Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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karanjakinuthia wrote:Please see the article below which is of utmost importance for gold. Just a background on the issue, the U.S. has locked Iran out of the SWIFT money transfer system effectively disarming the latter's international banking capacity. China, not wanting to draw the wrath of the States has worked out a mechanism of using gold as a payment method for Iranian oil. It is akin to the U.S. reverting to gold to pay for Saudi Arabian oil. Gold effectively re-emerges as an international payment mechanism as it was pre-1971. "As countries around the world and the banks that operate within them attempt to avoid American financial sanctions against Iran – which blocks access to doing business in the United States for any entity that buys Iranian oil- Forbes reports that China will look to buy the Iranian product using gold to circumvent Washington’s policy. China is Iran’s largest trading partner and buys more petroleum from Iran than any other country. Already, China and India are bartering with Iran, using consumer goods, and in the case of India, the rupee, to pay for Iranian oil imports...." Read more: http://www.tehrantimes.c...-us-financial-sanctions
http://en.wikipedia.org/wiki/Bretton_Woods_system
Quote:Nixon Shock
Main article: Nixon Shock
By the early 1970s, as the Vietnam War accelerated inflation, the United States as a whole began running a trade deficit. The crucial turning point was 1970, which saw U.S. gold coverage deteriorate from 55% to 22%. This, in the view of neoclassical economists, represented the point where holders of the dollar had lost faith in the ability of the U.S. to cut budget and trade deficits.
In 1971 more and more dollars were being printed in Washington, then being pumped overseas, to pay for government expenditure on the military and social programs. In the first six months of 1971, assets for $22 billion fled the U.S. In response, on August 15, 1971, Nixon unilaterally imposed 90-day wage and price controls, a 10% import surcharge, and most importantly "closed the gold window", making the dollar inconvertible to gold directly, except on the open market. Unusually, this decision was made without consulting members of the international monetary system or even his own State Department, and was soon dubbed the Nixon Shock.
The surcharge was dropped in December 1971 as part of a general revaluation of major currencies, which were henceforth allowed 2.25% devaluations from the agreed exchange rate. But even the more flexible official rates could not be defended against the speculators. By March 1976, all the major currencies were floating—in other words, exchange rates were no longer the principal method used by governments to administer monetary policy. As Iron Sharpens Iron, So one Man Sharpens Another.
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