By Grant Williams
November 25, 2014
“How could this have happened when everything was normal?”
– Joan Didion, The Year of Magical Thinking
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“I was walking along the road with two friends – the sun was setting – suddenly the sky turned blood red – I paused, feeling exhausted, and leaned on the fence – there was blood and tongues of fire above the blue-black fjord and the city – my friends walked on, and I stood there trembling with anxiety – and I sensed an infinite scream passing through nature.”
– Edvard Munch
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“ ‘What’s happened to me,’ he thought. It was no dream.”
– Franz Kafka, The Metamorphosis
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“Well, this is basically the end, so the answers should be in these next few pages. I doubt they will surprise you, but you never know. I don’t know how smart or thick you are. You could be Albert Einstein for all I know, or some literary prizewinner, or maybe you’re just middle of the road like me.”
– Markus Zusak, Underdog
“How could it happen, Grandad?”
The old man’s eyes misted over as he looked down at his grandson, who sat at his feet, his young eyes alive with questions as he turned the heavy gold bar over in his hands.
”I’ve told you the story too many times to count,” said the man, half-pleading, but knowing full-well he’d soon be deep into the umpteenth retelling of a story he’d lived through once in reality and a thousand times more through the eager questioning of the young man now tugging at his trouser leg.
“Why don’t I tell you the story of how I met your Grandma instead?”
“Because that’s boring.” The reply was borne of the honesty only a ten-year-old could possibly still possess.
“OK, OK,” said the old man, a smile creeping into the corners of his mouth, “you win.”
“It began in early November of 2014, when a man called Alasdair Macleod published a report on how the Chinese had been secretly buying gold for 30 years.
“Most people believed what the Chinese Central Bank had been telling the world — that they owned just 1,054 tonnes. That number, first published in 2009, had remained unchanged for over five years; but there was a group of people who refused to accept that the People’s Bank of China were telling the truth, and those people set about diligently doing their own analysis to try to determine what the real number might be.
“In early November of 2014, Macleod’s report — which went largely unnoticed because most people were busy celebrating new highs in the stock market and the fact that a newly strengthening dollar was forcing down the price of gold — laid out the case for there having been an astounding amount of gold bought by the Chinese over the previous three decades.
“According to Macleod, China saw an opportunity at a crucial time and, with a view on the longer term, they took it.”
Grandad dipped his thumb and forefinger into his vPad, which hovered just above the table, and pinched and cast a paragraph into the air before them. At the same time, they heard the voice of Alasdair Macleod himself read the words aloud:
(Alasdair Macleod): China first delegated the management of gold policy to the People’s Bank by regulations in 1983. This development was central to China’s emergence as a free-market economy following the post-Mao reforms in 1979/82. At that time the west was doing its best to suppress gold to enhance confidence in paper currencies, releasing large quantities of bullion for others to buy. This is why the timing is important: it was an opportunity for China, a one-billion population country in the throes of rapid economic modernisation, to diversify growing trade surpluses from the dollar.
“Macleod explained why what he was about to explain to the world was going to come as something of a surprise to most people.” Grandad dipped his fingers and cast again:
To my knowledge this subject has not been properly addressed by any private-sector analysts, which might explain why it is commonly thought that China’s gold policy is a more recent development, and why even industry specialists show so little understanding of the true position.
But in the thirty-one years since China’s gold regulations were enacted, global mine production has increased above-ground stocks from an estimated 92,000 tonnes to 163,000 tonnes today, or by 71,000 tonnes; and while the west was also reducing its stocks in a prolonged bear market all that gold was hoarded somewhere.
“But Grandad, why was the West selling its gold? That’s just stupid!” the young boy interjected, right on cue.
Again the old man smiled. Every time he told the story, his grandson would pepper him with the same questions, with a regularity that brought a familiar rhythm to this very private dance the two of them had performed so many times.
He paused, as he always did, to create just the right amount of dramatic tension before answering.
“I know it seems stupid NOW, but don’t forget, you know what you know. Back then, the people in charge in the West weren’t really all that smart; and, besides, when the Golden Domino finally fell, it became obvious that they had been...” — the old man paused, choosing his words carefully, almost theatrically; but when they came, they were the same carefully chosen words he used every time — “... a little less than honest about a few things.
“Now,” he continued with mock indignation, “if you’ll allow me to get back to the story...”
The boy smiled, and his grandfather pushed on.
