Friday, December 4, 2015

International Reserves.....A VERY PESKY FACT!

International Reserves

In the last fifteen months, from August 1, 2104 to November 27, 2015, International Reserves,have fallen three-quarters of a trillion ($752 billion) dollars, or 6.52%. International Reserves peaked at $12.032 Trillion on August 1, 2014, and have fallen since then to $11.28 Trillion on November 27, 2105.

At the present time, the system at work since the end of World War II is operating in reverse. Reserves are falling, the majority of which are held in Dollars. Government Bonds held as Reserves are being sold off. An important contraction in world commerce is taking place.

What we are witnessing these days is a mighty contraction in economic activity around the world, that reinforces itself. International Reserves are being sold off in a desperate search for liquidity. The contraction was originally seeded by a slow-down in the economies of the Reserve-issuing countries, i.e., USA, Britain, Europe and Japan.

The Chinese evidently have some plans which they are not divulging, for we see that China is purchasing huge amounts of gold. In the meantime, the US insists on trashing the price of gold, as if to say that the Dollar is and will remain the world's supreme currency till the end of time.  STUPID IS AS STUPID DOES!

China is quietly accumulating gold and saying nothing. But we can try to guess what China is thinking: "The US is mired in an insoluble problem. Do nothing to provoke the US. The US will destroy itself in a huge collapse."

A world struggling with increasingly severe economic problems is not a world that is going to be in the mood or in condition to continue to respect international treaties regulating commerce, much less such regulatory dreams as co-ordinate action on "Climate Change".

What lies ahead is a situation where each country will attempt desperate measures to ensure a minimum of internal stability. Treaties will be ignored or thrown overboard. Devaluations around the world will proliferate; some countries will declare bankruptcy. The gravity of the crisis will make these events inevitable. 

We have just seen India refuse to abide by the rules of the World Trade Organization (WTO); the WTO rules say that governments are not to grant subsidies to sectors of their economies. But India is forced to subsidize its agriculture, because it has a population of over 1 billion and 67% of the people depend on cheap food for survival. So the statist international rules - emanating mainly from the US - to regulate the whole world will be trashed, eventually.

When push comes to shove, China, with 1.3 billion or more population, will take unorthodox measures. The pressure of the enormous population of China, made up of quite intelligent men and women, is going to force its government to stop adhering to international covenants. China will take whatever measures can offer hope to the Chinese.

China will then say to the world: "We sell cheap. Very cheap. But, we sell for gold, for very little gold; and we pay with gold for what we buy - for very little gold, but we pay gold. You want our stuff, you find a way to pay us in gold. Or else, what do you have to offer us, in exchange for our stuff? You have something we want - we pay in gold. Rest of the world, do as you please."

The nations of the world are not going to flounder endlessly in the crisis that is upon us. Out of the huge crisis, China will break away and state its terms. And the terms will be: GOLD. The rest of the world will follow.


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