Bigworld, >> China Gold Exchange <<
Jim Rickards has discussed how China wants to keep the price of gold low while they accumulate, so the new China Gold Exchange might actually be used for gold price suppression. It's estimated that China currently has approx 5000 tons of gold, and their goal is parity with the US, which would be 8000 tons.
On the other hand, Rickards also discussed how the Western central banks may decide to encourage gold to rise as a way to devalue all the major currencies together and get some inflation going. In the usual approach of competitive devaluations or currency wars, the main currencies take turns devaluing against each other, but this approach only provides temporary benefit.
So far the Fed has been unable to get much net inflation going (their goal is 2% but would prefer 3%), and they can't allow the deflationary forces to continue to dominate. Rickards explains that despite QE and ZIRP, the banks won't lend, they just use it to bolster their balance sheets and for speculation (which leads to dangerous asset bubbles), so there's not enough lending 'velocity' produced that would expand the money supply and generate the desired inflation. The engine of inflation is fractional reserve bank lending which magnifies the money supply at each stage of lending, and this is what's missing.
So Rickards says the next step, taken out of growing desperation, is to inject money directly into the economy via infrastructure projects and other types of direct government spending that bypass the banking system. Not long after Paul Ryan became Speaker of the House last Fall, he surprised the fiscal conservatives by putting a lot of new spending into the budget, and Rickards says this is the implementation of the above strategy, born out of growing desperation. One way or another they have to get some inflation going because their system cannot tolerate deflation.
