Thursday 23 December 2010

Return to the Gold Standard?

World Bank President Robert Zoellick reaffirmed his proposal to use gold as a "reference point" to reform the current international monetary system on Wednesday in Paris.

Dollar was pegged at $35 to the Ounce in 1944
"What I suggested is that gold serves as a key reference point to allow people to assess the relations between different currencies," Zoellick told the press here at the end of his meeting with French President Nicolas Sarkozy in the Elysee Palace.

"It's an approach that we can take, others also estimate that we can establish a benchmark against prices of principal commodities," the World Bank president said in response to a journalist's question.

"I didn't propose a gold standard, which is an important distinction because it would directly link currency to gold," said Zoellick, denying reports that he had called for a return to the " gold standard" to modify the present monetary system, which he called "Bretton Woods II."

"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," Zoellick wrote in an article published in Monday's Financial Times.

Some media said Zoellick's proposal to revive gold's role in guiding exchange rates worked as a shock wave to current discussions and disputes over the international monetary system.

The "gold standard" is a system in which the standard economic unit of account is a fixed weight of gold.

Under the Bretton Woods system, which was set up in 1944 in the United States, the U.S. dollar was directly pegged to gold -- 35 dollars equaled per ounce -- while other currencies were pegged to the dollar. The Bretton Woods fixed exchange rate regime broke down in 1971, when the United States unilaterally terminated convertibility of the dollar to gold.

Source: Xinhua

149 Tonnes Gold Reserves - For Mining Co

Around £4.1 bn of Company Assets!
Gold mining and processing company China Precious Metal Resources Holdings Co., Ltd. (CPM) announces that a sale and purchase agreement was signed on 21 December 2010 in respect of the acquisition of a gold mine in Henan Province, the PRC, for a consideration of 1.18 billion yuan. Upon completion of the acquisition, the Group will have total gold reserves and resources of 149 tonnes.

The mine is located at Zhifang Village of Tantou Zhen of Luanchuan County in Henan Province and has an aggregate area of approximately 8.9940 square kilometers. Completion of the acquisition is conditional upon the Group having obtained a technical report confirming that the total amount of the reserves and the resources of the mine are not less than 25 tonnes.

The consideration of 1.18 billion yuan was determined taking into account the valuation of the target company of approximately 1.401 billion yuan as at 30 November 2010. The consideration will be settled as to HK$500 million by cash utilising the Group's internal resources, and as to HK$680 million by the issue of 328,185,328 consideration shares at an issue price of HK$2.072.

Dr. Dai Xiaobing, Chief Executive Officer and Executive Director of CPM said: "The acquisition is in line with our business development strategy in the gold mining industry. Considering the favourable prospects of the gold mining industry, the board believes that the consideration, which represents a discount of approximately 27.39% to the target company's valuation, is in the interests of the Group and our shareholders."

The issue price of HK$2.072 represents a premium of approximately 17.73% over the closing price of HK$1.76 on the date of the agreement, and a premium of 17.59% over the average closing price of HK$1.762 for the last five consecutive trading days.

Dr. Dai added: "The acquisition enables us to exceed our yearly growth target of reaching 100 tonnes of gold reserves and resources. The strategic locations of our mines in China's three fold belts also help enhance our overall efficiency."

Source: China.org.cn

Friday 3 December 2010

Why would Anybody want Cash?

Thanks to

By Bill Bonner
Mumbai, India

O, what a tangled web we weave
When first we practice to deceive!

– Sir Walter Scott, ‘Marmion’

“The trouble with today’s financial system,” we told a Bloomberg reporter, “is that it is based on fraud.”

“At the bottom of it is paper money – itself a kind of deception. It pretends to be real money. And it is real money – in the sense that you can use it to buy things. But it is prone to lie. All the feds have to do is to turn on the printing press and it will tell you that you are a lot richer than you really are.

“This sort of flimflam has been going on ever since the end of WWII. The feds systematically increased the amount of paper money... leading people to think they had more purchasing power than they really had. Today, a dollar is worth only about 3% as much as it was 100 years ago.

“But that’s just the beginning of the scam. They also systematically under-priced credit – in the belief that the key to prosperity is consumer credit and spending, rather than saving and production.

“The system has its architects and its operators – all quacks and mountebanks. They pretend that they can manage the currency and manage the economy. Yet they misunderstand the most basic elements of how a real economy works. Wealth does not come from consuming... it comes from producing.

“The managers claim to be able to manipulate the economy so well that they can actually improve its performance... that is, they say they can make the economy perform better than it would on its own... better than it has naturally for the past two thousand years. By eliminating the cyclical downturns, the feds told us that they would we all be richer... and free from the volatility that plagued us theretofore.

“So they fiddle and fake it... improvising... and making it up as they go along. The raise interest rates... and then they reduce them. They introducing more paper money when it suits them and change banking rules as their theories suggest.

“When anything ‘bad’ happens, defined as something they don’t like, they rush to fix it. But what can they fix it with? A little duct tape of monetary policy. A little fiscal baler twine too.

“Their fixes are not completely random or haphazard. They have a bias – towards more credit, more spending, more cash, and more speculation. If they tighten rates one month, they loosen them for two months. If they run a surplus in the federal accounts one year, they run deficits for the next five.

“Gradually, more and more debt, mistakes, bad judgments and cockamamie speculations build up. And then, the authorities are under pressure... running from one crisis to another... providing credit to one zombie... and bailout to another... and raw meat to a third.

“And then suddenly, the discipline and self-restraints that held them back gives way like a frayed old rope. Then the central banks and Treasury authorities are running free... abandoning themselves to the trickery and fraud inherent in their profession. The European Central Bank says it will provide “unlimited liquidity” to those who need it, in order to fend off a debt crisis in the Old World. In the New World, the Bank of Ben Bernanke is already bailing out big banks in North America as well as those of Europe. And everywhere, the feds are ready to support one another... and bankroll the IMF... with more paper money and more credit...

“...all of them desperate to hold the system together.”

And now they link arms – the Fed, the ECB, the EU and the US... and don’t forget Japan and the BOJ. And off they march – right off a cliff.