Just as the Iron Bank supplies gold to the Lannister’s to pay their debts (a Lannister always pays their debts), so too China is now offering gold as payment. If you are selling oil or other commodities to China and don’t want the Yuan as payment, you can exchange it for gold. Australian gold. This has seen the start of a new trading system, created to avoid having to use the US dollar. The story starts almost 10years ago and while the individual parts have been widely reported in the business media, I have yet to see someone identify Australia’s place in this new monetary system.
It all started just after the Global Financial Crisis (GFC). When the world found out that the Petro Dollar ruled and the Americans still called the shots using the IMF, World Bank, US currency and sanctions to influence countries around the world.
The GFC affected governments at all levels in many countries. They lost billions on the products sold to them as AAA rated. Many councils in Australia were affected. Some of the people that got hurt the most, came from a group of countries that like to be identify as the BRICS countries, Brazil, Russia, India, China and South Africa. Then with no action in the US taken, to hold the people in charge of the banks and finance companies accountable. It quickly became the aim of these countries to ditch the US Dollar and start trading in their own currencies.
To do this they have set up their own system, including an international bank which we (Australia) have joined. This bank allows two countries to trade in their own currencies and have the difference settled in gold. There are only a couple of countries that haven’t sign up, the USA being the largest. When the deal was announced at the end of 2017 between the Perth Mint and the Shanghai Gold Exchange to supply Australian gold to the exchange. This became the last piece of the new system, to be put into place and signaled the start of the new monetary system.
Shortly after this China made an announcement of its own. From now on it would only trade in its own currency the Yuan. But if you sold something to them and didn’t want the Chinese currency, then you can take it down to the Gold Exchange and swap it for gold, Australian gold. Not a piece of paper that says you own gold, but the physical bars that can be taken home. And just like that, in the same way as the Iron Bank supplies gold to Westeros, Australia and its gold mines now supply China the means to settle their debts to the world. This change is going to underpin the gold mining industry in Australia for decades to come.
To understand how far this has progressed you only have to look at the number of countries have that nationalised their gold mines. The Philippines took back their mines and then got a large Australian underground mining contracting company to run them. This points to why China has chosen Australia to supply its gold. We have a large professional work force that is sought after all around the world. I’m not talking about those with the degrees. It’s our Foremen, Shift Bosses and Jumbo operators that are sought after. The system of work they use are fast and safe, that are seen as world best practice. The Chinese know this and have recognized the stability our country offers, coupled with the larges deposits of gold and professional work force located around the country. We have been able to lift production to meet demand. This lift has pushed us to be the second largest gold producer in the world, with a total of 302tons last year.
With current world events only speeding up the change of systems, we need to understand how this change is going to affect us as a country. This means that there is going to be good long term jobs across the mining industry moving forward (no the robots aren’t going to take your underground mining job anytime soon). We as a country need to get over the idea that we are “just a quarry”, when this industry is so much more than that. There are great paying jobs to be had, that cover all parts of the population, all over the country. Now we are the Iron Bank and need to start acting the part.
Until next time
The Mining Coach