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Monday, September 10, 2012

Why Gold Must Soar under Rombama

Romney Doubles Down on Obama's Toxic Currency Policies

May 7, 2012 RSS Feed Print James Rickards is a hedge fund manager in New York City and the author of Currency Wars: The Making of the Next Global Crisis from Portfolio/Penguin. Follow him on Twitter: @JamesGRickards.

"On most issues, former Gov. Mitt Romney tries to distinguish himself from President Obama and set his policies apart from those of the current administration. Yet, in one area Romney is not only a clone of Obama but has doubled down and insisted that the president's policies be applied with even greater force. This area involves China and its alleged currency manipulation.
The exchange rate between the U.S. dollar and Chinese yuan is the main battlefield in the global currency wars. Romney demands that China be officially branded a currency manipulator and suffer retaliation in the form of taxes and trade sanctions from the United States. This is just a more extreme form of Obama's continual diplomatic pressure on the Chinese to revalue their currency upward."

And they're not the only ones.  The entire US government from Geithner to most every US Senator and congressman on both sides of the aisle are demanding a stronger yuan.  In other words they are demanding a weaker dollar.

Right now the dollar index trades primarily against the Euro.  But the euro, as a reserve currency,  is cooked.  China, Russia, Brazil etc are all paring back on euro reserves.  Meanwhile, they are all stockpiling gold.  

Say what you want about Chinese GDP growth - illusion or reality - the fact is that on a purchasing power parity basis chinese GDP is now equal to US GDP.  And whatever their growth rate - it's a lot faster than the US growth rate.

Soon China will find it in their own best interest to let the Yuan dramatically revalue.  They'll allow us to bully them into doing exactly what they want to do.

Then the dollar will trade against the yuan.  And then the dollar will cease to be the world's primary reserve currency.  Then gold will enter its primary bull phase.

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