Barb, I read with some interest your recent post regarding the Chinese inflationary economy. As a counterpoint, I'd like to share some thoughts about the Chinese economy. China has a ton of room to raise the value of their currency to increase to price of their exports, slowing the economic growth which will put the breaks on economic growth. Add to that, their central bank is currently the world's largest buyer of gold plus the Central Communist Government has removed the restrictions on the citizens from owning gold, and they have taken that idea to heart, and the Chinese people now buy more gold than any other population on earth. Yeah, China has a few economic problems, but compared to the US and the rest of the world, every country on earth would gleefully trade places with them in a NY minute.

Currently, China's inflation is not as bad as it was in 2007-2008. The rise in house prices has begun to stabilize, and the impact of the rise in commodity prices is tapering off.

Tuesday, December 13, 2011
Chinese still buying gold big time -huge imports in October

Chinese citizens continue to buy gold in record volumes with October the fourth successive record month for imports via Hong Kong.

And this isn't even the peak season for Chinese gold buying which happens mostly around the Chinese New Year which next year, The Year of the Dragon, begins on January 23rd.

What do those Chinese citizens know that almost all American citizens don’t or chose to ignore?

I have clients in China who are more aware of the US dollar’s hazardous state than most Americans. They know the US has way too much debt and they are afraid the excess printing of paper money will make the Chinese money less valuable because the US owes 1.5 trillion dollars to China.

Their answer; buy as much gold as they can afford.

China is currently buying gold as fast as the west can sell it. This appears to be a long term strategy to preserve its wealth in the face of currency deterioration in the west, primarily in Europe and the US. China carries massive debt from the west and is evidently looking to convert this debt to asset value (gold) as the value of debt deteriorates.

"Simply put, the Chinese government is trying to trigger a national gold craze...and its working. The Chinese public now has gold trading platforms on steroids.... ...Also, for the first time in history, Chinese investors can even trade gold abroad (in London) with the swipe of a 'Lucky Gold' card. I can't even get Bank of America to open a foreign currency account."

The existing LMBA and New York gold markets will also pale into insignificance if the Chinese gold market takes off. With the Chinese population now surpassing 1,338,299,000 the potential for the gold price to rise to astronomical heights is becoming more real each day.

Wally Pieper
623 695 4654
wally@wallypieper.ws
Skype: hamstation1

P.S. I don’t know about you, but I’m exchanging as much paper money to gold, 1 gram at a time, as my budget allows. http://vur.me/wallyp/yW