Canada almost polished all gold reserves in March last year. The Bank of Canada explained that Canada's gold reserves belong to the Canadian government and are under the name of the Canadian Ministry of Finance, and the decision on the amount of gold reserves is controlled by the Canadian Finance Minister.

The country’s selling of gold reserves is within the “normal business” of its government, and the selling of gold reserves does not limit and focus on specific prices. The sale of Canadian gold reserves was not completed in a short period of time, but was carried out over a longer period of time, and the sell-off was done in a “controllable” state.

So why should Canada polish gold reserves? Can a country really have no gold reserves?

Conjecture 1: The gold standard is no longer gold is just a saleable asset

The sell-off of Canadian gold reserves is a step away from the long-term model of using gold as a government-holding asset. Ian Lee, an economist at the Stern School of Business at Carleton University in Canada, believes that Canada has no other reason to hold gold reserves in addition to continuing the “tradition”.

“Under the Brinton Forest system, the dollar is linked to gold. One ounce of gold equals $35. However, in 1971, the currency system collapsed and the dollar was no longer linked to gold.”

Lee said that under the Brinton Forest system, gold and the US dollar are freely convertible. However, under the current Jamaican system, gold is no longer considered a currency, but a precious metal, like silver, is a kind of Assets for sale.

As a result, the amount of gold held by the Canadian government has been cut since more than 1,000 tons in 1960. Most of these gold reserves were sold in 1985, while most of the rest were sold between 1990 and 2002.

Last year, the Canadian government's gold reserves fell to 3 tons, and the latest data shows that it has now fallen to half of its level. At the current conversion rate, 1.7 tons of gold is less than 100 million Canadian dollars, putting it on the Canadian financial scale is like a drop in the ocean.

According to Lee, soon after a while, Canadian gold reserves will become history. Lee also believes that Canada has better assets to pay attention to, and said that the Canadian government's decision to sell gold reserves is "smart".

Guess 2: Canada is not a "power" after all, nor does it want to be a "power"

Before analyzing the real reasons for Canada's polished gold reserves, we may wish to compare, in recent years, which countries are increasing their holdings of gold reserves and which are reducing their holdings?

Stephen Mihm, an associate professor of history at the University of Georgia, believes that holding a large amount of gold in a country may not be related to sound fiscal policy. The act of holding gold reflects the weight of a country's history.

“A country with a large amount of gold reserves usually has a history of global hegemony, imperialist powers or economic powers, or has this ambition.”

In 2012, two economists at the University of Santa Cruz, Joshua Aizenman and Kenta Inoue, studied some data in the paper and found that the amount of gold held in a country is related to the “global voice”, which is the history of the empire. Especially those who are/have been the key currency suppliers.

As the world's largest economy and the most versatile reserve currency issuer, the United States ranks first in the world in terms of gold reserves. But this model also applies to ancient times. For example, in the 17th century, it replaced the hegemonic position of Spain and became the Netherlands with the most powerful sea capital in Western Europe and the most developed capitalist economy. This small country with a population of only 17 million is the 10th largest gold reserve country in the world.

The Portuguese, which once expanded its territory from Brazil to Angola to Macau, has a population of only 11 million, but has a gold reserve of 382 tons. The world's top 20 gold reserves also include these well-known "powers": Germany, Italy, France, Russia, and the United Kingdom.

The trend is not only limited to Europe, but Japan, which proposed a large East Asian co-prosperity circle for the expansion of the 20th century, has the largest gold reserves in the world. In the second half of the 20th century, industrialization was rapidly carried out, and the Taiwanese region that created the "Taiwan miracle" ranked 14.

Similarly, European countries that have no ambitions in history have little interest in gold. For example, Finland's current gold reserves are located between Argentina and Bolivia, and Ireland is even lower, sandwiched between Latvia and Lithuania. These countries often seek to survive in the gap between big powers and have a history of being occupied by strong neighbors.

Of course, the top 20 gold reserve countries still have new members, such as China and India. As Aizenman and Inoue pointed out, it is no coincidence that the two countries have gone from "dragon emperor" to "protagonist" in accumulating gold reserves. China is home to 1,762 tons of gold, making it the world's sixth-largest gold reserve country; India is ranked 11th with a gold reserve of 557 tons.

According to their research, the accumulation of gold reserves in China and India is accompanied by the rapid rise of economic power between the two countries. In other words, there is an unwritten rule: if you want to become a heavyweight in the world, you need to "heavy" metal.

Go back to the question of Canada. Mihm believes that Canada has never been a hegemonic country and has no ambition to become such a country.

Conjecture 3: Doing a daydream of the North American Grand Alliance

The Canadian heart that has no intention of becoming a hegemonic country and polishing its gold reserves is too big. Another guess is that Canada is all preparing for the North American alliance.

