Follow The Money – Follow China, Russia And India

The Chinese know this but their US treasury holdings are so large that they need to go slowly in order not to shoot themselves in the foot. In the end, China is likely to take a major loss on its dollar treasury holdings but that is the price they have been willing to pay in order to build up its economy and manufacturing sector by financing US deficit spending. Simultaneously China has invested heavily in the resource sector in most parts of the world. China understands that commodities are massively undervalued compared to the bubble asset markets. At the same time, China has continued to buy a major percentage of annual gold mine production since 2008, taking total Chinese purchases to 16,000 tonnes.

SELL US TREASURIES – BUY GOLD

For anyone who wants to Follow the Money, just look at the chart below how Russia is dumping US treasuries and adding to its gold reserves every month. Because Russia knows that gold will surge and US treasuries crash.

From insignificant gold holdings in 2007, Russia today has $80 billion of gold. And since 2010, Russia’s US treasury holdings have gone down by 89% to $20 billion today.

And just look at China and India. Their gold purchases in the last ten years amount to 25,000 tonnes. This is virtually the total global gold mine production during that period. These countries understand what will happen to the financial system and to most currencies. So again Follow the Money.

DOUBLE WHAMMY FOR TREASURY INVESTORS

Many investors are holding US treasuries as a flight to safety. Well, I certainly agree with the Russians and the Chinese. Treasuries must be one of the riskiest investments you can hold today and is as far from wealth preservation as you can ever get. The dollar will go to zero – it is already down 98% since 1913 – and treasuries will go to zero as the world realizes that US debt can never be repaid with real money.

So investors in US treasuries can expect the most momentous double-whammy. Whatever they don’t lose on the dollar going to zero, they will definitively lose on US debt instruments. This means that just in US treasury debt, over $21 trillion, and growing, will explode or more accurately implode.

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