious metal that the countries that introduced gold standards in the 19th century did not come close to it. Here, experts do not have a clear opinion.

After all, the gold standard is a double-edged sword. Maintaining the gold standard (i.e., ensuring the gold backing of the monetary unit and the obligation to convert banknotes into precious metal) is a powerful tool by which national currency can quickly rise to the pedestal of the world currency. The other end of the stick is that the introduction of the gold standard threatens that state gold reserves can also evaporate quickly.

Take, for example, the same gold standard established at the Bretton Woods Conference in 1944. Formally, it was in force until 1976 (before the Jamaica Conference), i.e., 32 years, but realistically, no more than ten years.

In the early 1960s, the United States had a trade and payment deficit for the first time since World War II. The deficit was covered by dollars, causing an increase in the mass of “green paper” outside the “New World.”

The conversion of “green paper” into the “yellow metal” by other countries began. The sixties were a time of rapid melting of US gold reserves (at the beginning of that decade, they exceeded 20 thousand tons). And when the reserve fell below the 10 thousand-ton mark on August 15, 1971, then-US President Richard Nixon loudly announced that the exchange of dollars for gold was “temporarily suspended.”

Exchanges were no more, and the gold-dollar standard was ceremoniously sent into the world at the Jamaica Conference in January 1976.

Let’s return to today’s China. My version of the accelerated accumulation of state gold reserves is as follows. Beijing could decide to introduce the gold yuan but with one goal—to sharply shift the demand of participants in the global foreign exchange market from the US dollar to the Chinese yuan (by the way, by then, the yuan might already be digital—China is currently “ahead of the rest” in promoting the central bank’s digital currency).

The Chinese gold standard will last only as long as it takes for the US dollar to be destroyed as the world currency. In my opinion, this may not last more than a month. After the collapse of the US dollar, the exchange of Chinese currency for the “yellow metal” will be immediately stopped (literally a day after the fall of the US dollar).

Of course, after this, it would be ideal for Beijing to convene an international conference in the spirit of the 1976 Jamaica Conference, where all participants would vote for the introduction of the paper-yuan standard.

The “Collective West” will finally deflate like a balloon after the collapse of the dollar, but out of inertia, it can still resist China and boycott its initiatives in the monetary and financial spheres. However, here, I am already entering the realm of fantasy, so I return to what I am more certain about—China increasing gold reserves to make the yuan the world’s currency.

Another question that concerns many is why Beijing is hiding the true extent of gold reserve accumulation? — The answer can be found in the article “China Almost Certainly Has More Gold Reserves Than the United States—Here’s Why It’s Important.”

The article’s author, Dominic Frisbi, writes: “Whether it’s 10, 15, or 30,000 tons, China won’t be able to declare such large reserves. In any case, not yet because it will cause an unwanted increase in both the yuan and the price of gold, and the government’s $3.2 trillion in foreign exchange reserves will be devalued.”

Ros Norman, executive director of “Metals Daily,” on the reasons for China’s rapid action, says that strengthening the currency as a result of such support for reserves will be counterproductive. He explains that it will reduce the competitiveness of Chinese exports.

However, it is obvious that Beijing will sooner or later have to reveal its ace in the form of a gigantic state reserve of monetary gold. Dominic Frisbi concludes his article as follows: “If China decides to use money as a weapon, as the US has done, all it has to do is declare its gold reserves, perhaps even partially support the yuan with them.

At one point, there was talk of a central bank digital currency partially supported by gold. In this case, unsecured Western money risks losing a significant portion of its purchasing power.

Supporting Western paper money at least partially with gold would mean a sharp revaluation of gold upwards—into tens of thousands. This is an ace that China currently has with its 20 years of continuous accumulation. Whoever owns gold sets the rules.

So, China is preparing an attack against the United States. Only this attack is not military but currency. China’s “golden weapon” against America can be much more effective than nuclear weapons.

Valentin Katasonov

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