People’s Bank of China Launches Trial Balloon: Back to Bretton Woods

Статья В.Ю.Катасонова «Пробный шар народного банка Китая: назад к Бреттон-Вудсу» на сайте Local Terror (Австралия).

On August 5 2013 the prestigious Chinese Market Journal published an article by Yao Yudong of Monetary Policy Committee of the People’s Bank of China.Two or three things the author mentions there warrant special attention. One is the idea to boost the role of International Monetary Fund (IMF) to provide the world economy with liquidity.  It’s not that the Monetary Fund is to become a kind of global central bank, which would issue its own supranational currency, something like the special drawing rights (SDR) it issued in small quantities four dozen years back. No, the Yao Yudong’s article puts it differently; it says it is expedient to go back to the times of Bretton Woods – the United Nations Monetary and Financial Conference, which set up a system of rules, institutions, and procedures to regulate the international monetary system. It was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained theexchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments. The gold standard had existed before WWI. This time the convertibility was not complete, but rather partial, because only one currency was tied to gold – the one of the United States. The reason for doing so was the amount of monetary gold reserves the USA accumulated during the WWII years. It promised to take on the responsibility and provide for free exchange of dollars for gold.

The People’s Bank of China representative does not propose to go back to gold-dollar standard today. In 1971, the United States unilaterally terminated convertibility of the US dollar to gold. This brought the Bretton Woods system to an end and saw the dollar become fiat currency. This action created the situation in which the United States dollar became a reserve currency used by many states. At the same time, many fixed currencies also became free-floating. Actually Washington imposed on the world the Federal Reserve System-issued papers, which lacked any back-up, as the universal reserve currency.

The most interesting Yao Yudong’s proposal is the one, which envisions the world’s return to the use of gold as a standard, but not the dollar-gold standard.  That is it’s not the US dollar only this time (at least not only), but rather the currencies backed up by significant amounts of monetary gold reserves stored in central banks and  treasuries. Formally, the United States is still the world gold reserves leader with around eight thousand tons kept in storage. Still, everyone understands these are iffy statistics, there are serious doubts the mentioned eight thousand tons are still stored in the famous Fort Knox. There is a great chance the gold is kept far away from the storage and has been used as gold credits and gold leasing for Wall Street and London City banks. If there is something in the vaults – it may be fakes, the so-called tungsten gold, for instance.

Many experts believe it’s not the United States only who provides unreliable statistics. The Western developed countries exaggerate their gold metal reserves which to great extent are squandered by banksters using the very same credit-leasing schemes. At that, there are states which keep away from making publicity of the fact they have fast growing gold reserves. China is the one. The figures for the  People’s Bank of China remain by and large the same during a number of years (a bit less than 1000 tons) against the backdrop of China’s leading position among gold producers (around 400 tons a year) adding the yellow metal to what it has in  state’s coffers. Besides, it annually brings in a few hundreds of gold through Hong Kong. Simple calculations based on official statistics related to gold production and imports show that today China is to have no less than five thousand tons of precious metal. Still, some experts believe the figure is no less than ten thousand exceeding the one for the United States.

 The official representative of the People’s Bank of China does not put it straight; he avoids saying in no uncertain terms that he stands for switching to the yuan-based gold standard. But the article leads to this conclusion. Mr. Yao Yudong lets know the yuan may take the dollar’s place and have the very same status the US currency enjoyed after WWII…

There have been a lot of publications devoted to the golden yuan recently. But the official Beijing has never mentioned any plans to make the yuan a golden currency.  Looks like that’s what the Rothschilds clan (I mean the world financial elite involved in gold business) wants. It’s a well-known fact that it was the Rothschild family who initiated the golden standard in the XIX. It started in Great Britain and then was imposed upon the whole world (including Russia which thanks to efforts of Sergey Witte, who was Financial Minister, switched over to golden ruble in 1897). There are reasonable grounds to believe the Rothschilds want to play a win-win game (and a very profitable one) called the “golden standard”.  Moreover, the Federal Reserve System, which has the Rothschilds and the Rockefellers as the major shareholders, is bursting at the seams.  So, the Rothschilds are ready to leave the printing-press to its fate and saddle up the “golden calf”.    

Someone should be the first to tie national currency to gold. Once done, other things will not take much time to take place. China appears to be chosen by the Rothschilds  for this role, they created “the most favorable nation” regime for it to allow the country accumulate the initial gold reserves, they dropped hints to Beijing that the yuan was to play a special role in the world.

Now, let’s put it this way, the Peoples’ Republic of China does need gold reserves (as a strategic back-up).  But it needs no golden yuan.  This currency is strong enough globally without being propped up by gold. China has concluded deals with many countries, including Japan, Russia, Brazil and others, which envision the use of national currencies in interstate trade.  It has also reached currency swap accords (the exchange of currencies) to avoid resorting to euro or dollar.   ThePeople’s Bank of China has signed such an agreement with the Bank of England.             

The currency swap accords are discussed by the Bank of China with the central banks of Switzerland and France. Iran supplies oil getting payments in Chinese currency to buy commodities in China. The use of yuan instead of dollar (as well as other national currencies) allows the so called “rogue” states to successfully get around the sanctions imposed by Washington…According to various sources, payments in yuan are accounted for no more than 1% of international transactions.  Not very impressive at first glance.  But the number of yuan settled international transactions is constantly on the rise, especially talking about the financial market speculative operations, the lion’s share of such deals is yuan settled.  The number of paymentsin yuans in the global market has grown from 0 to 12 percent in only five years, since 2008 to 2013.   By and large, it corresponds to the Chinese share of the world economy.

The Yao Yudong’s publication has stirred great commotion in the financial world. Does it mean that Beijing is shifting its financial policy in the Rothschilds’ direction? Or is it just a sign the country’s vertical of power is getting weakened and some officials may boldly speak out without looking back at what the ruling party says?

Valentin KATASONOV,  D.Sc. (Economics), Economist and the chairman of the S.F. Sharapov Russian Economic Society

Source  :  http://www.strategic-culture.org/news/2013/08/09/peoples-bank-of-china-launches-trial-balloon-back-to-bretton-woods.html

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