“Macleod’s report concentrated on the period between 1983 and 2002, because in 2002 two important things happened: the Chinese people became free to own gold, and the Shanghai Gold Exchange was established. He wrote that the reason they allowed these two events to take place was that they’d already accumulated ‘enough gold’ for what he called ‘strategic and monetary purposes,’ and they were happy to keep adding to their stockpile from their domestic mine production and scrap, rather than buy more in the market...”
The old man held up a hand to head off the question he knew was coming — “I know, I know... you want to know how much the Chinese would have had to accumulate in order to be able to do this, don’t you? Well, Mr. Macleod told us, remember?” He reached once more into vPad space, waggled his fingers a bit, and cast the following:
(Alasdair Macleod) Between 1983 and 2002, mine production, scrap supplies, portfolio sales and central bank leasing absorbed by new Asian and Middle Eastern buyers probably exceeded 75,000 tonnes. It is easy to be blasé about such large amounts, but at today’s prices this is the equivalent of $3 trillion. The Arabs had surplus dollars and Asia was rapidly industrialising. Both camps were not much influenced by Western central bank propaganda aimed at side-lining gold in the new era of floating exchange rates, though Arab enthusiasm will have been diminished somewhat by the severe bear market as the 1980s progressed. The table and chart below summarise the likely distribution of this gold:
The old man clipped his last sentence short to allow his young audience to make the (quite grown-up, the man thought) point that he always did at this juncture:
“But Grandad, you can’t just say things like ‘probable’ and make assumings like that. We always get told at school that you have to show your workings-out.”
His grandfather let the grammatical error slide — one more time.
“Ah yes, but THAT was the problem, wasn’t it? Everybody wanted proof that numbers like Macleod’s were accurate, but NOBODY wanted proof that the official figures were true, and THAT turned out to be the key lesson that the world learned from this whole sorry debacle.”
“But Grandad, YOU didn’t get hurt, did you?”
The old man looked through the window and out at the snowflakes settling on the tall pines that surrounded the ski field not 40 yards from where he sat, and smiled.
“That’s true,” he said, “but only because I was willing to think for myself and allow for possibilities that most people wouldn’t believe for a moment could actually happen. It wasn’t easy, and it wasn’t fun for many years, believe me. Now, where was I?”
“You were at the part where Mr. Macleod explained where all that gold had gone and...”
“Might have gone,” the man interrupted. “Remember, back then we didn’t know for sure.”
He smiled again and went on with the story.
“Macleod’s work suggested that, while a huge amount of gold had gone flooding into the Middle East during the oil boom of the 1970s (much of it ending up in Switzerland, which, back then at least, was famous around the world as being a safe haven for financial assets), in the mid-’90s, after the gold price had languished for many years, sentiment had changed.”
(Alasdair Macleod): In the 1990s, a new generation of Swiss portfolio managers less committed to gold was advising clients, including those in the Middle East, to sell. At the same time, discouraged by gold’s bear market, a Western-educated generation of Arabs started to diversify into equities, infrastructure spending and other investment media. Gold stocks owned by Arab investors remain a well-kept secret to this day, but probably still represent the largest quantity of vaulted gold, given the scale of petro-dollar surpluses in the 1980s. However, because of the change in the Arabs’ financial culture, from the 1990s onwards the pace of their acquisition waned.
By elimination this leaves China as the only other significant buyer during that era. Given that Arab enthusiasm for gold diminished for over half the 1983-2002 period, the Chinese government being price-insensitive to a Western-generated bear market could have easily accumulated in excess of 20,000 tonnes by the end of 2002.
“Now, I know this is all back-of-the-envelope stuff — assumings, as you call them — but remember, back then, in 2014, none of the other stuff had been exposed.”
“But, Grandad, why were the Chinese buying all that gold? And why did the Westerns let them have it? I mean, it’s worth so much. Why didn’t they just keep it?”
This was always the old man’s favourite part, and he leaned forward in his seat as his enthusiasm for the story returned. With a twinkle in his eyes, he beckoned the boy closer.
(WSJ, Oct 13, 2014): Russia and China have opened a currency-swap line, paving the way for further trade and investment between the neighboring countries, Russia’s central bank said on Monday.
The Bank of Russia and the People’s Bank of China agreed to open a yuan-ruble swap line worth 150 billion yuan ($24.47 billion or 984 billion rubles) for three years. This will offer both countries access to each other’s currencies without the need to purchase them on the currency markets, Russia’s central bank said.
