British Congressman Kovasi Kwotten is a descendant of Ghanaian immigrants. Born in London, he received rigorous academic training at two prestigious universities in Cambridge, England and Harvard. Before winning the election in 2010, he was engaged in analytical work at financial institutions. He has been focusing on the precious metals sector, and earlier this year published the monograph "War and Gold: Five Hundred Years of Empire, Adventure and Debt." At the end of July, he commented in the New York Times that China can also consider recommending the gold standard. He believes that China may one day also let the renminbi be linked to gold, just as Britain did in 1821 and when the United States built the Bretton Woods system after World War II. From the perspective of China's reserves, it has the ability to do this, and if there is evidence in the future that the US dollar is an unreliable reserve, China may have the willingness to do so politically.

Kovasi Kwotten believes that China may link the renminbi to gold, arguing that this constant and permanent thing is a superior value storage means than the US dollar. With a break-even budget and a gold-based currency, the Chinese economy may be more daunting than it is now. Such an initiative will mark the true return of the "land of China". The reporter interviewed him on his support for China's establishment of the gold standard.

China Gold News: In the history of the UK, the gold standard has ensured the UK's dominant position in the fiscal and monetary fields. However, this system seems to have encountered trouble since the 1930s. As the dollar approaches, the system of sterling and gold-linked has gradually collapsed. The Bretton Woods system, which was established after World War II, has a similar trajectory in the next 30 years. The US dollar is still the world's most important reserve and payment currency, and gold is still denominated in US dollars. In your opinion, is the situation facing the US dollar now similar to the pound under the gold standard more than 80 years ago? Has the replacement been gradually approaching?

Kovacy Kwotten: In many ways, the pace of the pound in the 1930s was more stable than the current dollar. In the era of the Great Depression of the time, Neville Chamberlain, then the Chancellor of the Exchequer, implemented a tight budget policy. Of course, in 1931, the pound had to finally give up the gold standard because of the devaluation. However, the depreciation of the pound is conducive to the UK to increase exports. The problem before that was that the British restored the gold standard from 1925 and used the exchange rate of 1.86 US dollars before the First World War. With the development of the US economy, this actually overestimated the value of the pound, resulting in The UK's industrial sector has had to cut costs and even lower wages in order to maintain export competitiveness. The strike that swept the whole of Britain in 1926 could be seen as the result of the overvaluation of the pound.

At present, the problem with the US dollar is that the United States is carrying more than $17 trillion in debt and has long been in a state of trade imbalance. In the medium term, this situation is not conducive to the currency to maintain the value of the currency. Of course, I don't think that the global currency that replaces the US dollar has already “forced the palace”, just as the US dollar replaced the British pound in the 1930s, but with the support of gold, in the next 15 to 20 years, the RMB will become a kind of Important reserve currency.

China Gold News: As you said, the foundation of the dollar is not stable now, and more and more central banks are questioning the security of the dollar. In this case, does it mean that it is a good opportunity for the euro, the yen and even the renminbi?

Kovacy Kwotten: We have always heard that many countries have made efforts to diversify their foreign exchange reserves in order to spread the risk of dollar reserves. In the process, the euro, the yen, the pound and the renminbi were mentioned, and some central banks are also increasing their holdings of gold. The fundamental problem, however, is that the dollar has been used as a globally accepted reserve currency for a long time. The long-term double deficit of the United States in terms of finance and trade does not provide sufficient guarantees for the value of this currency. This is why other countries believe that they need to find other reserve currencies. However, from the current point of view, no other currency has the ability to replace the dollar.

I think gold is a good reserve option in the long run. Since 1971, the price of gold against the US dollar has risen nearly 40 times. Moreover, gold is not as "manufactured" as a dollar. Therefore, I think it is very reasonable to use gold as part of the reserve. When Gordon Brown served as the Chancellor of the Exchequer, he sold nearly half of the UK's gold reserves at $280 per ounce to $290 per ounce in 1999. It is only 15 years now. The price of gold is already four at the time. Times. Obviously, in the process of perfecting the deconstruction of reserves, not only the types of reserve currencies should be diversified, but gold should also be an indispensable part of the portfolio.

China Gold News: As a world currency, the pound and the dollar have been decoupled from gold. Why do you think China will use the gold standard in the future? Can China and the world benefit from the link between the renminbi and gold?

