TNR Gold Corp V.TNR

Copper as Currency - China

[DowsingR0d]

Aside from Lithium and new tech energy, TNR is attractive based on the $2/lb copper price too... thikn Los Azules...
__________________________________

Ambrose Evans-Pritchard: A 'copper standard' for world currency?

Submitted by cpowell on 02:32PM ET Wednesday, April 15, 2009. Section: Daily Dispatches
By Ambrose Evans-Pritchard
The Telegraph, London
Wednesday, April 15, 2009

https://www.telegraph.co.uk/fin...../516012...

Hard-money enthusiasts have long watched for signs that China isswitching its foreign reserves from US Treasury bonds into goldbullion. They may have been eyeing the wrong metal.

China's State Reserves Bureau (SRB) has instead been buying copperand other industrial metals over recent months on a scale that appearsto go beyond the usual rebuilding of stocks for commercial reasons.

Nobu Su, head of Taiwan's TMT group, which ships commodities toChina, said Beijing is trying to extricate itself from dollardependency as fast as it can.

"China has woken up. The West is a black hole with all this moneybeing printed. The Chinese are buying raw materials because it is amuch better way to use their $1.9 trillion of reserves. They get 10times the impact, and can cover their infrastructure for 50 years."

"The next industrial revolution is going to be led by hybrid cars,and that needs copper. You can see the subtle way that China is movinginto 30 or 40 countries with resources," he said.

The SRB has also been accumulating aluminium, zinc, nickel, andrarer metals such as titanium, indium (thin-film technology), rhodium(catalytic converters), and praseodymium (glass).

While it makes sense for China to take advantage of last year'scommodity crash to restock cheaply, there is clearly more behind themove. "They are definitely buying metals to diversify out of USTreasuries and dollar holdings," said Jim Lennon, head of commoditiesat Macquarie Bank.

John Reade, metals chief at UBS, said Beijing may have a madestrategic decision to stockpile metal as an alternative to foreignbonds. "We're very surprised by Chinese demand. They are buying muchmore copper than they will need this year. If this is strategic, theremay be no effective limit on the purchases as China's pockets aredeep."

Zhou Xiaochuan, the central bank governor, piqued the interest ofmetal buffs last month by calling for a world currency modelled on the"Bancor," floated by John Maynard Keynes at Bretton Woods in 1944.

The Bancor was to be anchored on 30 commodities -- a broader basethan the gold standard, which had caused so much grief in the 1930s. MrZhou said such a currency would prevent the sort of "credit-based"excess that has brought the global finance to its knees.

If his thoughts reflect Communist Party thinking, it would explainthe bizarre moves in commodity markets over recent weeks. Copper priceshave surged 49 percent this year to $4,925 a tonne despite estimates bythe CRU copper group that world demand will fall 15 to 20 percent thisyear as construction wilts.

Analysts say "short covering" by funds betting on price falls hasplayed a role. But the jump is largely due to Chinese imports, whichreached a record 329,000 tonnes in February and a further 375,000tonnes in March. Chinese industrial demand cannot explain this. Chinahas been badly hit by global recession. Its exports -- almost half GDP-- fell 17 percent in March.

While Beijing's fiscal stimulus package and credit expansion havehelped lift demand, China faces a property downturn of its own. Onegovernment adviser warned this week that house prices could fall 50percent.

One thing is clear: Beijing suspects that the US Federal Reserve isengineering a covert default on America's debt by printing money.Premier Wen Jiabao issued a blunt warning last month that China wastiring of US bonds. "We have lent a huge amount of money to the US, soof course we are concerned about the safety of our assets," he said.

This is slightly disingenuous. China has the world's largestreserves -- $1.95 trillion, mostly in dollars -- because it has beenholding down the yuan to boost exports. This mercantilist strategy hasreached its limits.

The beauty of recycling China's surplus into metals instead of USbonds is that it kills so many birds with one stone: It stops the yuanrising without provoking complaints of currency manipulation byWashington; metals are easily stored in warehouses, unlike oil; and theholdings are likely to rise in value over time since the earth's crustis gradually depleting its accessible ores. Above all, such a policysafeguards China's industrial revolution, while the West may one dayface a supply crisis.

Beijing may yet buy gold as well, although it has not done so yet.The gold share of reserves has fallen to 1 percent, far below thehistoric norm in Asia. But if a metal-based currency ever emerges toend the reign of fiat paper, it is just as likely to be a copperstandard as a gold standard.

* * *