(WSJ, Jul 21, 2014): The Swiss National Bank and People’s Bank of China have agreed to set up a currency swap line designed to boost trade and investment between the two countries, joining a parade of countries hoping to become offshore hubs for trading the yuan.
The Swiss and Chinese central banks said Monday that the three-year agreement will allow them to buy and sell their currencies up to a limit of 150 billion yuan, also known as renminbi, or 21 billion Swiss francs ($23.4 billion).
(BBC, Oct 11, 2013): China and the ECB have signed a currency swap agreement worth 350bn yuan ($57bn; £36bn), state-owned Xinhua news agency has said.
Such agreements mean the central banks can exchange currencies and firms can settle trade in local currencies rather than in US dollars.
The deal is one of the largest for China as it looks to build a more international role for the yuan. It will last for three years and can be extended if both parties agree.
“Strategy,” he said, then, after a pause (and with what even he felt was a little more relish than usual) “... and STUPIDITY!
“The Chinese had become very rich during those years, but most of that wealth had come in the form of dollars...”
“What, US dollars?” the boy asked, incredulously. “But why would they ever have wanted lots of those?”
“Because,” the old man chuckled, “there was a time — long before you were born — when everybody wanted US dollars. I know that’s hard to believe NOW, but it was true. If I may...?”
“So-rry Gran-dad,” the boy answered rhythmically and with mock apology.
“Anyway, the Chinese were great students of history and knew that, over thousands of years, what used to be called ‘fiat currency’ had always ended up worthless; and so they planned for the day when that fate would befall the dollar. They began accumulating euros instead of dollars — not because the euro was better but because they didn’t want to own too much of any one currency.”
“Whatever happened to the euro, Grandad?” inquired the boy.
“One story at a time, little fella!” replied the old man. “Now, where was I? Oh yes, then, in the mid-2010s, China began signing all sorts of agreements with other countries, like Iran, Turkey, Russia...”
“And Switzerland!” the boy eagerly interjected.
“... and Switzerland,” his grandfather agreed.
“Those agreements enabled them to swap goods and services for currencies other than the US dollar — all so they could eventually break their ties to what they saw as a doomed currency. And all the while, quietly, in the background, they were swapping as much of that paper money as they could for...?”
“GOLD!!!” Right on cue the boy blurted out the answer, raising both hands in triumph.
“Gold,” the old man said, softly. “Remember what Mr. Macleod wrote?” He cast it up:
(Alasdair Macleod): Following Russia’s recovery from its 1998 financial crisis, China set about developing an Asian trading bloc in partnership with Russia as an eventual replacement for Western export markets, and in 2001 the Shanghai Cooperation Organisation was born. In the following year, her gold policy also changed radically, when Chinese citizens were allowed for the first time to buy gold and the Shanghai Gold Exchange was set up to satisfy anticipated demand.
The fact that China permitted its citizens to buy physical gold suggests that it had already acquired a satisfactory holding.
Since 2002, it will have continued to add to gold through mine and scrap supplies, which is confirmed by the apparent absence of Chinese-refined 1 kilo bars in the global vaulting system.
Furthermore China takes in gold doré from Asian and African mines, which it also refines and probably adds to government stockpiles.
Since 2002, the Chinese state has almost certainly acquired by these means a further 5,000 tonnes or more. Allowing the public to buy gold, as well as satisfying the public’s desire for owning it, also reduces the need for currency intervention to stop the renminbi rising. Therefore the Chinese state has probably accumulated between 20,000 and 30,000 tonnes since 1983, and has no need to acquire any more through market purchases, given her own refineries are supplying over 500 tonnes per annum.
“A man called Simon Hunt, who had extremely good connections in China and, more importantly perhaps, a willingness to entertain possibilities most people couldn’t, told a fascinating story once about a visit paid by a friend of his to an army base in China...”
(Simon Hunt, Nov 14, 2014): China is in the process of making the RMB acceptable as an international currency. It wants its trading partners and others to see the RMB as a stable currency that does not play the game of devaluation when difficulties arise. It is the long-game in which Beijing hopes that their currency not only becomes acceptable in financing trade but that central banks can feel secure in adding the RMB to their reserves, as some are now doing.
