Wikileaks - 'Be vigilant when considering restoring the gold standard system'

US embassy cable - 08BEIJING4432
MEDIA REACTION: FINANCIAL CRISIS
Identifier: 08BEIJING4432
Origin: Embassy Beijing
Created: 2008-12-04 09:54:00
Classification: UNCLASSIFIED

FINANCIAL CRISIS

"Be vigilant when considering restoring the gold standard system"

The official Communist Party People's Daily (Renmin Ribao) (12/03):

"Recent Western opinion has advocated a new Bretton Woods system with the U.S. dollar as the core and restoration of the 'gold standard' to solve the financial crisis. The appearance of such thought is not accidental. There is a great deal of background. The American financial crisis has caused the loss of the U.S. dollar's credit. Therefore, American financial strategists seek to use the gold standard system to maintain the global financial system led by the U.S.

The reason that the U.S. and Europe choose to use gold standard is the fact that the most of gold reservation in the world is in their control. The restored gold standard system will not be the original gold standard system, but instead a 'partial reserve system' partially based on gold.

Therefore, rapid economic growth will be relatively limited in the area of currency supply. The possible consequences would be: first, due to the economic growth of the U.S. and Europe is low, the partial reserve system can satisfy their currency supply and will not form serious restriction on their economy, but will greatly restrict China, India and other developing countries. Second, developing countries have to spend lots of foreign reserve to purchase gold. This decision betrays the common wish of the international society to substantially reform the international financial system."