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- This article is from MBA Think Tank Encyclopedia.
gold standard
The gold standard is a monetary system with gold as the standard currency. Under the gold standard, the value of each unit of currency is equivalent to a certain weight of gold (i.e., the gold content of the currency); when different countries use the gold standard, the exchange rate between countries is determined by the ratio of the gold content of their respective currencies - gold parity. to decide. The gold standard became popular in the mid-19th century. In history, there have been three forms of gold standards: gold coin standard, gold nugget standard, and gold exchange standard. Among them, the gold coin standard is the most typical form. In a narrow sense, the gold standard refers to this currency system.
Table of contents
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1Form of gold standard
2 Basic Characteristics of the Gold Standard
3 The history of the implementation of the gold standard
4 main reasons for the collapse of the gold standard
5 Impact of the collapse of the gold standard
6 Gold Standard Case Analysis
6.1 Feasibility analysis of returning to the gold standard[1]
7References
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Forms of the gold standard
1. Gold specie standard
This is the earliest form of the gold standard monetary system, also known as the classical or pure gold standard, which prevailed from 1880 to 1914. Free minting, free exchange and free import and export of gold are the three major characteristics of this monetary system. Under this system, governments of various countries stipulate the gold content of currencies in the form of laws. The comparison of the gold content of the currencies of the two countries is the mint parity that determines the basis of the exchange rate. Gold can be freely exported or imported into the country, and a coin-price flow mechanism is formed during the export and import process, which plays an automatic adjustment role in the exchange rate. The exchange rate under this system has a small fluctuation range due to the effect of mint parity and the limitation of gold delivery points.
2. Gold Bullion Standard
This is a disguised gold standard that uses gold bullion for international settlement, also known as the gold bar standard. Under this system, gold bullion is stored by the state as a reserve; the exchange relationship between various currencies in circulation and gold is restricted, and free exchange is no longer implemented. However, when necessary, banknotes can be transferred to the central bank of the country in a specified limited amount when necessary. Unlimited exchange for gold nuggets. It can be seen that this monetary system is actually a gold standard with restrictions.
3. Gold exchange standard (goldexchangestandard)
This is a gold standard system that maintains foreign exchange in a gold bullion standard or gold coin standard country and allows the domestic currency to be exchanged for foreign exchange without restrictions. Under this system, only bank notes are circulated in the country. Bank notes cannot be exchanged for gold. They can only be exchanged for gold bullion or the currency of countries that implement the gold standard. In addition to gold, international reserves also have a certain proportion of foreign exchange. Foreign exchange can only be exchanged for gold abroad. , gold is the last resort for payment. A country that implements a gold exchange standard must maintain a fixed ratio between its currency and the currency of another country that implements a gold bullion or gold coin standard, and maintain the stability of its currency value through unrestricted buying and selling of foreign exchange.
The two monetary systems, the gold bullion standard and the gold exchange standard, basically disappeared in the 1970s.
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The basic characteristics of the gold standard
1. Gold coin standard system
? Use a certain amount of gold as the monetary unit to mint gold coins as the standard currency;
Gold coins can be freely cast and melted, and have unlimited legal solvency, while limiting the casting and solvency of other coins;
Auxiliary coins and bank notes can be freely exchanged for gold coins or an equivalent amount of gold;
Gold can enter and exit the country freely;
With gold as the only reserve fund.
The gold coin standard eliminates the shortcomings of price chaos and unstable currency circulation that existed under the bimetallic system, ensures that currencies in circulation will not depreciate against the standard currency metal gold, and ensures the unification of the world market and the relative stability of the foreign exchange market. It is A relatively stable monetary system.
2. Gold Nugget Standard and Gold Exchange Standard
The gold bullion standard and the gold exchange standard are two unsound gold standards that emerged after the stability factors of the gold standard were destroyed. Under these two systems, although gold is stipulated as the currency standard, they only stipulate the gold content of the currency unit, instead of minting gold coins and implementing the circulation of bank notes. The difference is that under the gold nugget standard system, bank notes can be exchanged for gold nuggets domestically according to the specified gold content, but there are restrictions on the amount and use (for example, the United Kingdom stipulated that it should be above 1,700 pounds in 1925, and France stipulated that it should be above 1,700 pounds in 1928. It can be exchanged for more than 215,000 francs), and gold is stored centrally in the national government. Under the gold exchange standard, bank notes are not exchanged for gold bullion in the country. They only stipulate the exchange ratio with the currency of the country that implements the gold standard. The bank notes are first exchanged for foreign exchange, then the foreign exchange is exchanged for gold, and the reserves are deposited in the country.