The daily bell published a comment last year that she planned to support the establishment of the North American Union (NAU) if Hillary was elected president of the United States.

The North American Alliance is a theoretical North American economic alliance, and it is also possible to develop into three politically loose alliances of the United States, Canada, and Mexico. Its concept follows the European Union, and there is a rumor that a new currency called Amero or North Dollar will replace the current US dollar, Canadian dollar and Mexican peso in the future.

The daily bell is the topic of tracking NAU for many years. The article thinks that NAU is an elegy and coordinates the debate on the issue of “immigration”. In 2004, President Bush’s US immigration policy reform turned legal or illegal immigrants into permanent citizens and has already cast a “bomb” in the market. Bush said that his position was inspired by "warm conservatism." However, Daily Bell’s comments suggest that Bush has secretly placed NAU on the legislative agenda through a series of secret meetings with Mexico and Canada.

Although gold has been short-selled, as long as Canada is willing, there is still a large amount of gold that can be “backed up” for the Canadian dollar. Canada's domestic gold and silver resources are very rich, but the fate of the Canadian dollar seems to be more closely related to crude oil, which is not reasonable from a multi-faceted perspective.

In fact, when Canada polished all gold reserves in March last year, the Canadian dollar remained below 0.78 against the US dollar until the oil price rose in the short-term, and the Canadian dollar rose to a level of more than US$46.

At that time, the RMB had not been included in the SDR basket by the IMF, but the market widely expected that the RMB would be included in the SDR basket in October, and the World Bank had already begun issuing RMB bonds. All of this will eventually bear the weight of the dollar.

In order to make globalization work well, the world needs to be “balanced”. In order to prove the legitimacy of the monetary union, the single currency needs to be devalued. There is no doubt that NAU advocates/supporters consider a single currency, similar to the euro.

If the currencies of Canada, Mexico and the United States weaken and even depreciate in an orderly manner, especially in the absence of gold to “depend on”, the dream of creating a common currency will undoubtedly become more real, even if it may be just a more Comprehensive (comprehensive) dollar.

Previously, Mexico admitted that 96% of Mexico's gold reserves were stored in London (British central bank). As for whether it can be safely recovered, daily bell is skeptical, or that it believes that these gold has been loaned thousands of times. Judging from the peso exchange rate at the time, the Mexican currency was not supported by gold.

In 2016, the German central bank returned to the gold reserve speed significantly faster than the previous two years. The bank shipped back 111 tons of gold reserves from the United States New York Fed on the other side of the Atlantic, and returned to the gold reserve 105 from the French central bank in Paris. Ton. This also means that Germany is expected to complete the “recover gold” plan ahead of the year.

In the past four years, more than 1,500 tons of gold have moved out of the Bank of England's treasury. These gold are all hosted by the Bank of England for other central banks.

All in all, a currency without the “support” of gold may be the beginning of this “historical history”.

Helpless days are not as good as people. It wasn’t Hillary that won the US presidential election in November last year, but Trump, which was labeled “anti-globalization”. At the beginning of his term, Trump signed an executive order to restrict immigration and refugee entry in Muslim countries, saying that he would "build a wall" on the US-Mexico border, threatening to tax 20% of Mexican imports and amending the North American Free Trade Agreement (NAFTA). The preliminary draft.

After Trump took office, the US energy policy also showed a directional shift. The McGill International Review columnist Nick Chao believes that the United States now actively wants to be a major energy exporter, suggesting that the US and Saudi Arabian oil dollar agreements may end.

Guess 4: Canada does not panic about enjoying energy dividends

Canada is the second largest oil reserve country in the world and the largest source of US oil imports. However, 98% of Canada's crude oil reserves exist in the form of oil sands, which are unconventional oil and gas, and the mining cost is much higher than in the Middle East and Russia.

Energy is the economy. To understand this conjecture, we must mention the oil dollar system.

The golden age of US economic expansion was in the 1950s and 1960s, but this golden age collapsed with the economic turmoil of the 1970s. In the 1970s, the Bretton Woods system was difficult to maintain. Affected by the "Triffin dilemma", the trade deficit and fiscal deficit made it impossible for the United States to guarantee a fixed price relationship between the dollar and gold. On August 15, 1971, US President Nixon announced that the US government had terminated its obligation to exchange gold for the market at a price of $35 an ounce.

The decoupling of the dollar from gold has become the most important event in the international monetary and financial system after the end of World War II, which inevitably has a negative impact on the credibility of the dollar. In order to save the US dollar and protect the US's energy and financial security, the US government began to use international oil trade as a breakthrough to find solutions.

