"China will become the next reserve currency in about 5 years or...

"China will become the next reserve currency in about 5 years or so and have a growing relationship with Russia"

As the de facto leader of the goldbugs, All4one had once more to make an unprovable prediction in conformity with rule 10.

Sorry but I may be wrong because, now I remember, although the Chinese have already clandestinely accumulated the minimum amount of gold necessary for a currency to become a reserve currency (8,000 tones) for reasons linked to political prestige the Chinese are only going to do it in 5 years time when according to All4one's estimates their gold reserves will reach 12,500 tones.

A wait of 5 long years for only reasons to do with political prestige? Well, not really because, although All4one does not mention a single word about it, for the rembinbi to become a reserve currency the Chinese have to substantially restructure their economy, that is, instead of being an export oriented economy, China, like America, has to become a more consumer oriented economy sucking in more imports than exports.

More imports than exports? Why is that? Because, well, if the remninbi represents Chinese debt then for the rest of the world to be able to get their hands on it, China cannot be exporting more than what is importing.

Ah, at this point I hear a neophyte to this thread asking ( we cannot expect a question of this caliber to come from a hardened goldbug): but what about America? Weren't they a net exporter nation until the late 1980s or something like that? Yes they were. So, how did the rest of the world manage to get their dollars? Well, trough capital exports. You see, they had multinational companies investing abroad and a military spending rivers of money equally abroad.

But, why cannot the Chinese do the same? Well, they can. But China is still to a certain extent a dual economy. For instance, inside the country there is an enormous disparity between regions, with the interior still requiring massive amounts of investment in all kinds of things including infrastructure.

But this is not all. Before their currency can become a reserve currency they must set it free by decoupling it from the dollar and liberating capital movements, a policy that would force a enormous appreciation of the renmimbi, a policy that would kill their competitiveness sending millions around the coastal areas to the unemployment queues.

And what about the idea of pegging the remminbi to the price of gold? Well,in order to see what kind of consequence that would cause just imagine that the renminbi had been pegged to the pog in 2001 at the rate of 300 renminbi per gram equivalent to the rate of 34.36 to the dollar. With gold now at $1,350 instead of at $271 one would get 6.89 reminbi to the dollar, an appreciation of almost 500%. That would have devastated the Chinese industry completely by killing exports and sucking in imports.

But for the Nostradamus that populate this thread that is what defenitly is going to happen.

http://carnegieendowment.org/files/keidel1.pdf