[?[Editor]
The history of the gold standard
Historically, since Britain took the lead in implementing the gold standard in 1816, until World War I in 1914, all major capitalist countries had implemented the gold standard, and it was a typical gold standard - the gold coin standard.
After the outbreak of World War I in 1914, in order to raise huge military expenditures, various countries issued banknotes that were not redeemable and prohibited the free export of gold. The gold standard came to an end.
After the First World War, from 1924 to 1928, there was a relatively stable period in the capitalist world. The production of major capitalist countries successively returned to the pre-war level and developed. Countries attempted to restore the gold standard. However, since the basis for the circulation of gold coins had been weakened, it was impossible to return to a typical gold standard. At that time, except for the United States, most other countries could only implement the gold standard without gold coins in circulation. These were the gold nugget standard and the gold exchange standard.
The gold nugget standard and the gold exchange standard are also called incomplete or incomplete gold standards because they do not have a series of characteristics of the gold coin standard. Under the impact of the world economic crisis from 1929 to 1933, this system was gradually abandoned by various countries, and they all implemented non-honorable credit currency systems.
After World War II, an international monetary system centered on the U.S. dollar was established. This was actually a gold exchange standard. Gold coins were not circulated in the United States, but other governments were allowed to exchange U.S. dollars for gold. The U.S. dollar was the currency of other countries. The country¡¯s main reserve asset. However, due to the impact of the dollar crisis, the system gradually began to shake. In August 1971, the U.S. government stopped converting U.S. dollars into gold and devalued the U.S. dollar twice. This incomplete gold exchange standard also collapsed.
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The main reasons for the collapse of the gold standard
The gold standard has been around for about 100 years. The main reasons for its collapse are:
First, the growth rate of gold production is far lower than the growth rate of commodity production. Gold cannot meet the ever-expanding needs of commodity circulation, which greatly weakens the basis for the circulation of gold coins.
Second, the distribution of gold stocks among countries is unbalanced. At the end of 1913, the United States, Britain, Germany, France, and Russia accounted for two-thirds of the world's gold stock. Most of the gold stock is controlled by a few powerful countries, which will inevitably lead to the destruction of the free casting and free circulation of gold coins and weaken the basis for the circulation of gold coins in other countries.
Third, when the First World War broke out, gold was concentrated on the purchase of arms by the participating countries, and free export and cashing of bank notes stopped, which ultimately led to the collapse of the gold standard.
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The impact of the collapse of the gold standard
The collapse of the gold standard system had a huge impact on international finance and even the world economy:
(1) It opens the door for general currency devaluation and inflationary policies in various countries.
This is because after the abolition of the gold standard, in order to make up for fiscal deficits or expand military preparations, countries will issue unredeemable banknotes indiscriminately, accelerating regular inflation. This not only destroys the currency circulation and credit systems of various countries, but also intensifies the export pressure of various countries. The shrinkage of trade and the deterioration of the international balance of payments.
(2) It leads to violent fluctuations in exchange rates, impacting the world exchange rate system.
Under the gold standard system, the internal value and external value of currencies of various countries are generally consistent, the price comparison between currencies is relatively stable, and the exchange rate system also has a relatively solid foundation. However, after countries circulate banknotes, the process of determining exchange rates becomes more complicated. Changes in supply and demand caused by international balance of payments and inflation play a decisive role in exchange rates, thus affecting the exchange rate system and international monetary and financial relations.
