Chinese Yuan Gold Standard – and game theory

Chinese Yuan Gold Standard
China is clearly trying to position the yuan or renminbi as the alternative global reserve currency. The Chinese likely realise that they will need to surpass the Federal Reserve’s official, but unaudited, gold holding of 8,133.5 tonnes. China is the sixth largest holder of gold reserves in the world today and officially has reserves of 1054.1 tonnes which is less than half those of even Euro debtor nations France and Italy who are believed to have 2,435.4 and 2,451.8 tonnes respectively.


MK: The game theory article is great because it points out that China does not need to amass a gold stock similar to the US, it can simply go to a gold standard now and effect a simultaneous devaluation against the dollar (as game theory dictates that the US and all other CB’s would be forced to follow China’s lead, or risk losing all their capital as investors buy the only gold backed currency in the world).

18 comments on “Chinese Yuan Gold Standard – and game theory
  1. Paul says:

    Max,

    I came across an article a few months ago that was quite thought provoking. I don’t have the link but I’ll try to sum it up keep it short.

    China is a culture that for the most part of 5000 years has always held gold and silver in high esteem. And for the most part have not been part of the fiat money system. And since nobody really knows what China’s gold reserves are – they’re not telling -. Why should we assume that they only have 1k-2k tons ??? Long story short the author suggests that they likely have between 20k-23k tons. Yikes !!!

    Paul

  2. F. Beard says:

    If gold will eventually be remonetized, gold is insanely cheap. If gold will never be remonetized, gold is insanely expensive. Mendacious Moldbug

    Bingo! So much for “gold = money.” My toe-nail clippings would skyrocket if they were monetized; anything in short supply would.

    PMs are “Plan B” for the usury class; liberty will set us free, not PMs.

  3. F. Beard says:

    The reason I still expect gold remonetization to happen – in the long term, not tomorrow! – is that there’s simply no other viable alternative. Mencius Moldbug

    A completely private gold standard or coal standard or any other standard is acceptable but government should NEVER recognize anything but its own fiat as money else we allow counterfeiting.

  4. What-me-worry? says:

    What?

  5. F. Beard says:

    @Alfred E,

    PM based coins must always have a nominal value higher than their commodity value else they will be melted down for scrap. If anyone is allowed to walk into a mint and have their gold coined into legal tender, that is essentially private counterfeiting of government money.

  6. What-me-worry? says:

    The game theory article is good. @F Beard: Are you saying that a gold Maple with a face value of $50 and a weight of 1Troz (circa $20k) would be melted down for scrap?

  7. F. Beard says:

    Are you saying that a gold Maple with a face value of $50 and a weight of 1Troz (circa $20k) would be melted down for scrap? Alfred E.

    No but it might as well be except for its numismatic value. And if gold is remonetized then it almost certainly will be melted down and re-coined at a vastly higher denomination.

  8. Bob says:

    Since when does supply and demand have anything to do with the price of gold and silver? I might believe him if we didn’t buy or sell paper metal. Paper keeps the price of my silver low, not because people are actually selling huge quantities of actual silver.

    Theories are nice, but they don’t always fit what happens in the real world. Why? Because it’s hard to factor things like fraud and cheating into them.

  9. What-me-worry? says:

    Gold standard – mmmmmmmm, lovely gold standard.

  10. Martijn says:

    Max does not understand gold or the gold standard, despite all his yapping about it for years.

    Max does also not understand the ECB’s mark to market gold strategy, so basically Max is as big a nitwit as anybody regarding the topic, but he has – just as did the bankers – developed some rhetoric that people seem to buy.

  11. Martijn says:

    Gold standard – mmmmmmmm, lovely gold standard.

    How often have we had one in the past?

    How often did they fail?

    Dumb@$$

  12. F. Beard says:

    How often did they fail? Martijn

    Obviously, every time.

    Furthermore, gold as money requires usury and has invariably led to fractional reserves too.

    Our obvious problem is tyranny wrt money creation not the fact that it (money) is paper or electronic bits.

  13. realaverageamerican says:

    Whoah! Mendacious’ article was a fun read. @Beard, who cares if someone “counterfits” the gold as ‘money’? If its an ounce of gold, it is worth the same (at a given moment) regardless of what shape its molded into. No one would bother. You either have it or you don’t, the very basis of a gold standard. Some mental constipation effects, I gather?

  14. F. Beard says:

    If its an ounce of gold, it is worth the same (at a given moment) regardless of what shape its molded into. No one would bother. realaverageamerican

    Of course they would. Gold has a commodity value and a money value if used as money. If it is remonetized then gold’s value will rise enormously. The “counterfeiting” would be legal but the effect is the same, an undeserved windfall.

    Some mental constipation effects, I gather? realaverageamerican

    I suggest some raisin bran. A sound mind in a sound body and all that.

    You either have it or you don’t, the very basis of a gold standard. Some mental constipation effects, I gather?

  15. realaverageamerican says:

    Please accept my apologies for feeding trolls, folks. Something is making me want to write that with a chinese accent, though.

  16. F. Beard says:

    Who are you calling troll, troll?

    But I would love to see a world where you and your fellow metal worshipers were free to play with gold and silver to your hearts content while the rest of us are free to use sane and just monies.

    But as for a government gold standard, that must be denied as a matter of justice.

  17. mike miller says:

    Why don”t you get off the “poor” teachers and public employees unions.They are every bit as greedy as the bankers, and in the case of the teachers, they can’t teach. In wi they have the worst record in the midwest,and yet they get over one hundred k a year. They all feed at the public trough just like jamie and banksters. I don’t like ANY thieves, public or private! Stick to econimics!

  18. F. Beard says:

    They all feed at the public trough just like jamie and banksters. I don’t like ANY thieves, public or private! mike miller

    Normally, I would agree. But the government backed banking cartel is the root of evil while public service unions are a branch.

    And are you so pure? Have you ever taken a loan from the government backed counterfeiting cartel? Ever bought stock on margin?

    The whole system is corrupt from top to bottom but it STARTED with the FR bankers.

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