It’s 1am and I am still at the office in Shanghai, waiting for a client to approve a press release. So in my boredom, I just checked the stock market, and noticed that gold is now up 31 percent from when I recommended buying it in January. In that thread and especially in this thread, I took a lot of heat for daring to suggest the US dollar had no where to go but down and that gold would inevitably go up. “You are a fool” was one of the more memorable comments. At the time, commenter Kenzhu placed a bet with me that I was wrong when I said gold would be up ten percent within six months. And I lost that bet – it took eight months. And now, 10 months later, its up 31 percent.

As I said in those earlier threads, I am a dilettante and have no qualifications as an economist or fortune teller. But this wasn’t, in my eyes, a matter of economics, but simply of common sense in light of the collapse of our housing market coupled with a similar if less dramatic catastrophe in our auto industry, all further exacerbated by America’s insane involvement in two wars with no way to pay for them. Combine that with quietly creeping inflation and you have the perfect storm.

Gold isn’t the only way to go. Stocks (some of them, at least) will probably rise too, as the markets are flooded with liquidity as the Fed desperately drops interest rates. But for now, gold, precious metals and foreign currencies are where I am putting my money. Gold will be over a thousand within six months at the latest. But then, what do I know?

The Discussion: 41 Comments

Let the EU carry the burden of global currency, US trade deficits are drying up, exports are increasing, investment in the US is increasing, etc. Not bad I’d say.

And now China MUST continue to buy our debt to maintain their currency peg because the RMB would indeed rise if the peg taken away.


November 7, 2007 @ 2:16 am | Comment

Great Richard, but remember you haven’t make anything unless you cash it.

November 7, 2007 @ 2:53 am | Comment

It’s true that one has to find things to do with the gold, Arty, but his gold chaise lounge set and gold loafers are mighty stylish. I was over at his place for dinner the other night. We had gold.

November 7, 2007 @ 3:08 am | Comment

I always tell people that if I were Bill Gates or Warren Buffet, I would probably just buy a simple 2000 sq. ft. house, small yard, and then plate the entire thing in gold. Yeah, that’s probably why I’m not Bill Gates.

November 7, 2007 @ 9:15 am | Comment

Wonder how long this will continue. I then wasn’t that entusiastic about gold. You were right. I was wrong.

If one believes what Jim Rogers has to say the place to put your money is RMB. But that’s perhaps only if you have a couple of Millions too much.
(link to interview video is at the right)

November 7, 2007 @ 9:31 am | Comment

Shulan, I’ve said many times that I am delighted to be paid in RMB. I actually had my contract changed when I was in Taiwan to ensure my salary as stated in the contract was in local currency and not dollars.

I think Gold is now at a five year high, but when you look at it over 20 years, you see it is still not that high. My guess (and admittedly a stupid one) is that it will be over $2,000/oz. by the end of 2008.

November 7, 2007 @ 10:19 am | Comment

I Believe China Should Use Most of Its Foreign Reserves to Buy Gold

We know that China has a lot of foreign reserves in its Central Bank. A lot of those reserves are cash in American dollars. My suggestion is: take all the American dollars in the reserve, allot some for annual spending, and then use the rest to buy Gold from America.

This year’s China’s trade deficit with the US is 100 billion US dollars (rough estimate). Next year’s projected will also be around 100 billion. If China plans to buy 200 billion worth of American products this year, and again next year. Then it is equivalent to saying that this year, China sells a total worth of 300 billion dollars of goods to America, and next year, that worth will be at least 200 billion.

Then, if this pattern goes on, then China’s Central Bank will have 100 billion dollars increase in reserve every year. Then the amount of increase makes American dollars a way of “saving”. But of course, there is also a part of that reserve that’s used for exchange.

So we can divide the American dollars reserve in the Central Bank into two parts: used for “Savings” and those used for”Exchange”.

My suggestion is, take the part used for savings, and spend every dollar of that to buy Gold from the US, and transport those Gold back to China. So in principle, China’s Central Bank only keeps enough reserve for exchange, and sells the rest of the reserve for Gold.

So, originally China and US always have trade deficits. But if China buys enough Gold from the US every year, the deficit will be balanced, and this balanced decifit can be continued every year. I suggest this because I believe when you have something like Gold saved in your bank, this is a physical thing. But when you save American dollars in your bank, it is nothing but a pile of papers, or, I can say it is nothing but a digit in the memory of a computer in America. If you think about it, this is very very dangerous.