The diplomatic team headed by Henry Kissinger, then Secretary of State, first conducted a series of negotiations with the Saudi Arabian royal family and finally reached an agreement in 1974. The main contents of the agreement are: on the one hand, the United States sells military weapons to Saudi Arabia while safeguarding Saudi Arabia’s homeland security from Israeli infringement; on the other hand, in return, all Saudi Arabia’s oil exports must be denominated and settled in US dollars.

In other words, Saudi Arabia only accepts dollars when it exports oil to foreign countries. At the same time, Saudi Arabia used the dollar surplus from exporting oil to buy US government bonds. The agreement between the United States and Saudi Arabia initially laid the institutional foundation for the formation of the "oil-dollar cycle."

Because the establishment of the oil dollar system not only increased the international community's demand for the dollar, but also reshaped the dollar's credibility and its position in the international monetary and financial system after the collapse of the Bretton Woods system. In this sense, the "oil dollar system" can be seen as a follow-up to the Bretton Woods system and an alternative or supplement to the "golden dollar system." When the dollar is no longer linked to gold, oil replaces gold to a certain extent and becomes the credit endorsement of the dollar, helping to continue to ensure the core position of the dollar in the international monetary system.

Therefore, it is not so much that Reagan's economics in the 1980s contained the deterioration of the US economy, but rather it was purely out of luck. In the 1980s, large oil fields were developed, enabling the United States and Western countries to extend the growth period by 20 years.

Research firm Hills Group found that for purely thermodynamic reasons, the net energy of every barrel of oil that the oil industry provides to the global industrial world is rapidly approaching zero. What is talked about here is the energy costs of development, extraction and transportation, and the return on energy after arriving at the destination, not the dollar cost. Why is this important and how does it relate to the huge debt created by Western central banks since 2001?

The market may have forgotten energy as the economy. Everything modern, from industrial production and transportation to our lives, everything comes from energy. Oil is still a key factor. In the golden age before the 1970s, people experienced economic growth driven by an unprecedented 321% increase in per capita net energy. The Hills Group study can be summarized as the following chart:

But as St Angelo pointed out in SRSrocco Reports, the most important point in understanding the return on energy investment (EROI) is that the minimum EROI ratio in modern society is 20:1, that is, the net energy surplus required for GDP growth should be the cost of its extraction. 20 times. For developed countries with relatively high living standards, this proportion needs to be higher, close to 30:1. From the chart below, it is not difficult to see that the net energy output of the US oil and gas industry has fallen below 30:1 about 46 years ago.

The two important trends that appear in the above picture. When the net worth of US net energy output is higher than 30:1, that is, before the 1970s, the public debt of the United States did not increase significantly. However, after 1970, as net net energy output continued to decline, public debt experienced explosive growth.

In short, the question raised by the Hills Group's research is whether the reason for the explosive growth of government debt since 1970 is the lack of incentives for central bankers to compensate for the net energy surplus driving GDP growth. In fact, they have shifted from a tired energy-driven economic growth model to a new debt-driven growth model.

From a 1973 net surplus of nearly 40 gigajoules (GJ) to the peak level of 2012, large oil companies have consumed more energy in the oil processing process than the output of the global industrial world. Nowadays, the per capita net energy is less than 4GJ, and it is still falling rapidly.

Is this analysis by Hill's Group too simple to attribute the material prosperity of the early Western countries to the large-scale discovery of cheap oil, and the subsequent erratic growth to the net energy decline that can be used for GDP growth? Is the world economy because of the oil companies? Oil processing consumes more energy than it produces and is in trouble. This may be the case. This is a controversial point, but analysts have also found conclusive evidence in dollar terms that supports Hill's Group's inference.

What does the above picture mean? The three major US oil companies do not look so good – energy costs are economic costs. In 2016, the US Energy Department used 86% of its operating income to pay interest. The oil is not exhausted. The Hills Group did not say that oil was exhausted. The opposite is true. What they say is that the surplus energy produced by people is not enough to sustain energy-driven modernization. Its analysis report implies that our abundance is a one-off.

They also point out that this means that as modernization moves into a tougher energy-saving period, the dollar can buy less surplus energy, so that it is not enough to sustain growth engine operations, when global demand for oil will fall, oil prices It will also decline, which is very different from the expected increase in oil demand in the mainstream analysis. This is a vicious circle. If this view is correct, then an important balance will be tilted. Soon people may spend higher energy costs to maintain a modern economy that is over-reliant on fossil energy. In addition to controlling the entire Persian Gulf, Trump and European countries will be helpless. It may be too late to switch to renewable energy.

The true intention of Canada to short all gold reserves is only known to the authorities, and whether this is wise, we only leave the answer to time.