Why are the gold policies of the developing world fundamentally different compared to the gold policies of the West?
Chris Berry: Well, let’s take China. I mentioned earlier that as recently as the 1930s, China was on a silver standard. The idea of sound money is not a foreign one to the Chinese. China of course has $ 2.5 to 3 trillion of foreign reserves that consists predominantly of paper fiat currencies.
The Chinese obviously realize this and that’s why they are diversifying out of dollars and Euros and into hard assets such as gold. Just as an example, in the year 2000 China was responsible for 6 percent of global gold bullion demand. Ten years later, in 2010, they were responsible for 18 percent, and that will increase allegedly again in 2011.
Another example is India, which is the largest importer of gold bullion in the world. Last year they imported 958 tons. This year they will import more than 1000 tons. China and India have to support their populations with sound money. Paper currencies will not rule the day – they never have.
Additionally, take a look at the recent actions of the Central Bank of Kazakhstan that has exercised what is known as “priority right.” That gives the central bank the right to buy all domestic gold production starting on January 1st, 2012.
One final example is Mexico. In January of 2011 they imported 7.3 tons of gold, in July of 2011 they imported 100 tons – it increased in seven months by more than a factor of ten. These are just two relatively obscure central banks in the developing world that are running towards gold because they seem to have realized the folly of fiat currencies.