Also, I suggest that China continues to limit free exchange of its currency: the Yuan (RMB). But at the same time, it should establish a principle of “Yuan-Gold exchange rate”.

That is, the amount of Gold represented 100 Yuan should stay fixed. In other words, China’s “Gold Price” should stay fixed. If the Yuan devalues one day, then Gold will devalue. If the Yuan’s value goes up, then world’s Gold’s value goes up. This way, many rich people of the world will rush to buy the Yuan as a long-term savings method.

Of course, there could still be some scenarios that would change China’s “Gold Price”, such as when China discovers that America gets ahold of a lot of Yuan, tries to harm China by intentionally buying the Gold in China’s bank using the Yuan, thus depleting China’s Bank of its savings Reserve (Gold) and cause a financial crisis. If that’s the case, then China can suddenly announce a large devaluation of the Yuan, so that a Yuan can only buy 0.1 gram of Gold instead of 1 gram. This is like a protective measure. But this measure should not be used lightly, and only in the most extreme cases.

In conclusion, if China uses American Dollars in its savings reserve, then China’s economic lifeline completely depends on the credibility of the American government in the world. But if China replaces Dollars with Gold in its reserve and set up its “Yuan-Gold Price”, then the world’s economic lifeline will shift a lot onto China’s Government’s credibility. Who relies on whose credibility is of upmost strategic importance, like gaining an upper hand in a chess game. If you rely on my credibility, that means I have the power to harm you, at least the potential power to harm you. Also, the Chinese people like to save, while Americans like to spend. This is why credit-card debt has never been a problem amongst the Chinese. If all the clients of Visa or Master Card are all Chinese, then those companies will go bankrupt, or at least be earning much less profit.

Also, the US will of course collapse within the next 20 to 30 years. So before it collapses, replacing all the Dollars in the reserve with Gold is a way to minimize China’s loss when the US collapses.

November 7, 2007 @ 10:44 am | Comment

Remember that the CCP’s continued policy of “growth first” ensures that the RMB will be pegged to the basket of developed world monies including the dollar, this ensures that China has to buy US debt to maintain the peg.

November 7, 2007 @ 11:26 am | Comment

I saw a golden toilet in Hong Kong once, made by some offbeat wanker with way too much money.

November 7, 2007 @ 12:12 pm | Comment

I hope you’ve made significant profits, Richard.

Back in August, I took some of the excess left over from my grants and scholarships from school and used them to purchase several ounces of gold and I’m so glad I did; it proved to be a very good investment (which is always true for Gold). I just wish I could afford Platinum.

People can laugh all they want, I’m sure you were laughing all the way to the bank.

November 7, 2007 @ 1:36 pm | Comment


My guess (and admittedly a stupid one) is that it will be over $2,000/oz. by the end of 2008.

I’m glad you recognize that to be a far stretch, but at least you can take comfort in knowing that the price will not be going down.

November 7, 2007 @ 1:39 pm | Comment

Thanks, THM – one of the few smart things I’ve done in my life. Unfortunately, I didn’t have enough cash to invest to make a killing, but the profits have been sweet nonetheless.

November 7, 2007 @ 2:18 pm | Comment

btw did someone notice that tinyurl is all for Ron Paul?

November 7, 2007 @ 11:50 pm | Comment

Here’s a good article about China if any one is interested. I wish I had time to play stock market. But even if I had the time I think I would rather invest in a company than play the odds type…

Anyway, I hope all good people get lots of nice gold, or money or whatever. They say in Buddhism that theres a place where everything is golden so people actually cherish rock, cause it’s rare ha ha…

November 8, 2007 @ 12:07 am | Comment

oops forgot to put the link

November 8, 2007 @ 12:08 am | Comment

I can only conclude having followed this blog the past year or so, that its’ members consist of mostly expats & some foreign nationals who are ‘cleaning up’ as wage slaves big time in Asia, and with the possible exception of nanheyangrouchuan, remain clueless regarding how to manage their new found wealth.
Two extracts from Henry C.K. Liu and reference to
Jim Willie, 321gold, illistrate clarity amonst U.S. dishohesty
regarding these members muddy comments.

