“The global economy and global finance is at the turning point in a way… New rules have been discussed not only inside the advanced economies, but with all emerging economies, including the most important emerging economies, namely, China.” Jean-Claude Trichet, former president of the European Central Bank, stated on a financial forum in Beijing at the end of October 2014.
Documents from the seventies clearly demonstrate how global monetary affairs are discussed between politicians of the world’s largest economies. Just after the US ended the gold standard in August 1971, all power houses started negotiating the value of their currencies relative to each other and gold. These next exempts are from meetings between French President Pompidou and US National Security Advisor Kissinger, December 13, 1971:
Dr. Kissinger: President Nixon has asked me on one hand to discuss the general approach to the negotiations and on the other hand to make some concrete suggestions concerning the international monetary system.
…Additionally, despite the difficulties that this represents for him [Nixon], he will propose… a change in the price of gold…
…He [Nixon] is willing to consider a realignment of the dollar in relation to the franc of 9 or 10 percent… Apart from this the DM [Deutsche Mark] should be located some 4 to 5 percent above the franc, the yen 5 percent in relation to the DM and the pound and the lira would maintain their present relationship to the franc.
The exact relationship between the franc and the dollar remains open to discussion. Either you may prefer to revaluate and we would devaluate to a certain relationship, or there might merely be a devaluation on our part to establish an equitable relationship between our currencies. For our part we would prefer a devaluation of the dollar of about 6 percent and a revaluation of the franc of 3 percent.
Mr Pompidou: … A movement of 9 to 10 percent in the dollar is too much. It is not simply a matter of the revaluation of the price of gold but of a devaluation of the dollar in relation to gold…
December 14, 1971:
…Dr. Kissinger said that we had not settled the matter of devaluation.
President Pompidou said he would prefer to speak in terms of the price of gold… The French preferred 37.50 [dollars per ounce of gold].
Knowing how authorities negotiate might explain the current volatility in the price of gold and physical flows across the globe. Just speculating of course, but consider this thought when reading the following exempts from a report about the International Financial Forum 2014 in Beijing (and China’s gold hoarding strategy I’ve been reporting about for many months). As we are about to witness another monetary reset, this time it’s not the US holding the best cards, it’s China holding a royal flush worth $4 trillion:
A new global financial order is essential in the rapidly changing global economy, and strategic dialogues and cooperation are needed to reform the current system, international financial experts said at a forum in Beijing.
“The world today is facing a revolution. It is imperative to construct a new global financial framework and to formulate new rules for global financial market,” said Cheng Siwei, chairman of the International Financial Forum (IFF), a Beijing-based think tank, which concluded its three-day 2014 annual meeting on Sunday.
“The new global framework, new global rules, global balance and global governance require us to engage in renewed strategic dialogue and thinking,” Cheng added.
“The global economy and global finance is at the turning point in a way,” Jean-Claude Trichet, former president of the European Central Bank, also a co chairman of the IFF, told the forum via a videolink.
“…new rules have been discussed not only inside the advanced economies, but with all emerging economies, including the most important emerging economies, namely, China.” Trichet said.
Many experts agreed with Trichet and said that China, the world’s second-largest economy, is playing a more crucial role in reshaping the world financial order,…
“The global financial world is changing profoundly,” said Yukio Hatoyama, former prime minister of Japan and Chairman of IFF Advisory Committee. “China’s role became more important.”
Zhu Guangyao, China’s vice-minister of finance, said the major economies, including the United States, the euro zone, Japan and China, need to enhance global cooperation to tackle global financial and economic crisis.
At the forum, global financial experts discussed hot topics such as the global financial framework, the global monetary system and China’s economic transition and financial reform, as well the globalization of China’s currency.
Trichet clearly stated that behind the curtain politicians have already negotiated the new rules of the coming monetary order and that China has a major voice in this. China has been open about the fact the US dollar needs to be replaced as the world reserve currency, potentially by the SDR (the currency of the IMF). They’ve been less open towards the Western public about their plans with gold.
If you can read Chinese this is a little less of a mystery. In Mandarin many documents of Chinese officials and the State Council have been released wherein the importance of gold for the Chinese economy is emphasized. In these publications it’s clear China recognizes gold for its monetary value, as part of their financial industry and essential for a future economic landscape. How exactly the Chinese will play their cards I don’t know, but we will surely find out in the years ahead.
These are a few of the translations I have published in recent years:
- PBOC Governor Zhou Xiaochuan On Gold
- A Communication On How We Should Help Develop The Gold Market
- Building A Strong Economic And Financial Security Barrier For China
- China Accumulates Gold For The “World Dream”
- Gold Is The Strategy, Crude Oil Is The Tool
- Zhang Bingnan: Gold Safeguarding National Economy
- The “Chinese dream” Of ICBC’s Precious Metals Department
- ICBC: A New Global Currency Setup Is Being Conceived
- China Aims For Official Gold Reserves At 8500t
PS. The IFF Board consists of Mr. Cheng Siwei as the Chairman; Mr. Paul Volcker as the Honorary Chairman; Mr. Han Seung-soo, Mr. Jean-Claude Trichet, and Mr. Kevin Rudd as the Co-Chairmen; and Mr. Dai Xianglong as the President.