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Discussion Thread - Grant Williams Episode 52

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1 year 6 months ago #1 by PatrickCeresna
Discussion Thread - Grant Williams Episode 52 was created by PatrickCeresna
Erik and Grant discussed populism, Trump, peak optimism, China and gold. Please feel free to share with us your opinions on Grant's perspective.
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1 year 6 months ago #2 by spinafex
Replied by spinafex on topic Discussion Thread - Grant Williams Episode 52
First of all, thanks for a very entertaining episode. That said, I think Grant's thesis has a couple of problems.

1. The first problem is that China has a worse debt problem than the US. If you count all forms of debt guaranteed by the central government (corporate, bank and government), the total is higher as a percentage of GDP than the US.

2. The second problem is that China has lot LESS gold than the US. Despite being the largest producer of gold, China's output is minuscule compared to the US stockpile. At current rates of production and assuming the US does not increase its stockpile (the US happens to be the #4 producer of gold), it would take China nearly 18 years to accumulate a similar amount of gold.

3. Grant treats currency convertibility (open capital account) as a virtual fait accompli in his presentation. In fact, this is a long and fraught process (complicated by the massive debt load China is currently shouldering).

All this suggests that while he is likely correct in his general trajectory both for China's (and Russia's) strategic goals as well as America's looming fiscal issues, the scenario he suggests may take quite a bit longer to play out than he thinks. At a minimum, it is not apparent to me that major OPEC members would suddenly find payment in yuan a more attractive alternative than dollars until a) that gold stockpile grows considerably, b) the debt stockpile declines meaningfully, and c) the capital account is fully opened and the currency fully convertible.
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