China hoards gold as US government spirals into debt abyss

Today the Washington times reported that for the first quarter of fiscal year 2013 (which actually began in Oct 2012), the US federal government borrowed 46 cents of each dollar it spent.  I've reported on this many times over the past 5 years.  Couple that with the fact that government spending is listed to be 38% of GDP and you can see why the economy will plummet if federal, state and local governments stop borrowing to consume at their present rate.  If all government borrowing to consume would stop it would result in a GDP reduction of 17.48%.  This would be economic Armageddon for the US and there would be huge social upheaval as a result.  Lots of politicians would get fired and so they will never reduce the spending.  They simply can't do that and still keep their jobs.  They care only about their jobs.  The US can go (and is going) to Hell in a hand basket and they don't care a bit.

In the mean time, China is doing exactly what I wrote that I would do if I were in their position: hoard gold.  Why?  Because they see that the US is now in the end game of a massive debt spiral which will be the final unwinding of the Great Global Debt Ponzi that the US has been running on the world for many decades now.  He who has the gold will certainly make the rules going forward and China knows this.  In fact, gold has suddenly become China's largest import from Australia.

Now, China has been known to over hoard commodities in the past in order to try to diversify out of its worthless dollar holdings but gold is money, not a commodity.  You can't, as they say, eat gold.   But neither are the Chinese stupid.  They must be hoarding gold at this exponential rate for some good reason.  Perhaps it is being done to eventually float the Renminbi as the new world's reserve currency.  Perhaps it is just so that when all fiat currencies collapse (including the Renminbi) that China will have a seat at the big table in determining what will be considered international money.  Nobody knows for sure the exact reasoning but nobody can deny that the Chinese are serious about gold.

In my view, hoarding gold is China's only nonviolent, nonmilitary method of getting any fairness and independence from the scam of the US petrodollar.  If China can rival the US in terms of real gold held on account then China simply cannot be ignored in international business going forward.  It cannot be used and then tossed aside for cheaper labor from, perhaps, India and even from Africa.  China is playing the best possible game it can here.

Having said that, nothing exponential ever lasts.  The Chinese are making up for lost time but at some point they will slow down their gold hoarding, if for no other reason than to not over-excite war mongers in the US who must certainly view China's economic ascent as a threat to US national security (anyone who challenges US hegemony will be considered a threat to our national security...). 

Short term volatility aside, the long term course is pretty clear: gold is going to become an important factor once again in global economic and geopolitical processes.