[edit]
Gold standard case analysis
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Feasibility analysis of returning to the gold standard[1]
After the U.S. subprime mortgage crisis triggered this round of financial crisis, doubts about the current U.S. dollar-dominated global economic order have increased unprecedentedly. About two-thirds of the world's assets today are denominated in U.S. dollars, and the current bailout policy measures taken by the United States seem to inevitably lead to a depreciation of the U.S. dollar. Some well-known sovereign wealth fund investment experts have withdrawn funds from government bonds and transferred them to the gold market; they believe that "severe inflation in the future will almost inevitably lead to the collapse of government bonds, and the logical conclusion is that we will eventually return to some form of of the gold standard.¡±
It is precisely based on dissatisfaction with the current international monetary system and the rise of various conspiracy theories surrounding international monetary issues that the gold standard has once again attracted attention. Some scholars have proposed that the world's monetary structure should return to the gold standard, proposing "rebuilding the Bretton Woods system" or a "new gold standard" in order to form a stable international monetary system. A typical scenario is for all countries in the world to join together at the same time.?The Gold Standard Alliance to unanimously determine the stable relationship of its currencies relative to gold.
Supporters believe that returning to the gold standard has a series of advantages. First, the gold standard currency itself has a "rigid" value; the current credit currency is not only easy to depreciate, but may also lead to uncontrolled expansion of virtual financial wealth; second, it is difficult for developed countries to engage in international exploitation by issuing banknotes, so it is relatively fair; third, the currencies of various countries There will no longer be worries about exchange rates, and there will be no possibility of exchange rate manipulation and arbitrage for profit. The international investment and trade system will be more efficient and fairer.
Former Federal Reserve Chairman Alan Greenspan wrote in the 1960s that he supported the gold standard. He wrote in the article "Gold and Economic Freedom" that under the gold standard system, a country's credit limit is determined by the size of the country's tangible assets; without the gold standard system, there would be no safe storage carrier of value. , the government can indulge in a frenzy of credit creation almost unhindered. Deficit spending is purely a conspiracy to confiscate social wealth; the gold standard system will strictly restrict this kind of deficit spending and play a role in protecting public property rights.
Although Greenspan gradually abandoned his support for the gold standard after becoming chairman of the Federal Reserve, many people now look back and praise Greenspan for his foresight.
In fact, history and reality show that returning to the gold standard is an unrealistic fantasy. If it is really implemented, it may become an absurd farce with disastrous consequences.
There was a gold standard for metal currencies in ancient times; what we are talking about here is the gold standard when paper money was used as an exchange certificate or voucher.
Britain first implemented the gold standard paper currency in 1717, but it was not officially established as a system until 1821. Later, Germany, Sweden, Norway, the Netherlands, the United States, France, Russia, Japan and other countries successively announced the implementation of the gold standard. Countries around the world have implemented the gold standard for more than 200 years or decades, but China has never implemented the gold standard (if you do not count the short-lived "gold yuan coupons" before the collapse of the Kuomintang government).
From 1870 to the outbreak of World War I, the gold standard was the most widely used for 50 years. But a growing body of research shows that the prevalence of the gold standard at that time was a result of Europe's economic boom, not its cause. In fact, under the gold standard, the world economy broke out into a worldwide economic depression between 1879 and 1896, which was triggered by the collapse of the financial system.
When the First World War broke out, various countries implemented gold controls in order to protect themselves, making it difficult to maintain the gold standard. After the war, the World Monetary and Financial Conference was held in Italy in 1922, and an incomplete gold standard system was established to save gold, namely the international gold exchange standard implemented in 1925: the currencies of Britain, France, the United States and other countries were directly exchanged with each other. Gold peg, the currencies of other countries are indirectly linked to gold through the currencies of these countries. But once upon a time, the Great Depression of 1929-1933 caused central banks in various countries to abandon the gold standard and adopt a credit currency system that was not honored. What is particularly difficult is that the gold standard determines that central banks of various countries cannot adopt expansionary policies during economic downturns, making it difficult to recover from recession or even depression. After 1929, the global economy experienced almost 10 years of deflation. Since 1938, no country has allowed citizens to exchange currency or deposits into gold.
On the eve of the end of World War II, the United States led the postwar reconstruction of the international monetary system. In July 1944, the "United Nations International Monetary and Financial Conference" attended by 44 countries was held at a resort hotel in Bretton Woods County, New Hampshire, USA, and adopted the "Bretton Woods System" based on the "White Plan" of the United States. ), thereby establishing the "Bretton Woods System" of an "international gold exchange standard" (a dollar standard convertible into gold, an indirect gold standard).
