A Collapsing Dollar and China’s Monetary Strategy
The comments below are an edited and abridged synopsis of an article by Alasdair Macleod
The US dollar, given the Fed’s current monetary policies, is likely to become worthless by year end. Other major currencies are likely to fall with the dollar, because they adopt the same monetary policies, the same macroeconomic fallacies, and through the BIS, G7 and G20 meetings, continue to be bound by common policies. While the intention is for all to survive by working together, instead it ensures that they all sink together.
Then we have Russia and China. Russia is working towards protecting its currency with gold, while China’s position is more complex. Its leadership relies on the inflation of bank credit through state-owned banks to finance its infrastructure plans, as well as in financing the massive uplift its non-financial private-sector economy has enjoyed since 1980. Yet it has made aggressive moves to ensure its population owns physical gold, and it has invested in mine production, making it the largest national producer by far, while ensuring virtually no gold leaves the Chinese mainland.
Having more or less gained control of the world’s physical market, China is the greatest hoarder of gold in the world. It appears to understand the importance of gold to monetary stability, while at the same time playing the West’s games.
Up for discussion: China’s gold; China’s interest in the dollar; establishing a sound currency; sound money works best with free markets; the state and the economy; restricting functions of the state; mercantilism must be abandoned; regulation must be abandoned, allowing the public to set the parameters of its own demand; banking must be reformed; accumulation of private wealth to be embraced; digital money; and the return to sound money.