Kovasi Kwoten: I do think that China will link the renminbi to gold. The key point is that this is a behavior that can be taken unilaterally, and the state has the driving force behind its inner needs. After implementing the gold standard, the central bank can manage the currency according to the pegged gold.

For China, the timing of choosing the gold standard can be compared with the UK. In the early 19th century, six years after the British defeated Napoleon, the British government decided in 1821 to keep the pound pegged to gold. The price was set at just under £4 per ounce of gold. Behind the implementation of this gold standard system is the British government's balanced budget and strong manufacturing capabilities for the global market. At that time, the British territory was spread all over the world, and people all over the world were using British goods. At that time, the United Kingdom was not only balanced in budget but also had a trade surplus. At present, from the perspective of both budget and trade, China and the United Kingdom two hundred years ago have similarities, so they also have the conditions to implement the gold standard.

China Gold News: Both the United Kingdom and the United States have a large amount of gold reserves when implementing the gold standard. According to the latest data released by the International Monetary Fund, China's current official gold reserves are only 1054 tons, ranking only sixth in the world. Can China establish a gold standard without sufficient gold reserves?

Kovasi Kwotten: The gold standard is more based on interest and confidence. In fact, when the British implemented the gold standard in the early 19th century, the Bank of England did not have a huge gold reserve like the United States in the 1940s. The United States has its gold in the northern military base of Fort Knox, which has also become a symbol of US financial power. In contrast, Britain has never had a huge amount of gold reserves. The UK’s gold standard is based on a trade surplus and a strict budget balance. On the basis of this, this is also the source of British financial strength.

From 1815 to 1899, the UK had only four years of fiscal deficits exceeding 1% of GDP, which is an amazing record. In 1890, the British old-fashioned Bahrain Bank faced the brink of collapse and then rescued it. The Bank of England had to borrow gold from the Bank of France and the Russian government to help the Bank of Bahrain pay off its debts. After nearly a century, the Bank of Bahrain eventually became in 1995. Futures trading failed and went bankrupt).

The Bank of England does not have enough gold reserves, but can still issue gold-based pounds because of confidence in the UK's financial situation and trade conditions.

It is worth mentioning that I think that for China with 4 trillion US dollars of foreign exchange reserves, it is possible to gradually increase gold reserves in the next 15 to 20 years. If you buy gold at the right time, no one can really Noticed. The right time I am talking about is the process of gradually increasing the position over a long period of time, rather than a one-time large purchase. At present, the total value of global gold reserves is about 7 trillion US dollars, while China has 4 trillion US dollars of foreign exchange reserves. If 10% of them are gradually replaced with gold, then they can buy 400 billion US dollars of gold. Globally, it is only slightly over 5% of the total. If China can slowly increase its holdings of gold in the next 20 years, it will not have a significant impact on the market.

China Gold News: Historically, what is the similarity and difference between the gold standard of the British pound and the gold standard of the US dollar? If China has also implemented the gold standard, what characteristics do you think will be there?

Kovasi Kwotten: The gold standard of the pound and the gold standard of the dollar are based on what I call "orthodox public finances". The budget balance is crucial to this gold standard. The second element of orthodox public finance is strong export capacity. Both the UK and the United States are manufacturing powers when implementing the gold standard and have a large trade surplus. In the 19th century, Britain had the most powerful manufacturing capacity in the world, and the manufacturing industry in the United States ruled the 20th century.

The key difference between the sterling gold standard and the dollar gold standard is the amount of gold. As mentioned earlier, the United States stored gold in Fort Knox between 1945 and 1960, more than 60% of the global gold reserves. Although the UK also has some gold reserves, it has never been such a large quantity. The UK's gold reserves are just enough, and the gold standard is based on confidence. The international financial system trusts the British government to be able to maintain a balanced budget and believes that the UK has the financial capacity to assume the sterling responsibility. Based on this kind of trust, the UK does not need a large amount of gold reserves to maintain the gold standard system of the pound.

If China is also on the gold standard, I guess it will be between the United Kingdom and the United States. I don't think China can control more than 60% of the world's gold reserves like the US, but its reserves can exceed the Bank of England in the 19th century. If the renminbi is pegged to gold, the country's budget balance and the development of appropriate gold exchange rates are important. Once the exchange rate is established, it will become the key to maintaining the currency value in the future, which will have an impact on exports. However, after gaining the trust of the international community, it will bring benefits as a reserve currency. This is the consideration and practice of the British in the 19th century when establishing the gold standard for the British pound.

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