Liberating Sovereign Credit for Domestic Development
By Henry C.K. Liu

(Part I: The Curse of Dollar Hegemony)
all non-dollar economies are forced to attract foreign capital denominated in dollars even to meet domestic needs. But non-dollar economies must accumulate dollars reserves before they can attract foreign capital. Even with capital control, foreign capital will only invest in the export sector where dollar revenue can be earned. But the dollars that exporting economies accumulate from trade surpluses can only be invested in dollar assets, depriving the non-dollar economies of needed capital in domestic sectors. The only protection from such attacks on domestic currency is to suspend full convertibility, which then will keep foreign investment away. Thus dollar hegemony, the subjugation of all other fiat currencies to the dollar as the key reserve currency, starves non-dollar economies of needed capital by depriving their governments of the power to issue sovereign credit for domestic development.

(Part II: China and a New International Finance Architecture)
export to the US under dollar hegemony is merely an arrangement in which the exporting nations, in order to earn dollars to buy needed commodities denominated in dollars and to service dollar loans, are forced to finance the consumption of US consumers by the need to invest their trade surplus dollars in dollar assets as foreign-exchange reserves, giving the US a rising capital account surplus to finance its rising current account deficit.

Glaring Goldman Omission
By Jim Willie

Bigtime volatility has entered the crude oil market. This means the USDollar is due for a bigger decline, or the big players (USFed, JPMorgan, Goldman Sachs) will exert heavier influence to enable a noteworthy USDollar bounce recovery. That would require assistance by the Euro Central Bank, the Bank of England, the Bank of Japan, even the Bank of Canada. A certain resilience can be seen in the crude oil price, as some analysts have perceived a relentless rise toward $100. Any meaningful bounce in the USDollar or correction in the crude oil price might not occur until oil hits the 100 level. The lesson learned is that crude oil is directing traffic in the currency FOREX market, now that the central banks are acting predictably. Foreign central banks are hamstrung, rendered monetary doves at the point of a (US subprime slime) gun. Watch the oil price for future price signals on the USDollar. It cannot be controlled like the gold price, with absurdly large and uneconomical futures contracts. Using the Bank of Baghdad, deploying Iraqi oil funds, managed by JPMorgan seems to have stopped in suppressing the crude oil price. Perhaps the project angered the Saudis too much. If truth be known, both the Persian Gulf clan and the Chinese are hedging against the USDollar decline with usage of oil positions.

November 8, 2007 @ 12:46 am | Comment

Well, to be precise, I invest most of my money in Shuizhuniurou, kaoyou, huoguo and beer. And I have never regretted one of these investments.

November 8, 2007 @ 9:03 am | Comment

I invest my money in weight-control class, and I never regretted either, lol.

November 8, 2007 @ 10:28 pm | Comment

@ “Chicago Liberal Defender”: “Dan Harris, the CLB’s administrator and chief ideologue, and his lap poodle Mark Anthony Jones, a regular contributor to that site I notice, are among the two most pernicious, virulant forces I have ever encountered in cyberspace”

Oh my God, that was such a breath of fresh air in this otherwise suffocating stagnant swamp of intellectual dishonesty.

Be careful, Sir, or else Lisa will send you to her sister Nurse Ratched for lobotomisation. How dare you, how DARE you come so close to saying the Emperor has no clothes, ie, that there isn’t a farthing’s worth of difference between the neocon apologetics of CLB, MAJ, and CLB’s so-called “liberal” defender Lisa, and other boosters of the Potemkin Village “China miracle.”

Scratch any of them and you’ll find they’re all necons under the skin, and MAJ fits in perfectly among them.

November 10, 2007 @ 12:59 pm | Comment

Thanks Fat Cat. Ain’t it funny how spoilt rich kids grow up to all be so much alike, no matter where they’re from in the world? The Other Lisa would no doubt get along with Harris and Jones like a house on fire. The three of them would sit down together in some trendy bar, Harris with his pin-striped suit, Jones with his black poloneck, beret and cigar, and Lisa with her West Coast hippy garb, and they’d exchange similar views, full of liberal rhetoric – all talk that merely disguises their true instincts, which are those of neocons, of the petty bourgeois rich. Fashionistas, shallow and full of talk. That’s the impression I have of them anyway, and it seems as though that’s your impression too.

Thanks for your solidarity Fat Cat. It’s always good to know that there are still at least some genuine people left in the world.

November 10, 2007 @ 1:19 pm | Comment

Chicago Liberal Defender, I salute you for that eloquent, scathing, hilarious, evisceratingly perceptive description of those fake “liberals”.