In the 1960s, several gold rushes occurred. In order to protect its own interests, the United States first gave up the fixed official price of gold, and then announced that it would no longer assume the obligation to exchange gold. As a result, the Bretton Woods monetary system ended sadly and gold became non-monetary. cultural reform.
In January 1976, at the International Monetary Conference in Kingston, the capital of Jamaica, the "Jamaica Agreement" (Jamaica Agreement), whose main contents were the legalization of floating exchange rates and the demonetization of gold, was reached, and it came into effect in April 1978. The "Bretton Woods System" officially declared its disintegration.
Looking back at the history of changes in the currency standard over the past hundred years, it can be seen that the bumpy gold standard cannot solve the many shortcomings of the international monetary system, and its operation practice cannot be said to be successful. Historical attempts to return to the gold standard have all ended in failure, indicating that the precious metal standard banknotes, which have been abandoned for nearly half a century, have already completed their historical mission.
Because the concept of using gold to maintain value reserves is deeply rooted in people's minds, the demonetization of gold does not mean that gold has completely lost its monetary function. The gold reserves of the United States have dropped from 21,770 tons in 1945 (accounting for nearly 60% of the world's gold reserves) to the current 8,133.5 tons (accounting for less than 15% of the world's gold reserves).However, it maintains its status as the world¡¯s largest reserve country. Even the International Monetary Fund, which holds high the banner of gold demonetization, retains most of its gold reserves. In the Euro monetary system born in the late 1990s, gold accounted for 15% of the system's monetary reserves. Gold is still the fifth internationally accepted "quasi-currency" for international settlement after the US dollar, euro, British pound, and Japanese yen. This phenomenon means that gold still has a special function as a circulation medium among various commodities, but this does not mean that time can be turned back.
The reason why the gold standard does not work is that first of all, the gold market is too small, the growth rate of production is far lower than the growth rate of commodity production, and its prospects cannot meet the increasing needs of commodity circulation in the globalized world, which greatly weakens the As the basis of monetary reserves, it is impossible to return from a limited market commodity to a "general equivalent".
The total gold mined and accumulated by mankind in history is estimated to be more than 150,000 tons. About 40%, or 60,000 tons, are financial assets; official gold reserves of various countries around the world hold 32,000 tons, and the rest is private investment wealth. The other 60% is used as commodities, mainly jewelry and decorations, for private collection and circulation, and a small amount is used in the electronics industry, dentistry, gold medals and other industries.
Throughout the 20th century, South Africa was the world's largest gold producer. However, in recent years, South Africa's gold mineral resources have been gradually depleted and production has declined. In 2007, China produced 276 tons of gold, equivalent to one-tenth of the total global gold supply, surpassing South Africa's 272 tons and becoming the world's largest gold producer.
The gold nucleus is composed of 79 protons and 112 neutrons. It belongs to the odd-even type of nucleus. It is also sulfur-philic, chalcophile, iron-philic, and has a high melting point, etc., which determines the abundance of gold in nature. Low. To form an industrial mineral deposit, it needs to be enriched thousands of times; to form a large ore, it needs to be enriched thousands, tens of thousands, or even higher. It can be seen that it is difficult to generate a large gold mine. It is estimated that more than 99% of gold has entered the earth's core. It has been found that the total gold reserves in the earth's crust are only 166,000 tons. The abundance is only one ten millionth of iron and 1/21 of silver. The recoverable resources are only about and half of the total reserves. The current annual global gold production is nearly 3,000 tons. Based on this projection, the gold supply level will be unsustainable in 30 years.
As a commodity, gold has a very small scope of industrial application and is mainly used for aesthetic collection. Nowadays, science and technology are advanced. In addition to real gold, recycled gold and synthetic gold (white gold, black gold, rose gold) have appeared in large numbers, which have occupied the market share of gold in jewelry raw materials. It is a natural trend for the gold market price to run low. However, the residual power of gold as a "natural currency" established over a long period of time in human history still remains. Once a crisis or turmoil occurs, people will subconsciously return to gold as a haven for value preservation and hedging. Therefore, the price of gold has dual attributes of commodity and currency.
