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copperbullion
Penny Pincher Member
Australia
136 Posts |
 Posted - 05/17/2009 : 02:36:42
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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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1000+ Penny Miser Member
USA
3121 Posts |
Posted - 05/17/2009 : 08:45:53
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I can see why China may have an affinity to thinking about a copper standard. Bronze (copper with tin to make it more durable) currency, the "CASH" coins with the square holes in the middle of the coin  , were used for centuries in China. The Chinese invented the first metal coins around 900BC, they were made of bronze. So why not a Chinese copper standard, it's part of their history.
I don't see any mention of silver  in the article. Could the recent rise in silver, along with copper, be part of their strategic metal accumulation?
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The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
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pennybullion
Penny Pincher Member
243 Posts |
Posted - 05/17/2009 : 19:02:25
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Could you please post a link to where you got this article? I would like to mark it for future reference...
Thanks! |
www.pennybullion.com |
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Country
1000+ Penny Miser Member
USA
3121 Posts |
 Posted - 05/17/2009 : 19:18:54
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quote:
Originally posted by pennybullion
Could you please post a link to where you got this article? I would like to mark it for future reference...
Thanks!
It appears that this article was in the UK Telegraph online.
You must be logged in to see this link. |
---> Come to the new and improved realcent: http://realcent.org
The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
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highroller4321
1000+ Penny Miser Member
USA
2648 Posts |
Posted - 05/17/2009 : 19:20:23
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| I think they are looking into this a little to deep. China has about 2/3 of a TRILLION dollars worth of U.S "debt"/treasury bonds. At current market prices they would have to buy 333 BILLION lbs of copper!!! |
Copper Penny Investing
www.portlandmint.com |
Edited by - highroller4321 on 05/17/2009 19:20:49 |
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swusc
Penny Hoarding Member
USA
553 Posts |
Posted - 05/18/2009 : 06:56:33
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Yea, they aren't going to get it all into copper without creating a major run. I think they are just more or less sick of owning US dollars. They can't just sell the dollars (which I have said before) because it would kill the exchange rate. Plus what other currency would you want? Everyone in the developed world is doing the same crap.
Yet, if you start buying stuff with the dollars, then maybe you can spread out the purchases and not kill any one market.
I would guess they are buyers of copper, oil, silver, gold, and so on if they are trying to lower US dollar holdings.
-SWUSC |
`Everybody is ignorant. Only on different subjects.' Will Rogers
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." Alan Greenspan, 1966. |
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copperbullion
Penny Pincher Member
Australia
136 Posts |
Posted - 05/18/2009 : 20:08:23
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quote:
Originally posted by pennybullion
Could you please post a link to where you got this article? I would like to mark it for future reference...
Thanks!
Yup, It was here: You must be logged in to see this link.
Sorry, I usually ad the source. |
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A 'Copper Standard' for the world's currency syst
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