The great game accelerates…

Alasdair Macleod – 09 December 2013

In the jigsaw that is the Great Game of Asia pieces which heretofore made little sense on their own are beginning to slot in to give us an idea of the final picture. These disparate pieces are as varied as China’s claim of territorial rights over Japan’s Senkaku Islands, NATO’s backing off from Syria, America’s détente with Iran and the surprising move by Iran to improve relations with the other Gulf States. The Chinese yuan is now second only to the US dollar in trade finance, displacing the euro.  George Osborne, UK Chancellor at very short notice recently flew over to China, when there was already a British delegation there. And this week, again at little notice David Cameron flies to China for top level meetings with the new president and the premier, promoted by the British media as a trade mission.

There are also a few gold-coloured pieces in want of a slot in the puzzle. The Arabs are recasting some of their gold into one-kilo bars ahead of the introduction of a spot gold contract on the Dubai Gold and Commodity Exchange in a deliberate move away from LBMA standards. Chinese gold imports are far, far greater than Western analysts acknowledge. Despite accelerating physical demand from the Far East, Western capital markets insist on suppressing the gold price, forcing physical metal to rapidly disappear from Western vaults into the anonymity of Asia.

If we stand back to get an overall impression of how this jigsaw fits together, the guiding hand of China can be imagined throughout. While one can read too much into any big-picture action, things do seem to be working for China. The Senkaku dispute, with its provocative Air Defence Identification Zone looks like a kung-fu feint, designed to throw America off-balance and into defending her alliances with Japan and other long-standing allies. America has ended up wrong-footed over regional policy, hampered by a newly-appointed and inexperienced ambassador in Japan and by the imminent retirement of her ambassador in Beijing. All this detracts America from addressing China’s more important interests. Washington is now belatedly sending high-level envoys to the region, but this will be to no avail.

We must conclude that China’s future interest is no longer with America, which has been her largest trading partner. Her new ambitions are predominantly towards Asia through the Shanghai Cooperation Organisation (SCO), which is an economic bloc she jointly runs with Russia and has ambitions for the whole continent, excluding for the moment only South-East Asia and Japan. The spread of current member states, observers and associates covers more than half the world’s population. This she sees as her home turf with lots to develop. And the most important outstanding strategic objective for China is to do away with the US dollar for Asian cross-border trade, and also eventually with all other trade wherever possible.

This explains why America finds herself parked in a cul-de-sac labelled Senkaku. China is instead turning to London to utilise strong existing links with Hong Kong to develop a yuan alternative for trade finance for her non-Asian trade, which is why Cameron and Co are getting so excited. And even before this move, the financial power behind China’s economic renaissance has been sufficient to knock the euro into third place for trade finance.

We now turn to the Middle East. China’s interest in absorbing the Middle East into her sphere of influence is obvious, given her current and future energy requirements; but she will also want to tap into the enormous wealth in the region. Her link into it is through Iran, an SCO Observer State, to which she provided covert support during the Ahmadinejad years. One can only speculate about the degree of Chinese influence behind Iranian political developments, with Iran now aligning herself with China’s view that trade matters more than belligerence with her perceived enemies. However, if one acknowledges China’s strategic and trade interests, there is a ready explanation behind Iran’s diplomatic moves to heal the rift with Saudi Arabia and other members of the Gulf Cooperation Council.

The great-game strategy for the Middle-East appears to have been to force the US to resign as regional policeman, which has happened in two stages. Initially Russia brokered a deal over Syria, leaving America and her NATO partners completely outflanked. This was followed by a similar move over Iran, guided possibly by China. There will be no leaving party, and the role of American policeman will be replaced by common  peaceful trade interests throughout Asia.

We can begin to see how our jigsaw puzzle might complete. But there is an extra piece for which there is no place, and that is the dollar. It is simply becoming surplus to requirements; and here again China has America cornered. After concluding her alliances with the Middle East she will control directly and indirectly almost all the world’s above-ground stocks of gold, which in the final analysis is more powerful than any fiat currency, reserve status or not.

One can only speculate about how much of this is self-inflicted by the Americans. Was it her overt imperialism that undermined her, or is it the Fed’s monetary policy? I also remember Alan Greenspan’s undiplomatic remarks over China’s stock of US Treasuries, when he pointed out that they had the problem, not America.

That is for post-event analysis, but for now Western markets seem to be unaware of these important developments, leaving the dollar/gold pair more mispriced than perhaps at any point in history. Physical gold is being cornered, leaving Western capital markets operating as little more than casinos backed only by hot air. The dollar will one day be a bit-player in international trade, meaning that enormous quantities are becoming redundant and will have to be sold for something else.

After the inevitable upwards explosion in the dollar price of gold, we shall be left wondering at what price we will need to offer our goods and services to get some of it back from Asia.