The average cost of gold mining and refining varies depending on the quality of the ore and mining mode, and currently averages approximately $400 per ounce (troy ounce).
The price of gold is governed by the interaction of dual attributes. When the commodity attribute dominates, the price trend of gold will be the same as that of bulk commodities; when the currency attribute dominates, the price of gold will deviate from the exchange rates of general commodities and international reserve currencies. For example, from 1989 to 1998, the international political and economic situation was relatively stable, the commodity attribute of gold dominated, and its relationship with the US dollar was loose. Since 1996, the central banks of various countries have sold gold on a large scale, and the price of gold in the international market has plummeted from a high of US$418 per ounce. In 2001, it even dropped to US$251 per ounce, which was lower than the production cost at that time. It can be seen that the so-called theory of gold's value preservation is actually untenable. From 2001 to 2008, mainly because the euro began to challenge the international currency status of the US dollar after the birth of the euro, the relationship between gold and the US dollar became closer, and its monetary attributes gradually assumed an important position. Especially since the current financial crisis, driven by safe-haven buying, gold's monetary properties have been strongly demonstrated, and the price of gold has risen sharply, reaching a maximum of 1,032.55 US dollars in a single day in March 2008; however, due to the strength of the US dollar, the price of gold subsequently fell back and oscillated, and is currently at 900. Around USD.
Recently, the United States has issued a large amount of additional U.S. dollars, and people have higher expectations for future inflation, which has formed a support for gold prices. If the rescue plan is effective, the U.S. and world economies stop recession, and the loan market and commodity market pick up, it will attract funds to invest in the real economy, and gold prices may fall accordingly.
Even based on the historical high of US$1,000 per ounce, the total official gold reserves of all countries in the world are only US$1 trillion. The total global GDP now exceeds 60 trillion US dollars. If m2 is equal to half of the estimate, nearly one million tons of gold will be needed. It would be too unrealistic and unimaginable if the world could not dig deep into the earth's core to pan for gold.
The price of gold itself is volatile. Due to the dual characteristics of commodity attributes and currency attributes, it is particularly confusing and uncertain. So, can the price of gold be artificially significantly raised and determined (for example, the price of gold per ounce is as high as over $10,000) to support the restoration of the gold standard?
The question is who decides the price of gold? Government controls gold prices and self-regulationThe economy is not coordinated, and commodities will not fluctuate with the artificial price of gold. The extent of its deviation from the market and its negative consequences are no less than forcibly controlling the price of any other major material. It was once remembered that when the "Bretton Woods System" was implemented, gold was stipulated at US$35 per ounce. In order to make this requirement effective, it was illegal to own gold in the United States; but once the market no longer recognized this price, it deviated far away. At this time, the entire system could no longer hold up and collapsed.
In November 2008, China Business News conducted an exclusive interview with "Father of the Euro" Mundell in New York. This Nobel Prize winner who once spoke highly of the gold standard also believed that "no economist would consider returning to the gold standard. Then It would be too big a change to succeed. The gold standard is a good fixed exchange rate system, but this system has a very big flaw, that is, there is no mechanism that can float with the price of gold and commodities. .¡±
The second main reason why the gold standard does not work is that the distribution of resources is very uneven. Since the 19th century, most of the world's gold stock has been controlled by a few powerful countries; as can be seen from the table below, it is still in the possession of a few developed countries. Gold reserves in the United States and Europe now account for more than 75%. If the holdings of institutions such as the International Monetary Fund are included, it has exceeded 80%. "Rest of the world" totaled less than 13%. In terms of reserves, South Africa accounts for almost half of the world's recoverable reserves; the rest are mainly distributed in the United States, Australia, Brazil, Canada, China and Russia. This situation will inevitably make it difficult for many countries, especially emerging economies that lack gold reserves, to obtain an equal basis for currency circulation, which in fact further deprives vulnerable groups of their voice in the world.
