Print 
PDF
BookmarkChina To Launch Massive Bull Market In Gold
Dr. Stephen Leeb: “China never rests on its laurels, and China is always thinking ahead. As we reported recently, China plans to take control of the Eastern oil market – the world’s most dynamic oil market, control over which is likely to lead to China’s control of oil markets outside the East. It’s a step that will lead to a gold-backed yuan being widely used in trade – not just oil trading but trade in general – throughout the East and possibly beyond. It is step that is in the process of launching gold into an epic bull market as gold becomes the center of a new monetary order…
At the same time, this farsighted country is thinking several moves beyond oil. Oil is going to be around for a long time still – for decades, if not generations. But there will come a time when oil will fade and other energy sources will power the world – including powering automobiles – and China is making sure it will be dominant in those sources as well. In the future, like today, the country with the greatest control over energy is the country whose currency will be the world’s most important. Among industries where new energies will play a massive role is automobiles.
China Moving To Control The Auto Market
This past week, China announced it was drawing up plans to phase out sales of cars with internal combustion engines (something many European countries and Britain have announced they are planning as well) and promote electric vehicles (EVs). At first glance, this seems to be a noble goal. China is committed to reducing greenhouse gas emissions, and EVs are more climate-friendly than gas-powered vehicles.
But it’s revealing that this wasn’t the only car-related story from China this week. Another was a story in The Financial Times reporting that China’s auto companies are going after export markets. Geely Automobile will begin selling one of its leading brands in Europe next year. Great Wall, another large Chinese automaker, already has begun selling pickup trucks in Italy and is trying to acquire the Jeep brand from Fiat Chrysler. And BYD, China’s largest company in the auto arena, has been exporting electric buses to the U.S.
We see these stories as intricately related. They point to China’s ultimate goal, which is to secure a global franchise in one of the world’s most important industries – automobiles – as part and parcel of its intention to maintain control over all the minerals and resources that will be needed to power cars in the post-oil world. And that, in turn, is essential to China’s determination to maintain a gold-linked yuan, or probably a basket of gold basket of gold-backed currencies that include the Yuan, as the world’s predominant currency, something that will ensure China’s control over its own fate.
Here’s how I see it. By announcing it intends to phase out gasoline-powered cars, China can plausibly tell the world, sorry, we can’t export to you the critical minerals and commodities needed to make the most efficient, most cost-effective EVs. But hey, what we can do is sell you the efficient EVs that we make right here in China.
It’s a characteristic mark of its foresight that China has been accumulating and stockpiling those critical EV components. First and foremost, among them are heavy rare earths. They are needed to make the most powerful permanent magnets, a critical source of free energy, which in turn are critical to making the most efficient electric motors. China has a vertical monopoly in heavy rare earths and essentially controls around 90 percent of the world’s supply, an enormous boon to its automakers and a benefit that car companies outside China must do without. Tesla, for instance, has had to rely on induction motors, which result in less efficient engines.
China Has The Rare Earths
Now here’s a historical tidbit worth mentioning in this context: Deng, China’s first leader as the country was transforming its economy in the 1970s, once said that while the Middle East had oil, China had rare earths. That was long before anyone was contemplating the end of the oil age. Now, quite remarkably, China is positioning itself simultaneously not just as the leader in rare earths but as a leading factor in oil as well. Not only is it the world’s biggest oil importer, underpinning its ability to create an Eastern oil benchmark. It’s also the biggest provider of refined oil products, at least to the East. Once China seals the deal by backing oil trading with a gold-linked yuan, its control over oil will extend more broadly to overall trade within the East and likely beyond.
But if its multi-tentacled role in oil will guarantee China’s overall preeminence today, what about in coming decades when the age of oil finally ends? That question brings us back to China’s announcement about curbing sales of gas-powered vehicles. A day after making the announcement, China pulled back a bit, saying its automakers weren’t ready for the rules they planned to impose – a kind of cap and trade system designed to reward companies producing the most EVs – and that they would be put off to 2019.
As we noted, it seems the real purpose of making this announcement now, when the rules were still in such a rough and ready shape, was to stake a claim to leadership in new energies as an excuse for holding onto all the resources needed to implement them.
Rare earths for EV engines are far from the only critical resources that are relevant. EVs also depend on efficient batteries. And, predictably, China by a large margin is the world’s largest battery producer. And guess what China is the country that has the greatest access to the commodities and minerals essential to EV batteries.
One of these is lithium. China through holdings it has in Australia as well as within its own borders has huge lithium holdings, and there’s also evidence that it has been stockpiling lithium.
China Controls Cobalt…
Another essential component of EV batteries is cobalt, probably the most expensive ingredient going into electric car batteries and a mineral that Tesla has said it’s even more concerned about obtaining than lithium. While you can make batteries without cobalt, they’re less efficient, and Tesla needs efficient batteries to compensate for its less-efficient engines. China has a secure source of cobalt through its purchase of a major Congolese mine, along with its overall strong relationship with the Congo, which has the world’s largest supplies.
And Graphite
One last chemical we must mention is graphite, which is vital for virtually all rechargeable batteries. China controls the natural graphite market. We say natural because while there is a substitute for natural graphite, it’s expensive – and, coming round full circle here, it involves oil products.
To sum up: looking ahead – as China is doing – to the post-oil world, the Middle Kingdom, by announcing its commitment to a greener EV world, has made a case for withholding from the rest of the world many of the critical resources needed for that world. Instead, China can export its cars – essentially tantamount to maintaining control over the next major energy source, or more precisely the product whose efficient use of energy will be most critical in a world without abundant oil. Smart. And no one should be surprised.
China To Link Its Currency To Gold
It amounts to a multi-generational plan to control energy and via that control to maintain currency hegemony. And it all starts with gold, because the genesis of China’s currency control will be linking its currency to gold as the new Eastern oil benchmark gets underway.
King World News
9/18/2017
