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Copper Catcher
Administrator
USA
2092 Posts |
 Posted - 07/02/2010 : 20:57:50
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While I realize this is dated information it is still an interesting read: By Ambrose Evans-Pritchard Published: 6:54PM BST 15 Apr 2009
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Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.
China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.
Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.
"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years."
"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).
While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep."
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities - a broader base than the Gold Standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees.
If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49pc this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15pc to 20pc this year as construction wilts.
Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February, and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports - almost half GDP - fell 17pc in March.
While Beijing's fiscal stimulus package and credit expansion has helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50pc.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.
This is slightly disingenuous. China has the world's largest reserves - $1.95 trillion, mostly in dollars - because it has been holding down the yuan to boost exports. This mercantilist strategy has reached its limits.
The beauty of recycling China's surplus into metals instead of US bonds is that it kills so many birds with one stone: it stops the yuan rising, without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; the holdings are likely to rise in value over time since the earth's crust is gradually depleting its accessible ores. Above all, such a policy safeguards China's industrial revolution, while the West may one day face a supply crisis.
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1pc, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a "Copper Standard" as a "Gold Standard".
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 07/02/2010 : 21:33:19
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| I have heard Ron Paul talk about a "commodites based currency". |
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Common Cents
Penny Sorter Member
82 Posts |
Posted - 07/03/2010 : 16:36:04
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| Silver would be the most likely candidate to back China's currency, IMO. A bi-metallic currency is a possibility, I guess. Copper could be used for smaller denominated coins, and silver for the higher ones. |
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beauanderos
1000+ Penny Miser Member
USA
2408 Posts |
Posted - 07/05/2010 : 01:42:07
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The bancor was a World Currency Unit of clearing that was proposed by John Maynard Keynes, as leader of the British delegation and chairman of the World Bank commission, in the negotiations that established the Bretton Woods system, but was never implemented.
It was to be initially fixed in terms of 30 commodities, of which one would be gold. It would stabilize the average prices of commodities, and with them the international medium of exchange and a store of value. Central to Keynes' proposal was to tax countries' current account surpluses, encouraging domestic demand and promoting global trade balance.
The Americans made a comparable plan for reform that included a world currency called the unitas. At Bretton Woods in 1944 U.S. President Franklin D. Roosevelt told U.S. Treasury Secretary Henry Morgenthau, Jr. to prepare for an international currency to be implemented after World War II. Harry Dexter White at the U.S. Treasury formulated plans for the unitas.
In practice, until the collapse of the Bretton Woods system in 1971, gold itself filled this role, with the U.S. dollar fixed to gold and many other currencies fixed to either the U.S. dollar or directly to gold.
There have been variations on the model of the bancor recently, such as having a currency unit for regional trade organizations such as the North American Free Trade Agreement (NAFTA), ASEAN (Association of Southeast Asian Nations), etc. In this model the commodities that would be placed into the pool would be limited to a fixed number of the currencies of the partner nations, and this would be done on an annual basis with agreement on prerequisites for withdrawal.
In a speech delivered in March 2009 entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China called Keynes' bancor approach "farsighted" and proposed the adoption of IMF SDRs as a global reserve currency as a response to the financial crisis of 2007–2010. He argued that a national currency was unsuitable as a global reserve currency because of the Triffin dilemma - the difficulty faced by reserve currency issuers in trying to simultaneously achieve their domestic monetary policy goals and meet other countries' demand for reserve currency  |
Hoard now and hold on!
http://coppermillions.blogspot.com/
http://wherewillyoubein2012.blogspot.com/ |
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misteroman
Administrator
USA
2565 Posts |
Posted - 07/05/2010 : 13:46:08
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If that's true shouldn't CU be wayyyyyyyyyy above $3 a lb?
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Buying CU cents!!!! Paying 1.2 unlimited amounts wanted. Can pick up if near Ohio area. |
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wolvesdad
1000+ Penny Miser Member
USA
2164 Posts |
Posted - 07/05/2010 : 18:06:03
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Common cents,
I don't think their currency WOULD BE metal (ie, bi-metalic as you suggest), just BACKED by metal(ie, they have it in a vault/warehouse!!).
