Wednesday, November 30, 2016

China Gold

The Chinese know from money, and they are buying up gold in anticipation of a big crack-up.  China does not have to have a hard currency (back by gold) to win the coveted "reserve currency" title when THE crash comes.  It only has to be harder than the current leader, USA.  If Fort Knox is compromised, as suspected, then it won't take much for China to win.

Gold is tricky because it is both a commodity and a money at once.  Koos Jansen has been following the gold makets and writing illuminating articles on the topic.  Here is summary of one:
To understand the reasoning behind this calculation, please note that after withdrawing the metal, this standard gold leaves a VAT exempt environment (the SGE system), for an environment that is not exempt from VAT, and hence VAT is born into existence. When Laofengxiang doesn’t withdraw the gold, the SGE invoice is the only invoice it will receive for accounting purposes – Laofengxiang needs some evidence for accounting entries. If it withdraws the gold, then it will receive an SVI because the standard gold withdrawn can be manufactured into new gold products and sold off-SGE. Therefore Laofengxiang will need to claim input VAT. General VAT taxpayers that withdraw will get a SVI, individuals that withdraw form the SGE will not. The input VAT noted on Laofengxiang’s SVI from the SGE is not an amount Laofengxiang paid to ICBC as VAT, but Laofengxiang is allowed to deduct this amount from its output VAT.
That seems dense, but I think he does a good job of explaining, if you read the whole article, and his basic research is good.  That a trader will buy a commodity to turn into decoration and ultimately replace the commodity is unique.  The taxing authorities are perplexed.  Dealers thrive in this trade.

Who buys lead and then pays back the the seller with lead? Only gold.

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