On the heels of what has been a wild start to 2017, below is a shocking admission from Trump and one of China’s most important government officials.
Stephen Leeb: “China, which has typically followed a course of craftily concealing its long-term intentions, evidently now feels sure enough of its position in Asia that it has abandoned cryptic nuance. On the question of which country – the U.S. or China – will dominate Asia’s economy and security, China is confronting U.S. bluster head on, as shown in a recent Chinese White Paper. Not surprisingly, given the widespread denial (and ignorance) here, the White Paper received little attention in the American press…
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As reported in The Diplomat, an award-winning online publication that focuses on the Asia-Pacific region:
“In early January China’s Foreign Ministry published a White Paper on ‘China’s Policies on Asia-Pacific Security Cooperation’ signaling an intensification of China’s effort to establish itself as the dominant power in Asia and dislodge U.S. influence…Chinese authorities also regard divided leadership along economic and security grounds as unsustainable and as an impediment to growth.”
By divided leadership it is referring to leadership shared with America. In other words, if America wants to play in Asia, it will have to follow a playbook written in Chinese.
The White Paper’s concluding sentence was:
“The Chinese people are working hard to realize the Chinese Dream…China will bring greater opportunities and benefits for development and cooperation in the Asia-Pacific region.”
Shocking Admission From One Of China’s Most Important Government Officials
For investors, the phrase that stands out is ‘Chinese Dream.’ You may recall that in a previous KWN interview I quoted from the Chinese secretary in charge of gold:
“For China, gold’s strategic mission is to support the internationalization of the renminbi and be a strong support for China’s goals of becoming an economic power and realizing the ‘Chinese Dream.’ Gold is the only product that holds properties of a commodity and currency; it’s the most trusty asset on which modern fiat currency can be based. From a historical perspective, gold has played an irreplaceable role in times of financial and geopolitical crises and in protecting a country’s economic security. It is this unique nature and function of gold that give it a glorious and holy role to play during the revitalization of the greatness of the Chinese people and the realization of the ‘Chinese Dream.’’’ — Song Xin
It should be an automatic reflex: anytime you hear about Chinese domination of a major chunk of the world and anytime you hear the phrase “Chinese Dream,” think gold.
For some historical perspective I went back to a paper written by Zbigniew Brzezinski for Foreign Affairs in 1997 titled “A Geostrategy for Eurasia,” which summarized a book he’d written that year. It focused in part on what America’s role should be in Eurasia, which he cited as accounting for 75 percent of the world’s population, 60 percent of the world’s GDP, and 75 percent of energy resources. His premise was that “America’s status as the world’s premier power is unlikely to be contested for more than a generation.” America’s military, economic, technological, and cultural power meant the only alternative to American leadership would be “international anarchy.”
While America seemed transcendent then, I think that what Brzezinski missed was that even by 1997 our culture was in decline. In particular, we had become ever more obsessed with immediate gratification and short-term results in almost every area of life, which I trace back to when Nixon took us off the gold standard in 1971. For most of the postwar period the U.S. had an ability to think long term, to save and invest for the future and not look for immediate payoffs – traits that led, among other things, to the interstate highway system, the space program, and many Bell Labs projects. We’re still reaping the rewards of those triumphs today. But once we escaped the discipline imposed by the gold standard, and could print money at will with seemingly no serious consequences, there seemed no need to postpone gratification. We became a culture of wanting everything now, and to heck with the future.
Tumultuous Time Ahead For The U.S., Including Skyrocketing Inflation
Changing this culture is an overwhelming challenge. As I’ve said before, I think the U.S still can remain dominant in part of the world. But as China inevitably centers the East’s monetary system on gold, it will translate into tumultuous times for us, including inflation likely higher than anything we’ve seen before.
Trump Shocker: Confirms U.S. No Longer Possesses Its Gold
In March of 2015, campaigning to be the Republican party’s presidential candidate, Trump told a New Hampshire radio station:
“We used to have a very, very solid country because it was based on a gold standard.”
Trump added that it would be tough to bring the gold standard back because:
“We don’t have the gold. Other places have the gold.”
I think Trump is right on both counts. But “tough” is not the same as impossible. To follow others in launching a gold-based monetary system would mean we would have to borrow, probably mortgaging ourselves to the hilt. The immediate outcome could be hyperinflation as we struggle to pay back our debt. But it would not necessarily be hopeless. And if you have accumulated a significant amount of physical gold, you will be filthy rich, benefitting from the massive wealth transfer that unfolds.
China’s Staggering $1.1 Trillion Trade Surplus
One of the best measures of China’s growing success is in the trade arena. Yesterday China reported its trade figures for January. They were blowout numbers as imports jumped by over 25 percent and exports by nearly 16 percent. The trade surplus climbed to $51 billion, bringing the two-year total surplus to over $1.1 trillion. By a growing margin, China is the world’s largest trader and by a wide margin the largest exporter, accounting for about 20 percent of the world’s total exports compared to 17 percent for the United States (see chart below).
Perhaps most surprising is that these exports aren’t cheap doodads produced in sweatshops. Indeed, incomes in China have risen sharply, and the country no longer can compete on labor costs with countries like Viet Nam and India. Instead, China’s leading exports are phone systems, computers, optical readers, integrated circuits, lighting products, all things with large amounts of technology embodied in them. Take phone systems. Currently six of the 10 top smartphone companies are Chinese. And they haven’t been gaining market share on the basis of price alone. Many of them compete in terms of software and hardware.
Moreover, look at any list of leading smartphones and you’ll find a plurality of Chinese names like OnePlus, with its best version of Android software, HTC with its best of breed camera, and Xiaomi, whose battery offers two days of uninterrupted use and with a vast array of health sensors. As for the leading smartphone manufacturer, Apple, China is a critical link in the supply chain. I could go on about the computers and other tech products that have vaulted China so far ahead of others in the world of trade. But you should not be surprised as I have pointed out before that China has the world’s best programmers, with Russia a very close second.
The Ticket To Survival And Prosperity
In many ways, China is just catching up with itself. From infrastructure to cities to its educational system, China’s plans each project with a minimum of 20 year view into the future. If we can turn our own economy around it will be a long haul. But whether or not we succeed, China’s domination within the East makes it clear that the best ticket to survival and prosperity is to own gold.”
***KWN has now released the remarkable audio interview with Peter Boockvar and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Man Who Correctly Predicted Bull Market In Commodities Now Says Gold Headed To New All-Time High CLICK HERE.
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