You might enjoy how I ripped the “leftist” fashionistas a new asshole in a guest post I wrote for this blog almost exactly a year ago, in the wake of Nancy Pelosi’s meaningless “victory.” (One year later, how many more Americans and others have died needlessly in Iraq? Yeah, thanks for nothing, Nancy.) Here’s the link:

November 10, 2007 @ 1:34 pm | Comment

Ivan, thanks for the link man. I enjoyed reading your essay. You refer to the “the vapid, plutocratic, faux-feminist-icon Nancy Pelosi who is about as qualified to represent “Women” as Condoleeza Rice, and the shallow demagogic Affirmative-Action-Prince-Senator Barak Obama, who has even less in common with the majority of Black Americans than my very White Anglo-Celtic hide does.” Spot on! I’m continually sickened by would-be liberals, who are instinctively neocons at heart, masquerading as trendy hip liberals.

I have posted my feelings about Harris and Jones on the CLB, so it will be interesting to see how they respond, that’s if Harris actually posts it. Fake liberals need challenging wherever and whenever they raise their petty bourgeois little heads.

November 10, 2007 @ 1:59 pm | Comment

Harris had better beware of Jones’ “invisible hand”.
The market isn’t the only thing that can molest you, you know.

November 10, 2007 @ 2:58 pm | Comment

Open discussion fuels the revolution! Let the tongues slash and the keystrokes fly!

November 10, 2007 @ 3:28 pm | Comment

speaking of ultra-softie panda licking kowtowing, someone shut off the debate I was having with “me” with “it” getting the last word.

Panda licking bums.

November 10, 2007 @ 3:44 pm | Comment

Fat Cat, Ivan – I had to delete the comments you were referring to. They were placed by MAJ to draw attention to himself. The usual ploy; he comes on with two separate monikers, and refers to another blog where he’s posting. MAJ1 praises its intelligence, MAJ2 then argues, trying (successfully this time) to get others to check it out. Year after year, some things never change.

November 10, 2007 @ 10:52 pm | Comment

Nanhe, ifyou are referring to the “Why Asian guys..” thread, it’s a mystery to me – the thread is open but it won’t take comments. I tried to comment myself – “me” is totally wrong and I was going to slam him for his comment on how racist America is. Must be a code error or something; never happened is before. Trust me, I do not want that fanatic having the last word.

November 10, 2007 @ 11:28 pm | Comment


On another board I heard about a code that can be embedded by a poster in their message to “jam the works” on that thread. You might have to do some de-bugging.

November 11, 2007 @ 1:47 am | Comment

Liberal Defender – I’ve been through this enough times to know that something’s wrong when someone suddenly appears here for the very first time and all they write about is MAJ and make specific references to other posts about him on other blogs, thus creating the one situation on which he thrives – attention from others. You have two choices: go away, or comment as you please without referencing MAJ in any way, and without provoking totally unnecessary and personal insults of friends of mine. It’s my blog and those are my terms. Take them or leave them.


November 11, 2007 @ 8:00 am | Comment

Somebody must be talking naughty again. Blogspot is down, but Youtube is still working.

November 11, 2007 @ 6:28 pm | Comment

NH “On another board I heard about a code that can be embedded by a poster in their message to “jam the works” on that thread. You might have to do some de-bugging.”

If it happens on another thread, I’ll be really alarmed. For now I’m going to regard it as a fluke. If you really want to add something, email me the copy and I will paste it into the last comment from “me” as a rebuttal from you. That’s the best I can do.

November 11, 2007 @ 9:07 pm | Comment

No, “me’s” let comments stand as they are, let people read what is going on in the minds of frustrated Chinese men. I was reading MITBBS the other day and most of the posters claiming to be Chinese females made my points and many of their own (most about “I’ll date, sleep with and marry anyone I darned well choose…and the first requirement is masculinity) and were denounced by dozens of “me’s” as traitors, whores, walking dogs, etc, etc.

November 12, 2007 @ 1:06 pm | Comment


The thread “Traveling for 10 days” has the same problem. This was my response:

San Diego is in free fall, Shanghai won’t be allowed to drop beyond a pre-determined amount by Beijing economists to placate connected investors, developers and most importantly not to cause a market panic. Same goes for the stock market, insurance companies and the big 4 state banks have standing orders and access to capital to buy up stocks in the Shanghai exchange to keep drops limited.

China does has its rules, but they aren’t free market ones.

November 12, 2007 @ 1:15 pm | Comment


I thought you are in the US what’s with all the posting problem.

As for the Shanghai stock market and its real estate market, either you or I will eat our own words in about two years.