Table 1 List of gold held by central banks and monetary institutions of various countries
Official gold reserves (December 2008)
Ranking
National institution
Gold reserves (tons)
Gold reserve ratio (%)
1
USA
8,133.5
76.5%
2
Germany
3,412.6
64.4%
3
International Monetary Fund
3,217.3-
4
France
2,508.8
58.7%
5
Italy
2,451.8
61.9%
6
People's Republic of China
1054.0
1.6%
7
Switzerland
1,040.1
23.8%
8
Japan
765.2
1.9%
9
Netherlands
621.4
57.8%
10
European Central Bank
533.6
20.1%
11
Russia
495.9
2.2%
12
Taiwan
422.4
3.6%
13
Portugal
382.5
85.9%
14
India
357.7
3.0%
15
Venezuela
356.4
23.4%
According to the statistical report of the World Gold Council (www.piaotia.comcil)]
Note: 1 ton = 32,150 ounces (troy system)
*Gold ETF Fund (Exchange Traded Fund) refers to a financial derivative product that uses gold as its underlying asset and tracks the fluctuations in spot gold prices. The operating principle is: large gold producers consign physical gold to fund companies, and then fund companies rely on this physical gold to publicly issue fund shares on the exchange and sell them to various investors. Commercial banks serve as fund custodians. and physical custodian banks, which investors can freely redeem during the life of the fund.
Returning to the gold standard will also drive the entire world to work hard to mine gold, which originally had little practical significance; because the easy-to-mining areas have almost been exhausted, gold mining will develop into more remote and dangerous areas in the future, resulting in a waste of social resources and Environmental damage. And the gold mine owners who broke out will become the darlings of the times, making the whole world happy.?The hard-working innovative workers crawl at their feet. American economist Triffin once pointed out: "If gold is used as the world's currency, the fate of mankind depends on the profits of gold mine owners. Humanity will be slaves of gold mines and slaves of gold mine owners." Is this an unfairness that modern civilized society must succumb to?
The third reason why the gold standard does not work is that the inevitable conflicts of interests inside and outside the country make this security system very fragile. When World War I broke out, the participating countries needed to concentrate gold to purchase arms, so they stopped bank redemptions and the free export of gold, leading to the collapse of the gold standard.
The "Bretton Woods System" of the gold exchange standard was a product of the United States' willingness, ability, and sufficient international support. When the United States had difficulty balancing national interests and international agreements, France took the lead in resisting, and the participating countries fell apart. The United States made a unilateral announcement without prior consultation with any country: "Stop foreign central banks' obligation to exchange U.S. dollars for gold," and that was it.
For example, the United States partially adopted the so-called "compensated dollar" plan of the gold standard during Roosevelt's New Deal. This system allowed the official price of gold to be periodically adjusted to stabilize the country's price level, that is, when prices fell. Raising the official price of gold and lowering it when prices rise; in the international environment of financial capital, this method is actually openly sacrificing the currency stability of other countries in exchange for the price stability of one's own country.
It can be seen that the reliability and fairness of the gold standard essentially depend on the position of the dominant power country; under the inevitable conflicts of interests inside and outside the country, compared with the current international monetary system ("systemless system"), its reliability is Sex and impartiality may be even more vulnerable.
In today¡¯s world, there are still major differences in political systems and economic development levels; it can be said that a universally implemented, long-term effective, fair and reasonable gold standard can only be a beautiful imagination that is divorced from reality.
¡°Don¡¯t crucify humanity to the cross of gold.¡± ¡°Gold can prevent certain economic excesses, but unfortunately it can also hinder economic activity and its virtues can turn into sins.¡± As Reuters November 15, 2008 According to Japanese reports, central bank governors and government officials around the world do not want monetary policies to be affected by gold reserves, and they have all begun to take action to halt the return of the gold standard system.
Faced with the dilemma of overturning the gold standard, some people also envision a physical standard, using a combination of strategically important resources such as oil, ferrous and non-ferrous metals, coal, timber and wheat, to serve as the standard for international currency and replace the credit currency system. .
The unfeasibility of this idea is actually more obvious than the gold standard.
First of all, how to store various commodities that serve as physical goods is an extremely complex and difficult problem. If those metals, energy, and raw materials are stored like gold, not only will the cost be huge, but such a large amount of very practical value materials will be separated from the operation of the global economy and accumulated for a long time, which itself is an absurd act that violates economic principles. .
