The SCO, China, Iran & Bullion

Discussion in 'Subcontinent & Central Asia' started by panduranghari, Oct 8, 2012.

  1. panduranghari

    panduranghari Senior Member Senior Member

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    Very good article

    The SCO, China, Iran & Bullion

    I make no apology for returning to the subject of China, its role in the Shanghai Cooperation Organization, and gold. Gold is now a strategic metal for present and future SCO governments, which between them have over 40% of the world’s population; and now that the price of gold is re-establishing its rising trend, understanding its future role as a replacement for the US dollar is increasingly urgent, because gold is wealth and this wealth is being transferred from west to east.

    The SCO is an economic bloc consisting of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Between them they produce about 26% of the world’s gold, none of which leaves the SCO. Other nations accepted as future members are India, Iran, Pakistan, Mongolia and as soon as NATO leaves, Afghanistan. Belarus and Sri Lanka are on the waiting list. It is no less than the economic unification of most of Asia, with a combined population of three billion. All their central banks are buying gold, and the gold imported by the citizens of just two of them (India and China) accounts for all but 400-500 tonnes of the rest of the world’s mine production – and some of that (particularly in Africa) is now also controlled by China.

    One of the SCO’s economic objectives is to do away with the dollar for cross-border trade between members. Any doubts we may have on the matter have now been dispelled as a result of the US government’s monetary sanctions on Iran.

    Iran is important, because it supplies crude oil to China and India, and the Americans have banned all countries from buying Iranian oil on pain of sanctions. The consequence has been to force Iran to settle some of her trade in gold, giving SCO members both a de facto remonetization of gold, and a solid reason to want higher prices for it in US dollar terms, so that it buys more.

    This creates a dilemma for the US. If she escalates her attacks on Iran, she threatens the interests of China, India and other SCO members. At this stage it is too early to judge the political reactions of the SCO members to this threat, but there are broadly two possibilities: either military or economic.

    It is too early for China to fight a currency war. She is developing her internal market, and in time the SCO will provide her with the most powerful captive market since the British Empire. However, she still depends on declining markets in the West for much of her economic activity. However, the reason she has accumulated gold and encourages her citizens to do so as well is ultimately to transfer wealth from the West.

    The Iranian situation is already undermining the position of the dollar as the international currency in the context of pan-Asian settlements, because oil is simply more important. Attempts over the years by western central banks to bluff us out of gold ownership have given China and its SCO affiliates a tremendous wealth-transfer windfall, as we may be about to discover. That’s what the geo-politics of gold is actually about, and it is a pity our leaders seem to be blind and deaf to it.
     
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  3. panduranghari

    panduranghari Senior Member Senior Member

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    I would say buy as much gold as you personally can. Instead of speculating in the stock market or buying property or but money into a FD, buying gold is the most sensible thing in the very short, short, medium and long term.
     
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  4. blank_quest

    blank_quest Senior Member Senior Member

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    yaa but this is speculative in toto ~! What I think is that BOP is also pushing India to reduce Gold imports as it is creating the current account deficit. it means lowering of Rupees Value and inflation.
     
  5. spikey360

    spikey360 Crusader Senior Member

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    Well, the way that the value of a US dollar is artificially jacked up, the fall of the Dollar is a matter of time. The only real reason it has not fallen yet is due to the romance that investors and economic institutes have for it. Printing of it in excess has also helped the cause somewhat.
    However, the Iran sanctions and the ensuing bypasses used by other countries to deal with Iran has clearly shown that such romance if fast fading and it is, again, a matter of time before dollar loses its place as the de-facto international currency.
    GOLD
    Gold has always been the obsession for people of the subcontinent. There are religious ethos attached to gold too, not to mention psychological affinity for the yellow metal. Therefore it is highly unlikely that customers will now stop buying gold any more. There is a line of reasoning that says that a person who has gold has already been paid while the person with currency bills is yet to be paid. Therefore, buying gold as much as possible, personally, is very much recommended. that way, your savings/investments are future proof. Gold is never going to disappear. Wars may be waged, countries may fall, whole currency and economic regimes may be abolished or wiped out. However, your wealth in Gold will remain and will gain in value as long as it exists.
     
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  6. panduranghari

    panduranghari Senior Member Senior Member

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    There are approximately 100 references to Gold in the Vedas.
     
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  7. spikey360

    spikey360 Crusader Senior Member

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    No wonder. Bharatvarsh was the wealthiest nations of ancient time. The Vedas can testify for it. Foreign travellers can testify for it. Even Macaulay's speech in the British Parliament can testify for it.

    One particular aspect of the article is very interesting.
    If the present machinations of war which is obscurely but undeniably going on, continue, we would find ourselves in a flashpoint where war between two major factions with US on one side and China-Russia on the other side becomes imminent. What would trigger the war exactly is a question only time can answer. In this context, do you think that India will go to war against the US to secure her national economic interests? [Post-2014 LS Elections]
     
  8. asianobserve

    asianobserve Elite Member Elite Member

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  9. panduranghari

    panduranghari Senior Member Senior Member

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    India never goes to war. Indian people have, are and always will secure their own economic interests. They do this by buying gold. Not an exchange traded fund, Not a Gold fund of funds, Not shares of gold companies

    The simple folk who may not have enough money and no access to CNBC or MSNBC or Bloomberg actually make the most sensible decisions. They spend what ever they need to on necessities but with excess left over they buy gold. easy peasy lemon squeezy
     
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  10. The Messiah

    The Messiah Bow Before Me! Elite Member

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    Bought gold last year, its value its much more now :)
     
  11. panduranghari

    panduranghari Senior Member Senior Member

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    Probably the most common misconception is that price and value are the same thing. They are not. They are related but different. Price can be precisely known, but true value can only be estimated or guessed. And because price changes, price is always wrong while true value is always right, even though it is unknown. So price and value are always different. Value is always either higher or lower than price.

    There is a little trick to knowing whether value is higher or lower than price. This trick will reveal the direction of value, but not the magnitude of the disparity. The trick is to look at which direction the government wants to influence any price. If the government is attempting to manage a price upward, then it is a safe bet that the value is lower than the price. And if the government would like to keep a price down, then you can be pretty sure the value is higher than the price.

    It is certainly fair play to place your bets on the ability of government to overpower the gravitational pull of value. But when you do, you should be aware that you have just purchased the opposite of real value. And to understand why this may be detrimental to our financial wellbeing, we must first understand the concept of value.


    Messiah I ask you this - Is 50 gm of 9999 purity gold more valuable than the price of 2012 model BMW M3 coupe limited edition?

    [​IMG]

    or

    [​IMG]

    Tell me is the value of 1 equal or greater or lesser than the other.

    Serious question.
     
  12. The Messiah

    The Messiah Bow Before Me! Elite Member

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    For me gold is more valuable than bmw provided at the time of purchase there price was similar. Simply because the value of bmw will depreciate while value of gold can rise or stay constanst or even fall slightly. Plus i wont have to spend more money on gold on maintainence which i would do on bmw.
     

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