I'm surprised the article didn't mention rare-earth metals that China is monopolizing the market on. And the scary thing is that rare earth metals are essential to high tech military weapons. |
"May your percentages ever increase!" |
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Common Cents
Penny Sorter Member
82 Posts |
Posted - 07/06/2010 : 11:32:17
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quote:
Originally posted by wolvesdad
Common cents,
I don't think their currency WOULD BE metal (ie, bi-metalic as you suggest), just BACKED by metal(ie, they have it in a vault/warehouse!!).
I'm surprised the article didn't mention rare-earth metals that China is monopolizing the market on. And the scary thing is that rare earth metals are essential to high tech military weapons.
You could have both. In the past we had gold, silver, and copper coins in circulation within the US, while at the same time the paper notes were fully convertible to metals. I don't see it as an either/or situation.
Or should I say an either/ore situation? |
Edited by - Common Cents on 07/06/2010 11:36:28 |
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psi
Penny Collector Member
Canada
399 Posts |
Posted - 07/06/2010 : 13:22:38
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| I can see some merit in the argument that a currency backed solely by gold or silver no longer makes sense because the world supply of either metal is not large enough in relation to the combined value of all other assets worldwide. Include base metals and that particular argument against a return to hard currency makes less sense. |
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stateofmind
Penny Pincher Member
143 Posts |
Posted - 07/06/2010 : 15:38:07
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| It is doubtful that China, or any other country would even back their currency. And, if a currency would in fact be backed, it would be by silver or gold. Copper is not a precious metal, it is an industrial one. Nearly all of its price is determined by supply and demand. This would not be good for a country's currency. |
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"There are people who are very resourceful, at being remorseful, and who apparently feel that the best way to make friends is to do something terrible and then make amends."
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 07/06/2010 : 17:45:22
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quote:
Originally posted by stateofmind
It is doubtful that China, or any other country would even back their currency. And, if a currency would in fact be backed, it would be by silver or gold. Copper is not a precious metal, it is an industrial one. Nearly all of its price is determined by supply and demand. This would not be good for a country's currency.
Aren't silver and gold's prices also determined by supply and demand too?  |
Realcent.forumco.com disclosure. Please read.
All posts either by the members, moderators, and the administration of http://realcent.forumco.com are for your edification and amusement only. It is not the intent of realcent.forumco.com or its host to provide investment, medical, matrimonial, legal, security or tax advice and nothing posted here should be considered to be so. All rights reserved.
Think positive. |
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Common Cents
Penny Sorter Member
82 Posts |
Posted - 07/06/2010 : 19:52:51
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quote:
Originally posted by stateofmind
It is doubtful that China, or any other country would even back their currency. And, if a currency would in fact be backed, it would be by silver or gold. Copper is not a precious metal, it is an industrial one. Nearly all of its price is determined by supply and demand. This would not be good for a country's currency.
Think global currency crisis. Currently the value of a currency is determined by how it floats in comparison to other currencies around the world. So a currency crisis in one country has the potential to spread. In an environment where there's a widespread loss of confidence in the currency, backing the currency with something tangible is pretty much necessary in order to regain that confidence. Copper has been used as currency for centuries in all corners of the globe. Why would it no longer be viable today? |
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Lemon Thrower
1000+ Penny Miser Member
USA
1588 Posts |
Posted - 07/06/2010 : 23:22:21
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| read FOFOA. the commodities are gold and oil, not copper. |
Buying:
Peace/Morgan G+ at $15.00
copper cents at 1.3X
wheat pennies at 3X
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AGgressive Metal
Administrator
USA
1937 Posts |
Posted - 07/07/2010 : 04:45:37
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quote:
Originally posted by Lemon Thrower
read FOFOA. the commodities are gold and oil, not copper.
word |
And he that hath lyberte ought to kepe hit wel / For nothyng is better than lyberte / For lyberte shold not be wel sold for alle the gold and syluer of all the world.
-Caxton's edition of Aesop's Fables, 1484 |
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A 'Copper Standard' for the world's currency
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