As we have discussed in earlier reports, China, not just the PBOC, holds far more gold than the market has been assuming, probably in the region of 30,000 tonnes, compared with the USA holding very little of its reported 8,300 tonnes.
Whilst in Japan we were told an interesting if not amusing story that supports this contention. A friend of ours has several factories in China and thus knows many senior people in different disciplines, one of which is a senior PLA officer. He was invited down to their HQ for drinks. After a few hours, his friend suggested they take a walk around the compound ending up at the entrance of a large warehouse. The door was opened and to my friend’s astonishment the warehouse was stacked from floor to ceiling with gold bars.
One day, when the timing suits Beijing best, the PBOC will link the RMB to gold. The West may dislike gold, or at least some of their central banks [do], preferring to operate with fiat currencies, but Eastern governments have a history of seeing gold as a store of value.
“NOW, of course, it seems that what Simon said should have been completely obvious; but all the way back in 2014, believe it or not, the idea that the Chinese would peg their currency to gold was something that most people here in the West just couldn’t even comprehend. I can’t even begin to tell you the number of times I talked to people about this stuff. For years it was obvious how things would end, but only a small group of people listened. Mostly, people just laughed and told me I was a fool. They said I should be buying shares and that a return to ANY kind of gold standard was a ridiculous idea. Do you know what I did?”
“Bought more gold?” The boy phrased it like a question even though he knew the answer. He just liked to let his grandfather have his moment.
“Bought more gold,” the old man said matter of factly. He threw up a chart they both knew well:
“But, but, you’ve jumped ahead, Grandad! The part where the Chinese link their currency to gold isn’t for ages yet. You skipped the bit about the Swiss gold! AND you left out the best part — the missing gold?”
“Sheesh!” the old man said in mock exasperation, “I’m coming to that part now! You are one impatient little fella, aren’t you?”
“But this is the best bit!” the boy replied excitedly.
“Well, if you’ll just stop interrupting...? Thank you! So... in November of 2014, the Swiss people had a referendum to decide whether the citizens of that once monetarily sound country wanted to take the first step towards returning to their historical position as a place where money actually meant something. Prior to the vote, some folks had warned of dirty tricks being used in the media to try to ensure the vote was a ‘No.’”
(Smaulgold): If Save Our Swiss Gold passes, the SNB would have to sell billions worth of Euro assets that they bought in recent years to support the 1.2 Swiss Franc to Euro peg in order to buy gold. Such an action would have a negative impact on the Euro.
As such … expect statements from central banks regarding the “danger” that Save Our Swiss Gold presents to the entire global monetary system... Expect the propaganda to be ratcheted up as November 30th approaches and to hear the terms “right-wing,” “far right” and “racist” bandied about in the mainstream media when discussing Save Our Swiss Gold, its sponsors and supporters... expect the SVP to be labelled “financial terrorists”...
“Well, this warning proved to be well-founded. This Reuters article (one of a number of such articles) ticked all the boxes...” The old man dipped again and again into v-space.
(Reuters): The “Save our Swiss gold” proposal, spearheaded by the right-wing Swiss People’s Party (SVP), aims to ban the central bank from offloading its reserves and oblige it to hold at least 20 percent of its assets in gold.... The SVP argues it would secure a stable Swiss franc....
The chairman of the SNB, which had already expressed its opposition to the proposal, said it would make it harder for the central bank to do its job.
“The initiative is not in Switzerland’s interest because it wants to fundamentally change the rules of our monetary policy,” Thomas Jordan was quoted as saying in Swiss newspaper Neue Zuercher Zeitung.
“It would be disastrous if Switzerland limited its own capabilities to react to disorder and maintain the stability of its currency.”The SNB also argues that Save our Swiss Gold could reduce the SNB’s annual profits that it distributes to Switzerland’s cantonal governments.
Fritz Zurbruegg, SNB board member warns “The higher the gold content, the smaller the income from interest or dividends,” he said.
“But some people,” the old man said, his voice taking on a defiant edge, “were having none of these arguments...”
(Smaulgold): This is a disingenuous argument, since the misguided goal of European banks is to reduce interest rates to zero or have them negative if possible, in order to boost inflation and economic growth. If the Save our Swiss Gold initiative were to pass, the loss in interest payments to the Swiss cantons would almost certainly be de minimus.
