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Old 04-22-2012, 01:39 PM   #1
KMS
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Buying Chinese Renminbi (RMB)

I'm buying some Renminbi. This is why and how I plan on doing it.

We have been spectators of competing governments and their central banks. Everything we have been seeing and has happened tells me that the competition will not stop. The back and forth between central banks, and the debt of the west has me nervous, like most of you, about our respective fiat. Having such a worry of depreciation, I am trying to protect what I have, what I will have, and all the while, trying to profit from the situation.

When I lived in Germany in 2000-2002, the Euro was introduced there. I had been operating in a foreign country for over a year under their Deutsche Mark, and loved that if I took $100 out of the ATM that it would get me nearly double that in DM for hitting the town, depending on the exchange that day of course.

Mind you, I was pretty naive about a lot of things @ 21 years old, and I still have a lot to learn. But what I did learn, is that when the Euro was introduced, that DM2:$1 went away, and now it was €1:$1. Furthermore, after a few years, I saw that the freaking Euro was hitting €1:$1.5. Yes I know that was a peak, but the Euro has more or less averaged a €1:$1.177965.

Regardless, after becoming more sophisticated and wiser in my years, I knew I had missed an opportunity when I had been there on the birth of the Euro. Had I invested some fiat USD and just let it alone in a EU bank, I would have gotten some free fiat out of the deal.

My opinion is that I can do the same with the Chinese yuan, or Renminbi (RMB) today. Currently I can get ¥6.3:$1. The IMF released a report last year that predicts China will take the position of the worlds largest economy by 2016. Read the rest of the article here, Seeking Alpha.

Jim Rogers states that he buys CNY/RMB whenever he gets a chance, or sees some for sale. He doesn't only expect China and the rest of the East to take the world economy title, he's betting on it, and advising on it.

Jim Rickards' book Currency Wars was a good book and if you haven't read it yet I encourage you to borrow one or buy one and do so. He earned my money and respect. He continues to do lectures and interviews, and is also highly active with his twitter account. Even though I don't do twitter, I have read some of his tweets. He has a two part interview that is very recent, I forget where I saw it. I think Silver Doctors has it posted. I recommend it. His position is that we are currently engaged in a Currency War against the East and that the East can win. The US-Chinese currency war is more or less just getting started, and that the US fired the first shot. China has been sounding the call to replace the USD as the world reserve currency and is winning more and more support with their neighbors, other BRIC countries, and even with the IMF through capital injections/donations. China was our biggest debt/credit supporter. What happens to our dollars if China refuses to buy our debt and continues to sell their Treasuries? I think you all know the answer.

The Seeking Alpha article that I found is a year old, but the opportunity is not lost. In a month I have a trip to New Jersey and I will be spending part of my trip in NY to pay a visit to the Bank of China there. My woman has requested that I go to the Chinatown branch because there is a faux purse seller nearby that sells some really nice knock offs. She even used the ATM at that bank on her last trip. Crazy coincidences, but hey, at least I'll have an idea of where to get lunch too, thanks to her.

The account must be opened in person, and there are minimums, but nothing me or my fellow PM Bugger's couldn't handle I'm pretty sure. Here is a FAQ about opening a RMB denominated account with them. RMB FAQ

I expect the East to continue to hoard PM's and continue to try and open a PAGE type of exchange as we have heard about. If the Chinese and the US continue to play leap frog on a race to the bottom, my bet is on the CNY coming closer to 1:1, even if never fully realized, at least it will gain. Further more, who, given the current propaganda we see every day, would you expect is more likely to try and initiate a currency with a gold or silver or PM basket backing to it?
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But both are the refuge of political and economic opportunists.”
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Old 04-22-2012, 03:01 PM   #2
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I already have been holding a small CNY account (the official code for RMB is CNY: http://en.wikipedia.org/wiki/Renminbi ) since early 2009 (when the FED announced QE1). Back then banks only offered CNY accounts registered at their Hong Kong branches. Looks like it's a lot easier now to open an account.
My CNY account is only ~ 2% of my pm holdings (including mining shares and derivatives).
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Old 04-22-2012, 05:43 PM   #3
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A well diversified portfolio.... blah blah blah...

There is something about travelling to foreign lands and experiencing the currency trade physically that really drives home the lesson about the currency devaluations / wars. Props to you KMS for having the guts to act when you see a window of opportunity.
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