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Even when the rules change gold bullion will still be the standard.

April 27, 2011 – You don’t have to wait for Bernanke’s much touted first-ever press conference Wednesday to have ample reason to invest in gold bullion. Chances are we’ll just get more side- stepping semantics anyway, while the Fed bumbles along with its head where the sun don’t shine. After all, this is America, where politics trumps common sense and nothing serious will be done about the deficit before the next election.

But forget 2012. Think four more years down the road and it won’t matter who is running the show stateside because that is when the IMF predicts that China will ascend to top economic dog. That’s right, in five short years the Chinese will have succeeded in deposing the once great American economy in real terms of purchasing power parity (PPP).

PPP, which is a normalized measure of what people really earn and spend in an economy and cannot be manipulated as GDPs can be and it is not subject to the volatility of exchange rates. PPP is a very common and well accepted tool, so how did we get blindsided? Plain old arrogance.

The alarm first sounded forty years ago, when China made its first public moves to enter the global economic community. We were too caught up in the cold war to worry much about it, so our only reaction was a series of protectionist measures. When the Soviet Union fell we celebrated the victory of capitalism over communism, but China was taking the best from both systems.

Communism may not be humane, but properly applied it can be extremely efficient in such a huge emerging economy. For decades it was no secret that China was experiencing unprecedented growth but we refused to believe that they could overtake us. But only a decade ago their economy was just one third the size of ours, and today it is nearly three quarters. We’re on the final lap and we’ve run out of gas.

When China takes over we’ll face a much bigger problem than learning to play second fiddle. It will be a real game changer. China’s goal is global domination, pure and simple. We will all have to play by their rules and most markets are in for very dark times as they try to adapt.

The market for gold bullion, however, will still set the standard, just as it always has.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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