“Anyway, as the vote got closer, the dire ‘warnings’ from the establishment picked up steam — even though technically they weren’t supposed to be able to campaign. In a development that surprised nobody who followed the gold market closely and understood the various forces at work, the gold price fell like a stone from precisely the day the first poll — which showed significant support for the initiative — was published (after all, who would want to vote to hold more of something that was making headlines for falling in price?); and a few weeks later another poll was published that showed a suspiciously large swing from ‘Yes’ to ‘No’...”
(Marketwatch): Gold retreated on reports Wednesday that support for a Swiss referendum to require the country’s central bank to hold 20% of its reserves in gold bullions is losing momentum.
Only about 38% of those polled plan to vote for the Swiss gold measure, according to the Daily Mail, while Bloomberg reported that about 47% are likely to vote against it. The referendum, scheduled for Nov. 30, must secure more than 50% support to pass.
“Strangely, at the time, the comments sections of most online news sites in Switzerland were awash with pro-SGI sentiment. Anyway, that didn’t matter because the referendum passed with a clear majority, surprising the establishment and causing a massive tremor in gold and currency markets. It was that day which led indirectly to what they call the Golden Domino falling.”
“Tell me about the Golden Domino, Grandad!!”, said the boy, now unable to contain his excitement as his favourite part of the story approached.
“Well,” said the old man, relishing the tale and milking the tension for all it was worth (if dramatic tension were still possible in a story he’d told the young man so many times), “despite all the attempts to derail the Swiss gold vote, it passed; and the market had to react to the sudden realization that, not only was there now a buyer of 1,700 tonnes of gold in the market, but that same buyer had to defend an unlimited currency peg against the euro.
“The signs had been there in the run-up to the referendum, of course, but only a few people had been paying attention. People like Koos Jansen, who had been following the amount of gold leaving London, Hong Kong, and finally Switzerland for other countries. Koos saw the writing on the wall, and here’s his writing for you in the air...”
(Koos Jansen, Nov 20, 2014): From looking at rising SGE withdrawals and Indian import in recent months, we knew demand was increasing consistently and huge amounts of physical gold had to be supplied from somewhere. As I’ve written in a previous post, this type of gold demand can’t be met by mine supply and so the metal has to be sourced from countries that have large stockpiles, the usual suspects: the UK, Hong Kong and Switzerland.
In 2013 the UK was severely drained (net 1424 tonnes), last week we learned Hong Kong became a net exporter since August 2014, the latest trade data from Switzerland shows the Swiss net exported 100 tonnes of fine gold in October. 75 tonnes net to India and 45 tonnes net to China.
“Koos even told people that this couldn’t go on forever, but unfortunately very few people listened to him.”
Customs data of the usual suspects (Switzerland, the UK and Hong Kong) is getting exciting; they can’t net export gold forever. We know there are often shortages in these trading hubs, it’s only the price of gold that tells us otherwise. The Financial Times reported there are currently shortages in London, from November 14:
As one refiner told me: “Over the past four weeks my cost of hedging has risen by 30 per cent. Not only that, but there is not enough liquidity in the physical market in London to settle my obligations as they come due. I have to fly gold from Zürich to London, because there just is not enough gold on offer in London. You never used to have to do that.”
“Everybody focused on the fact that the Swiss would have to buy 1,700 tonnes of gold and tried to jump in front of the price, but nobody really worried about the repatriation of the Swiss gold — after all, it was only 312 tonnes — 104 held in Canada and 208 held at the Bank of England.”
“But Grandad...”
“Did you know I can read minds?” the old man asked mysteriously before the boy could finish his thought.
“No you can’t!” the boy exclaimed in the tone of a young child who’d heard similar outlandish claims from a grandparent one too many times.
“I can,” asserted his grandfather. “In fact, I know EXACTLY what you are thinking right NOW.”
The boy looked on, his wide eyes tinged with a favoured grandchild’s inherent skepticism.
“You are just about to say ‘But what about the German gold?’” said the old man casually, before settling back into his chair, enjoying the silence. It didn’t last long.
“No... I was... I was going to ask you about... something else,” the boy fumbled, “but you can tell me about that anyway. If you like.”
“Well the German Bundesbank, after getting just 5 of their 300 tonnes back from the Federal Reserve in 2013 and laying off their plans for repatriation, had a sudden change of heart. They decided they needed to get their hands on their gold as fast as they could. They knew the Swiss had no choice but to force repatriation, and they also knew that the more people they let in front of them in line, the smaller their chances were of ever getting their gold back.