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Alasdair started his career as a stockbroker in 1970 on the London Stock Exchange. In those days, trainees learned everything: from making the tea, to corporate finance, to evaluating and dealing in equities and bonds. They learned rapidly through experience about things as diverse as mining shares and general economics. It was excellent training, and within nine years Alasdair had risen to become senior partner of his firm. Subsequently, Alasdair held positions at director level in investment management, and worked as a mutual fund manager. He also worked at a bank in Guernsey as an executive director. For most of his 40 years in the finance industry, Alasdair has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

99 thoughts on “The great game accelerates…”

  1. Thank you. This is the perspective/insight that I constantly look for. Thanks Alasdair — it is not ‘Monday morning Qtr back’ analysis… but an analysis from outside the stadium (outside “the game”)…

  2. Good article but as usual does not see the wood for the sovereign trees. This whole article is predicated on the concept of sovereignty and the sanctity of democratically elected represented politicians .. This should now be hogwash to all serious students of real recent history. The true powers that be are the banking cartel .. They care not for sovereign borders only for the continuation of their monopoly over the creation of fiat money.. For 100 years this has been a hie ed by the medium of the US dollar facilitated by the Fed reserve system …the franchise is now to continue for the next 100 years via the Yuan .. This was brokered back in 68/69 by Kissinger . We have to start realising that our politicians are not there to protect our sovereignty , they are there to ensure the continuance of the cartel’s monopoly and this transcends borders/race/idealogy … Yes the dollar is toast and 1.5 billion Chinese eager to borrow and have their puppet government borrow to fund their eventual welfare state aspirations will be the next market for the fiat money creation cartel… The same shadow names will and are pulling the strings to achieve this in China whilst our bought and paid for politicians have/continue to preside over policies which have allowed this plan, hatched in 1968, to be one reality. Democracy? Sovereignty? … Hogwash !

    1. Although there may be some element of truth to the thrust of this idea, it smacks too much of conspiracy theory stuff for my likeing.
      Carl Sagan once said, extraordinary claims require extraordinary evidence.

      1. The evidence could not be clearer . Gold price suppression ( itself once thought of as a wild conspiracy theory !) leading to drainage of gold from western sovereign vaults to China ,( the gold tonnages don’t lie … In previous centuries a nations men would go to war to acquire gold …to allow a foreign nation to drain one’s sovereign gold reserves would have been the epitomy of treason )… policies to promote a loan thirsty capitalist engine within a so called Communist state .. Sir the evidence is real and it’s right under our noses .

        1. I agree with Martyn. There’s a long history of subterfuge here. And there’s plenty of evidence Paul. Plenty. Where have you been?

          However, it is also probably true that within ALL these governments there are elements that would like to sever the tie between banks and governments but 911 and WTC building #7 weakened those people in our gov significantly.

          Regardless, this is an environment where it matters not what you get others to believe, it’s only what you do for yourself that will matter at the end of the day.

          Did your own analysis and world view serve you or did you not do enough homework?

          1. An interesting conversation. I’m relatively new to all of this. I’ve been encouraged to buy gold in order to protect my “wealth”, what little of it there is. Gold is only “worth” something because, as is the case with fiat currency, we all agree to it. It conducts electricity well, does not oxidize and will weld at room temperature. I don’t ever see us carrying around a lump of the metal and a file in order to pay for lunch.

            My cynical side thinks that the great “they” have a plan to sell all the gold to China and India and any other idiot who will buy it and when there is nothing left to sell, “they” will create a currency backed with a basket of things that have real value;copper, rare earth metals iron, manufacturing capacity, high tech ability, water, wheat etc.
            I have no evidence to support his but wouldn’t it be a great scam; the ultimate bait and switch.

            And, as i have told my friend who advocates for the purchase of the metal, if it gets so bad that we need gold as a currency, things will pretty much be over. With that in mind i went out and bought another few thousand rds. IF things don’t collapse I can go to the range and enjoy an afternoon of plinking. If they do, my bullets will be worth a lot more than your gold. I don’t see a down side to that bet.

            I’d be interested in your comments

        2. Agreed Martin. The test of a theory is that the theory that explains the most about what’s going on is probably the right one. I still don’t understand though what’s in it for the Chinese. Why would 1.4 billion armed Asians submit to the Rockefellers, etc? Or are we seeing different cartels co-operate to bring about regional hegemony for each of them?
          In other words, what’s in it for the Chinese?

          1. Again look at the evidence… Pre the Kissinger deal , the dollar was indeed good as gold and the US ruled the World whilst China was de facto a failed state with a population starving to death … What is there not to like about the new reality for the Chinese? They are fast becoming the new Superpower , reserve currency status beckons , their people are reaping the fruits of Capitalism yet bizarrely remain a “communist” centrally planned idealogy …. . The leaders ( puppets to the banking Cabal) enjoy new founded immense wealth and power as all puppets crave. Remember the words of old man Rothschild.. “Give me control over a nations money and issuance and I care not what fool makes its laws or what puppets sit on its throne” . I

  3. Good point Martyn. I too have been wondering whether or not the (British) banking oligarches are setting the USA up for a sucker punch from the Chinese.

