More Chinese Gold Accumulation Rumours

Re: More Chinese Gold Accumulation Rumours

Currency vs. Commodity. 

Non-official sector consumers still see gold as a commodity.  If there is less disposable income, then less money will leak into "commodities" like gold.

The official sector  on the other hand sees gold as currency.  China might want to "buy low" but how do you define "low" when gold is denominated in fiat dollars?  China's gold reserves are paltry relative to their dollar reserves.  I think the Chinese are much more concerned about timelines than they are about weight or price.

There is a big difference in how non-official sector consumers value gold and how the official sector values gold.  One must work to buy gold, the other can simply print to buy gold.  

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This past weekend I babysat my niece and nephew.  They are 8 and 10 years old.  They are always so jacked up and hyper I decided to play some board games with them to calm them down and keep them occupied.  Naturally, I picked Monopoly.  They resisted at first... Ashlynn wanted to do jigsaw puzzles and Thomas wanted to play Connect 4.  I offered the winner of Monopoly a dollar and they obliged.  In the middle of the game I offered my niece and nephew a quarter for $500 of their Monopoly dollars.  Both declined, they needed the Monopoly dollars to buy houses and hotels... what were they to do with a quarter anyhow?  A few minutes later, I started issuing myself Monopoly dollars from the bank.  Enraged, Thomas who at the time was in the lead, kicked the board and quit the game.  Ashlynn wanted to exchange her Monopoly dollars for the quarter I previously offered her.  I thought these were very interesting reactions to my little experiment.  Anyhow, I took both to McDonalds and bought each a Happy Meal to ensure a happy ending to this story.

Two things stook out to me.  The first was that neither was willing to exchange their fake dollars for the quarter I had offered ("real" money).  Clearly, they were engrossed in the game... all they cared about was accumulating Monopoly dollars to build their hotel empire.  Thomas said "No Way!" to my offer, apparently disgusted by the high cost of purchasing just one quarter.  Second was the fact that at the end of this game, Thomas was much more upset than Ashlynn.  Ashlynn wanted to exchange her fiat for real money.  Thomas was just angry all around as apparently he had the most to lose as a result of my manipulating the bank.

Are we that much different than Ashlynn and Thomas?  Is our financial system that different from a game of Monopoly?  Can we really say an ounce of gold is too expensive at current levels?