“Nick Laird, the Australian Prime Minister, was an analyst back in those days who ran a website called Sharelynx. Like Koos, he was one of the few people paying close attention to what was going on. Nick published two charts right around the time of that Swiss referendum, showing that gold had once again begun to leave the Federal Reserve’s vault — something that had happened only twice in any size in the previous two decades: once right around the bursting of the NASDAQ bubble and the second time during what was then called the Great Recession, in 2008, but which we now know as...”
“The Great Head Fake!” Once more, the young man couldn’t help but interrupt, such was his excitement at the story as it unfolded
“The Great Head Fake, yes,” his grandfather patiently affirmed. “Nick’s charts showed that a few central bankers were maybe starting to get nervous and didn’t want to be the last ones looking for a chair — or in this case, their gold — when the music stopped.” He cast them up:
“Now, do you remember the difference between eligible gold and registered gold?” the old man asked his young charge, knowing the lad knew the answer but wanting to give him a chance to impress.
The boy sat bolt upright and recited, word for word, what he’d learned by rote at his grandfather’s knee: “Eligible gold is gold that meets exchange requirements but isn’t available for delivery, whilst registered gold is fully available to anybody who stands for delivery on the exchange,” he beamed.
“Bravo!” the old man said enthusiastically. “Well, on the COMEX the number of claims for every registered ounce had once again crept up to almost 60, whilst the mystery around why gold kept pouring out of one ETF as silver poured into another continued to baffle people. “Anyway, right before the Swiss referendum, the Dutch, of all people, dropped another bombshell when they announced that they had, without making a fuss or telling ANYBODY, brought home 122.5 tonnes of gold from New York to Amsterdam.”
DNB Adjusts Gold Reserves Allocation Policy
Press release, date November 21, 2014.
De Nederlandsche Bank has adjusted its allocation policy for its gold reserves. To achieve a more balanced distribution of gold over the various locations, DNB has shipped gold from the US to the Netherlands.
In the old situation 11% of the gold reserves were located in the Netherlands, 51% in the US, with the remainder in Canada (20%) and the UK (18%). The location distribution according to the revised policy is as follows: 31% in Amsterdam, 31% in New York, while the percentages for Ottawa and London with 20 and 18% remain unchanged.
This adjustment of DNB joins other central banks that store a larger share of their gold reserves in their own country. Next to a more balanced distribution of the gold reserves over the different locations, this can also contribute to more trust towards the public.
“So, some people refer to that as the Golden Domino, while others point to 2016 when the EU broke apart after British Prime Minister Nigel Farage withdrew the UK and it was discovered that Greece and Spain had both been cooking the books again. That’s when Italy demanded their gold be repatriated, which of course led to a whole bunch of other countries doing the same thing.”
“Which one do you think was the Golden Domino, Grandad?” the boy asked.
“Me? Well personally I think the day Deputy Fed Chairman Jon Hilsenrath went before the cameras and announced that the Fed was refusing to repatriate any more gold and would settle in cash instead was the real Golden Domino. Some people said there were literally hundreds of claims on the gold supposedly held in safe custody, but we won’t know for sure how many there actually were until 2075, when the findings of the Krugman Commission are unsealed. I’ll be long gone by then, but at least you’ll get to find out — I hope.
“Of course, it was hardly a surprise that, with the gold price rising like a rocket, the Western central banks banned people from holding gold and capped the price; but that just played into China’s hands; and when the PBoC announced that they did, in fact, own not 25,000 tonnes of gold, as Mr. Macleod had estimated, but 38,000 tonnes, and that they were going to back the yuan with it, it was game over.”
“Dinner time, you two,” called a soft voice from across the expanse of the great room.
“But Grandma, we’re just getting to the bit where Grandad swaps one of his gold bars for this house!” the boy protested.
“Well I’m sure Grandad can tell you the rest of the story once you’re in bed. Goodness knows it’s the best way I can think of to put anybody to sleep.”
The boy’s grandmother winked at him as she put three steaming plates of stew on the table.
With mock indignation, the boy carefully put the gold bar back on his grandfather’s desk and headed towards the dining room. Behind him, his grandfather looked out of the window at the Chinese flag fluttering over the large gatehouse down the hill and smiled to himself as he hauled his weary body out of his comfortable but weathered armchair.
“How did it happen?” he mused to himself as he rose. “How could it not?”
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