Furthermore, once there is a need to use reserves to redeem currency, the mortgage commodities that are the basis of currency value are complex and difficult to divide and distribute. In fact, there is a lack of operability; the monetary system will lose its ability to self-regulate in response to crises.
The gold standard has become a historical term. Of course, for a long historical period in the future, gold will also be combined with foreign exchange, various currency claims and other assets to serve as currency issuance reserves with special significance. Therefore, it still has certain practical significance for emerging economies to appropriately strengthen domestic gold mining and increase gold holdings as an effort to reduce their holdings of U.S. dollars or other sovereign currencies and improve the diversity of their reserve systems.
Since the beginning of this century, China has continuously adjusted and increased its gold reserves. In 2001, it increased from 394 tons to 500 tons, and in 2003 it was increased to 600 tons. In recent years, China has stepped up its efforts in gold mining, with annual output rising from around 100 tons at the beginning of this century to a record high of 282 tons in 2008. However, due to constraints from natural conditions, it is unlikely to double as in previous years. .
On April 24, 2009, the State Administration of Foreign Exchange of China announced that since 2003, through domestic production increases, miscellaneous gold purification, and market transactions, it has significantly increased its gold reserves by 454 tons, and the total reserves have reached 1,054 tons. It was announced in various countries. It ranks fifth in gold reserves, worth about US$30 billion; but it only accounts for 3% of the world¡¯s total official gold reserves, equivalent to 1.6% of the country¡¯s foreign exchange reserves (this ratio has actually declined since 2003).
While China announced an increase in its gold reserves, it also asked the International Monetary Fund (IMF) to sell its gold holdings. If China buys all 3,217 tons of the imf's gold reserves at a price of US$1,000 per ounce, it will cost US$103 billion, which is only equivalent to 5% of the existing foreign exchange reserves of US$1.95 trillion.25%. Some people have suggested increasing gold reserves as a hedge against the risks of U.S. bonds held. To produce such an effect, I am afraid that reserves would have to be increased many times.
Russia has also continued to increase its gold holdings in the past few months. India, Taiwan, Singapore, Norway, Saudi Arabia and some countries in the Organization of the Petroleum Exporting Countries have increased their gold reserves and will continue to do so in the coming months in an attempt to protect the value of their currencies. This trend will push up the price of gold and even generate a large number of bubbles, but it does not mean that it increases the chance of restoring the gold standard. In the long run, since the price of gold is dominated by the interaction of dual attributes, its value-preserving function actually has no rational and rigid guarantee. Moreover, gold reserves require both custody fees and no interest; once the hedging buying effect subsides, As commodity properties return to their dominant position, risk provisions for serious write-downs are required.
It is worth noting that not only does the International Monetary Fund have no intention of increasing its gold holdings, on the contrary, it has agreed to sell its gold reserves and use the proceeds to provide preferential financing to the poorest countries.
At present, most countries will rely more on printing money and expanding debt to fulfill their responsibilities of financing the market, and the risk of expanding inflation is self-evident. Selling gold, then, is an ideal option for an economy that is both a major debtor and a major gold reserve. As expected, more international financial institutions and even major gold reserve countries will join the ranks of selling gold.
Jonnadler, a senior analyst at Kitco Bullion Dealers (a well-known precious metal dealer), pointed out that all the gold that has been mined in the world accounts for only about 0.6% of the total global wealth. Even if the gold price rises to $10,000 per ounce, it will It only accounts for 6% of the total global wealth.
¡°That doesn¡¯t start it being a panacea for the problems plaguing the world,¡± he said. Even so, a country as important as China should continue to seek to diversify its vast reserves, and so should ordinary investors.
Nadler said, just don¡¯t have speculative thoughts when diversifying, thinking that China¡¯s purchase of gold is a sign that the fuse under gold is igniting (which will detonate gold prices). He said it was just buying insurancea little bit at a time.
The contemporary market economy is a market economy dominated by credit money. The world has embarked on the road of no return where virtual credit currency monopolizes the monetary history stage. Credit money no longer directly represents any precious metal; its only support is confidence in the strength of the issuer. The only way to solve the shortcomings of today's monetary system is to use the word "credit" to maximize imagination and creativity, rather than repeating the old habits of various precious metals and physical currencies that belonged to the 19th century and earlier eras.
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