PBOC & Yuan: Trust Gold, Not Central Bankers

This article was submitted by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

So the People’s Bank of China (PBOC) just weakened the yuan fix to the United States dollar by the most on record – 1.9%. A central bank has devalued its currency, you say? Well, duh! With apologies to GEICO, it’s what central banks do. Apparently with exports suffering and their economy struggling to grow, something had to give. Devaluing the yuan immediately gives its export sector a boost. The hope is that this boost offsets whatever capital outflows result from a now weakened currency.

The move recalls another recent currency devaluation on the other side of the world. This time last year, the Swiss National Bank still wholeheartedly protested that it would never let its currency fix of the franc to the euro revalue. It continued declare as much right up until the week that it dropped that very peg. Me thinks it doth protested too much.

Of course, immediately after its yuan announcement, the PBOC assured everyone (especially those at the International Monetary Fund considering the yuan for inclusion in the Special Drawing Rights basket of currencies) this was merely a “one-off adjustment.” Naturally, this was a bald-faced lie. “We’ll always maintain this peg.” “This was just a one-time thing.” “Of course we promise to maintain the value of the currency.” “You’ll always be able to exchange your Federal Reserve notes for gold.” Again, with apologies to GEICO: lying, it’s what central bankers do.

If there’s one lesson Americans need to learn about finance today, it’s that you cannot trust central bankers. They will say whatever needs to be said to keep the line moving and keep enriching themselves off of this fiat currency system. They do not care about your economic livelihood, though in many ways they have a certain amount of control over it.

One thing central banks can’t directly control is the price of gold, and it shot up noticeably after the PBOC’s announcement. Today, it is nearly 3% higher in US dollar terms than it was at the beginning of the week. But in Shanghai, gold shot up 5.6% in two days, which is the largest gain in 6 years, according to Bloomberg.

What does this mean for physical bullion investors? Already robust gold demand in China is likely to grow stronger as the Chinese move to protect their savings from a devaluing yuan. This could put even tighter constraints on the already limited physical bullion supply and lengthen wait times for shipments.

If you want to take action to protect yourself and your family financially, then opt out of this fiat currency deception. Exchange your paper currency for actual, real and trustworthy money: physical gold and silver. For this is the money they do not control and whose value they cannot simply “devalue” away.

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