    Considering the the likes of Obama (the mouth piece of the oligarches), brain-dead Joe Biden, Hillary (a high school girl with a really bad hair-do) and the “useful idiot” John Kerry, we’re being led down the primrose path by the nose – and no politicians in the USA – with the exception of Ron Paul – even come close to getting it.

    Interesting to think the next phase is the Oligarches and the Chinese working together while we’re stuck here “frackin” our brains out with a bunch of Mexican gardeners.

  4. I always look forward to your analysis. This is one of your best. Many thanks. Also, I’m pretty sure Goldman Sachs and Morgan will not be caught lacking gold.

  5. Interesting thoughts here , delivered with due humility.
    Only mr Poirot could work the inscrutable Chinese game with complete self assurance !

  6. I am new to this site… Do any of these people, and by that I mean both Mr. Macleod and the pigmies snarping behind him, actually WORK for a living ?

  7. I can follow your way if thinking, but…..i read to many articles about how smart China is, buying all the gold and expanding it’s power. Signing currency swap deals with europe and australia. But do we all think the USA is watching idle and let things devellop like this, and many other articles suggest ? Is Europe really heading to china ? I think the common intrest between the western countries (US and Europe) is to strong. Why should Europe be intrested in helping china to replace the dollar ? We , me also, the goldbugs, really think that china can accumelate all the gold ? Maybe the european and american political popular faces are buttheads. But the real power behind these marionets ( dutch word) or puppets can not be so ignorant. What is really going on behind the curtains ????

    1. Well, one thing going on behind the curtain is that the U.S.A. will become an awful lot more competitive in trade as its dollar declines. We in Australia might find it a better deal to start buying American cars again instead of Japanese ones. American factories will start up again and young American and immigrant unskilled workers will suddenly find themselves able to earn an honest and more adequate living than they have been able to in the recent past.
      Chinese consumers will find themselves able to consume more of their own production.
      Older Americans who were planning to live well on saved money will find themselves short-changed.
      The American government will find itself obliged to curtail its military adventures. The Australian and European governments will find themselves obliged to pay for more of their own defense, and about time too.
      All this assumes, of course, that war doesn’t break out as a result of Chinese military aggressivenes, in which case we may see an Asian version of World War One, with nuclear weapons.

  8. Obamas weak international position and the weakening and downfall of his position in Syria and Iran gave China just enough of a position that they felt they could ram rod and justify moving in to the Sakelan Islands held by Japan. Obamas weak international position will be cause of much more to come. It will be interesting to watch further actions.

  9. The Great Game is the Great Shift. It’s been going on since 1997. The BRICS led by China are building a parallel monetary architecture. Even with that they are following the rules of Western Civilization.

    I have surmised that for China to become the haven for the world’s reserve currency they need to have four things:

    1.The world’s largest manufacturing base
    2.The largest creditor nation. (Balance of payments)
    3. The largest holder of gold
    4. a large blue water navy

    If Russia and Putin agree to serve as muscle in lieu of the 4th where are we on the list?

  10. David above asked why the Chinese would submit to the Rockefeller paradigm… what Kissinger did with the Arabs in the early 70’s was to turn camel jockies into the wealthiest sheiks in the world. The initiative promised to develop the Saudi (arab) oil infrastructure and allow the sheiks to keep a portion of the profits from the oil in exchange for being owned by the West’s debt instruments and the West got the fruits of the oil-money for next to nothing with the investment in US debt instruments.

    Now, you are seeing a similar scheme played out with the Chinese. The Chinese won a free pass from Chinese Agrarian Age into the Industrial Age from their faustian deal with the Western devil… the globalists got, in exchange, a power wedge to use against the Western sovereign mindset by bankrupting it on the debt which started with the Arab oil deals and then having the Chinese finish the job from an economic standpoint… Game, Set, Match for the banker/globalist regime.

  11. Precious Metal investors are excited about their gold and Silver holdings climbing in value. Should they be ? Should these profits be welcome ?

    A meteoric rise in the the prices of Gold and Silver can only mean a very unstable world. Are you willing to pay the price ?

    Do Gold and Silver investors want Gold at $5,000 or $10,000 ? Be careful what you wish for. (Part One) … silver-80/
    What does Gold at $5000 and Silver at $200 mean to the gold and silver investor ? (Part 2) … investors/
    Most gold and silver investors will be crushed when gold goes above $6000 and silver above $200! (Part 3) … above-100/

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