west to east gold distribution update, page-5

This is another of those zombie ideas that keep on resurfacing no matter how many times you kill them.

The term wealth is commonly understood to represent a monetary measure of the value of all claims over the economic resources and what can be produced with them in the context of a given society.

This means that for wealth to be moving from the West to the East some of the claims generated by the Western economies must be passing into the hands of people residing in the East.

However, when a resident in an Eastern country buys gold from the West is claim over the resources and what is being produced in the West is extinguished in the same way when he buys a bottle of whisky at a duty free shop. This is the reason why non-monetary gold (all gold, except gold given in settlement of debts by central banks) appears as a merchandise export and rightly so.

http://unctad.org/en/Pages/DIAE/World%20Investment%20Forum/Exports-and-Imports.aspx

The claims over the West that the East has gained came from surpluses in their trade balances and are substantiated mostly in the form of Western currency and Western gov bonds. When they import gold from the West by, for instance, converting their bonds into cash and subsequently their cash into gold obviously that their claims are EXTINGUISHED.

Ah, but gold is not a commodity like coal or iron ore or bananas but money and therefore it still represents a claim over the Western resources and whatever is being produced with them.

Well,if that is the case, and it is not, then what would be happening is a conversion of a certain type of claim into another, in our example of bonds into cash and then of cash into gold, a wash.

Ah, I hear you saying, but gold always goes up as fiat money always looses value and therefore over time there will be a wealth transfer from the West to the East. People that say this must be people that have not yet grasped the concept of monetary versus real value.