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Strategies & Market Trends : China Warehouse- More Than Crockery
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To: RealMuLan who wrote (4963)5/26/2005 1:24:10 PM
From: regli  Read Replies (1) of 6370
 
First of all, I don't think that there can be a reserve currency without gold backing. Even the Japanese back their currency with a certain amount of gold. In many cases, due to gold leasing, it is very difficult to say how much each country still posesses.

I think that 10% with an ideal of 25% of M1 should be the figure, especially for a country with reserve currency ambitions.

However, at this point I think the key should be to say that this is China's intention and that it will gradually acquire a reasonable reserve. If at the same time it were to announce the peg to gold, it would display strength instead of giving the appearance of having given in to pressure.

Note that its peg could be freely chosen. The fascinating part then would be to watch if the U.S. or the EU would want to debase their currencies against gold over time, an entirely different proposition than asking another country to revalue its currency.
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