as for china shifting its reserves into gold — well, see my earlier comments, or drezner’s. there isn’t much evidence that china is increasing the total share of its reserves in gold. it may — but it hasn’t yet happened.

what clearly has happened is greater willingness on the part of China to use its foreign assets to buy into resources abroad.

I own no gold. I was asking a serious macro econ question in line with the post. The IMF is selling its gold to fund investment in the developing world, which, as this essay posits, turns around and support the US. China is amassing gold, has huge amounts of US paper, and wants a global currency. If I’m way out of line speculating that CHina could be looking for a way to changes the rules a bit and to their favor by going back to a gold std with their currency supreme, linking a fixed fx rate tied to gold then I do apologize. I’m trying to weave many possibilities together based on arbitrary factoids. Which I think are relevant to this thread in that shuffling gold bars around on the floors of central banks to “balance trade imbalances” is how it used to work, no?

that does not mean they are always wrong – just that they never give up . . .

a headline says china has amassed a quantity of gold. this is true. you could also report this in terms of the proportion of total chinese reserves held in gold. if they have a gold policy (they must ?) – surely it is more likely to be expressed in percentage terms, than somebody saying in some committee – “let’s go for the thousand tonnes !”

there are about 30 billion teeth in china. someone should check with the dentists. it might be the teeth which are rotten and about to fall out, not the dollar.

http://www.cnbc.com/id/30392494

ALMATY, Kazakhstan – The rivalry between Russia and the West for Central Asia’s energy resources has generated headlines. But it’s Chinese companies that have been snapping up assets in the region.

State-owned China National Petroleum Corp. is acquiring joint ownership of Kazakhstan’s fourth-largest energy company, MangistauMunaiGaz, which controls an estimated 500 million barrels of oil reserves. The deal, announced Monday, is expected to be completed in July.

Backed by hefty foreign currency reserves, China is doing big energy deals in Central Asia’s biggest oil supplier and elsewhere as it seeks to secure future energy supplies for its growing economy.

The purchase of the stake in MangistauMunaiGaz means that Chinese energy companies will control around 15 percent of this former Soviet nation’s current total oil output.

CNPC efforts to secure the MangistauMunaiGaz stake was complicated by the lively interest shown by Russian and Indian rivals, but Beijing’s jaw-dropping $2 trillion foreign reserves gave it an unassailable advantage.

It is that kind of solvency that has given China the leverage to strike deals at a time when the global financial crisis has left other governments scrambling for cash. In February, China signed a long-term oil supply contract and pipeline deal with Russia worth $25 billion. Days later, Brazil agreed to supply up to 100 million barrels of crude oil a day to China in exchange for a loan of up to $10 billion.

That same month, Venezuela and China struck a deal to put an additional $6 billion into a fund used finance joint development projects in areas including oil production. Venezuelan President Hugo Chavez said the fund would in part be aimed at increasing oil exports to China from 330,000 to 1 million barrels a day by 2015.

Another key element of Beijing’s strategy is the Kazakhstan-China oil pipeline. When fully completed in 2011, the route will span almost 3,000 kilometers from the oil-rich Caspian coast to the Chinese border and ferry around 20 million tons of Russian and Kazakh oil every year.

Regarding this post and previous where you note China buying gold, requesting IMF SDR’s to be “global” money. If, as suggested, China kicks in a barrel of CNY to the IMF, buys many many tons of gold and then declares the CNY linked to gold at a set price does that get us back to pre-Nixon days with now China the dominant (and stable) currency? Then we shift gold bars around in cages and thus end the “abuse” of trade deficits and all the financing this essay is based on?

So I have two issues. The first is abjectly political but the second is a version of what we’re seeing now with the Euro and the strains being produced as countries struggle to stay inside the guidelines required for the single currency. It’s one thing to speak generally of emerging economies, another to get into specific countries, and yet it is at the specific country level that decisions would need to be made.

Again, if we’re talking about charity, about maintaining capital levels in emergencies, that’s something the world prefers to handle ad hoc. If we’re talking about policies that have consequences and then rewards and punishments, that’s an entirely different thing. It’s at this level that the economic and political objections come together because the interests of say countries in South America differ from SE Asia differ from Europe, etc.

In the worst case – meaning an absurd case – imagine voting blocs that drive these policies in favor of oil producing and exporting nations. They have a lot of power, can buy support, and yet their interests are the opposite of much of the world’s present and certainly of the future.

Im alarmed by the divergence between opinions of traders (that the IMF $1 trillion will be enough to bail out anyone in trouble), and the massive shortfall that you describe in your post. I think there is an issue of having a false sense of security that comes with the additional commitments of funding for the IMF (outlined at the G20 meeting). This seems to also lead to a moral-hazard issue whereby private investors are lulled into taking additional risks thinking the IMF is offering enough protection.

My thoughts are outlined on my blog here: http://blog.globotrends.com/2009/04/03/moral-hazard-of-increased-imf-funding/

While the White House may be making all the right noises about fixing American finance, a growing number of astute observers (see the Newsweek article as well as the Simon Johnson piece in The Atlantic) worry that the administration has fallen into the grip of what Willem Buiter of the London School of Economics calls “financial capture”.

Lawrence Summers, director of the National Economic Council, and Treasury Secretary Timothy Geithner (not to mention President Obama himself) have become victims of “cognitive capture”. That is to say, well-meaning as they might be, they had spent so many years in and around Wall Street that they were unable any longer to conceive of how an economy not run by and for finance capital could possibly function.

But watching the dissembling out of Washington and London, Buiter fears “it is becoming increasingly hard to deny the possibility that the extraordinary reluctance of our governments to force the unsecured creditors (and any remaining non-government shareholders) of the zombie banks to absorb the losses made by these banks, may be due to rather more primal forms of state capture.”

If this is true – if key figures in the Obama White House are essentially acting as shills for Goldman Sachs or, to put it more politely, if they are unable to distinguish the interests of Goldman Sachs from those of the Obama administration and the American public.

http://www.atimes.com/atimes/Japan/KD28Dh01.html