On the heels of gold and silver surging as the mining stocks hit new multi-year highs, China’s shocking plan to push gold over $10,000 is part of the world over the world’s monetary system.
A Huge Game-Changer Will Rock The World
(King World News) Stephen Leeb: “America is losing perhaps the most important battle we have ever fought because we don’t understand the game and we’re in denial about the real score. From the financial press to most economists, no one here sees China as a threat to our way of life. That will change, though, once gold assumes, as it will, a starring monetary role – benefiting China, sending gold soaring, and harming the U.S….
Continue reading the Stephen Leeb interview below…
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Gold To Soar Above $10,000…
Stephen Leeb continues: “The past week’s gains in gold and silver, despite the headwinds of option and contract expirations, suggests the bull market may already be shifting into a higher gear as China begins to assert its control over the Midas metal. Gold at $10,000 may sound like a fantasy, but it is likely to prove too low a projection.
…The Stakes Are High In The War Over The World’s Monetary System
Our war with China isn’t over the South China Sea, though the Chinese would no doubt love us to focus on that dispute. It’s a war over who controls the world’s monetary system. The stakes are incredibly high.
China’s longstanding love of gold and its steady and stealthy amassing of the metal, which I discussed last week on KWN, make plain that China believes gold is central to its ability to manage monetary affairs within its own borders and in the East in general. Given that the East will account for the bulk of future global growth, gold’s monetary role is likely to span the globe.
U.S. To Lose Control Over Its Economic Fate
If gold and a gold-backed yuan do grab the leading monetary role, the U.S. will lose control over its economic fate. The dollar will assume a subordinate role, perhaps a very subordinate one, depending on how much gold the U.S. really has.
Think about it. If the world’s leading currencies are directly or indirectly backed by gold, how many dollars would you have to print to buy anything really valuable? If the dollar itself isn’t in some way backed by gold, it would be worth no more than the paper it is printed on. That may be an extreme outcome, but it could happen.
We need to wake up fast or face a much-diminished future. The Chinese are running rings around us, in large part by relentlessly adhering to a 2,500-year-old script, i.e., the classic Chinese book “The Art of War.” Six words from a recent translation stand out for me:
“Warfare is the way of deception.”
I’ve been aware for some time of China’s selective use of deception and misdirection. But it hit me in full force recently when Eric King sent me the IMF’s latest report on the world economy. It was by and large grim, concluding that the world’s chief hope would be structural reforms — meaning, less regulation and more fiscal spending. Given that fiscal spending on a large scale is probably not going to happen because of massive debt levels, this wasn’t reassuring. In this downbeat report, the most positive finding was a slight upgrade in the estimated growth for China, the only major economy receiving such an upgrade. But that upgrade was highly qualified.
The report stated:
“In China, the government again resorted to boosting credit and infrastructures spending, supporting near-term growth but further raising vulnerabilities. As a result, the economy is expected to continue to grow strongly this year, at 6.6 percent, exceeding the IMF’s recommended range of 6-6 ½ percent.”
Virtually every financial news outlet, from Bloomberg to CNBC to The New York Times to The Wall Street Journal, picked up on this, focusing on the message that China is following a dangerous path of rising debt and reliance on the same old growth drivers. The more China grows, according to this narrative, the less stable the country will be until it finally falls apart.
China’s Masterful Misdirection & Deception
I have no doubt, however, that China is delighted for such a message to be conveyed and works assiduously to convey a similar message on its own, sometimes subtly and sometimes very directly. It has done this, in part, by consistently understating its growth – contrary to the widespread impression here that China inflates its figures. But when there’s evidence of this, no matter how credible, it’s widely overlooked here.
A case in point is a detailed study of China’s GDP conducted by the prestigious Center For Strategic & International Studies (CSIS). CSIS’s board includes leaders from a wide range of U.S. life, from Home Depot co-founder Kenneth Langone to Henry Kissinger to Sam Nunn. The staff is comprised of a bevy of top academics.
In September 2015, the CSIS released a report one of whose conclusions was that China’s GDP was actually bigger than China’s official statistics had indicated:
“Our reassessment suggests that China’s 2008 GDP was most likely 13.1 to 16.3 percent higher than official statistics indicated…Beijing’s reappraisal (released in spring 2015) adjusted up the official number by less than 1 percent, leaving the bulk of the activity we identified uncounted.”
But typically, this more upbeat view of China got little coverage and did nothing to puncture the prevailing narrative.
Equally striking, the report further said:
“(The) service sector overtook the industrial sector earlier than believed – in 2009, not 2012 as official data now suggest. This is a necessary indicator of a sustainable future…”
Since it seems clear that services have continued to grow more quickly than other sectors and it is also clear that in the words of the report: “The service sector is most problematic” — meaning likely to be understated. I can add that using America as a benchmark of what rules to follow, even the most heroic efforts by China to get it right would very likely still understate the service sector, leading to understating overall growth as well.
Lagarde Warns West That China Will Experience Huge Growth
But let’s get back to the recent IMF report. It was released in conjunction with last weekend’s recent China-hosted G-20 meeting. Toward the start of the meeting, IMF head Christine Lagarde noted the IMF had increased its growth forecast for China for two reasons:
“First of all, we have witnessed the determined and decisive implementation of reforms; and second, there was also support given to the economy in order to encourage growth to go forward. On the latter point it did not take the form of vast fiscal stimulus but simply solid and steady support in order to make sure that growth was indeed sustainable.”
In other words, the widely respected chairman was downright dismissive of her staff’s comments about the supposedly shaky basis for China’s growth gains. She made no mention of any increased vulnerability or of growth exceeding recommended ranges. Who’s right? As the saying goes, should you believe the monkeys or the organ grinder?
For me the only question is why Lagarde spoke so openly about China’s success. And I’d bet her motivation was to tell the West to get on the stick or risk losing not only hegemony but in a worst case a good chunk of its sovereignty. She’s dead on.
Investors Must Follow China Into The Gold Market
Last week I pointed out that China easily has enough money to buy 70,000 tons of gold – maybe more – and certainly enough to control the world’s gold market. I don’t know how far along China is in its accumulation of gold, but clearly the action in gold and the yuan, which both rallied strongly this week, point to the urgent need for investors to start accumulating the yellow metal and its correlates.” ***KWN has just released the jaw-dropping interview with the man who advises the most prominent sovereign wealth funds, pension funds, hedge funds, and institutional funds in the world CLICK HERE OR ON THE IMAGE BELOW.
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