Free market rules are bunch B.S., it is not like US run on the free market rules. I will classify as a FEERER market rules. We have regulations, and the Federal Reserve Bank which is not even part of our government (it is a private bank you know) is trying really hard at controlling the markets. Btw, I am 100% in favor of a regulated market than a free market. In addition, we are been sued by WTO for violating trade rules.

November 13, 2007 @ 8:13 am | Comment

Allways scraching my hat when someone brings up regulated vs. free markets again. Hasn’t history shown that a regulated economy does not work. I mean look at all the socialist experimets. Right now you can wittness how to destroy a countries economy by setting price controlls in Venezuela. The country is swimming in oil but the shelves in the shops are empty.

November 13, 2007 @ 9:13 am | Comment

“Hasn’t history shown that a regulated economy does not work. I mean look at all the socialist experimets.”

It depends on the degree of regulation and control.
Regulation through law enforcement works great but is always a clean-up method.

I’m no economist or finance person but things seem to work well when a central bank/national gov’t simply controls the heat under the pan but lets everything in the pan go as it may.

November 13, 2007 @ 12:29 pm | Comment

The guy below me worked for a major bank in Singapore and saw fit this morning to give me the following advice via email:
“Just thought i’d alert you to this: if you have cash coming in: the canadian dollar has had a meteoric rise in recent years but has begun to fall; fast; the USD will continue to fall against other major currencies for 6-12 months then rise, so don’t buy USD; but if u ever wanted to, and had a way (i don’t) to buy other-country assets or currency this may be your last chance for some time to get them cheaply; careful which country, very few currencies will be stable-and-rising over the next 2 years; e.g. imagine British pound is stable/rising or Swiss franc, if u buy low and sell high it’s easy and low risk because it’s actually cash in a bank; i’m sure you know a few financial geniuses, which i’m definitely not, so you may ask their advice; just thought i’d alert you to this in case you didn’t know already.”

November 13, 2007 @ 9:07 pm | Comment

Allways scraching my hat when someone brings up regulated vs. free markets again. Hasn’t history shown that a regulated economy does not work. I mean look at all the socialist experimets. Right now you can wittness how to destroy a countries economy by setting price controlls in Venezuela. The country is swimming in oil but the shelves in the shops are empty.

Unforunately you cannot read or understand English, there is a big different between “regulated” and “state controlled” economies. Venezuela is best a “state controlled” economy. However, I can tell you the problems with Latin American economies are partially due to the state control (I am not going to detail but someone can write a Ph.D. thesis on this). As for the “regulated economies,” the best example will be the US, Western Euros, Canada etc. Btw, go read up this years nobel prize economy winners, you will understand what is the different between regulation and control. The problem with state controlled economies is that the person who is in the driver seat always gets the market information late. While a completely free market while working all so efficiently sometimes does not serve the common good of the society (funny thing is that Adam Smith already realize this in his work).

November 14, 2007 @ 2:15 am | Comment

One could also argue that the central banks themselves are the problem. When you agree that it is not a good idea to have the price for bread decided by a central authority, why should it be a good one to do that with the price for credit?

November 16, 2007 @ 11:14 am | Comment

One could also argue that the central banks themselves are the problem. When you agree that it is not a good idea to have the price for bread decided by a central authority, why should it be a good one to do that with the price for credit?

Because central banks control the credit throgh OPEN MARKET operation. They do not destory the invisible hands but simple directing it from a far. Central banks have their power but also have their limitation. The good thing about it is that it doesn’t require all information to make their decisions. Btw, central banks’ goal is to promote long term growth and sometimes it means to let the economy goes into a recession (see late 70s and early 80s Fed policies).

I can even give you an example what some of the Asian countries need to do to combat the increase in oil price. No, you do not fix the price (price control will result in short supply and long line). If you really want to lower the cost to the public, you simply take away the taxes temporarilybut let the price flow with the market. This way you will be able to extend the price affortabilty and minimumize social cost while allow the market force to adjust and catch up to the price.

November 17, 2007 @ 2:59 am | Comment

Well, but this is the invisible hand of a puppet. The whole idea of the invisible hand is that the market can allocate resources better and more economic than any planner. But if you give the participants in the market the wrong signals by setting interest rates too low or to high i.e. not the price a free market would generate, you give investors the wrong signals which will lead to malinvestment and not the optimal allocation of ressources. This creates bubbles like the internet bubble or the current housing bubble in the USA.

Sorry, the Austrian in me just took control. Off to eat a Wiener Schnitzel and some Kaiserschmarrn.

November 17, 2007 @ 10:22 am | Comment

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