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  • IMF urged to sell gold to battle cash crunch

    A panel of financial statesmen advised the IMF to sell 400 tons of its gold reserves as part of a new strategy to avert a long-term crunch in its finances.

    But the International Monetary Fund should proceed with care in selling any gold to avoid destabilizing world markets, the panel members including former Federal Reserve chief Alan Greenspan recommended.

    The IMF has more than 3,200 metric tons of gold as part of its financial stockpile, but has fought shy of offloading any of it. The sale of 400 tons could raise 6.6 billion dollars at current market prices, the panel said.
    IMF chief Rodrigo Rato appointed the panel in May last year to come up with ideas to avert a cash crisis for the global lender, which has seen its operational income slump as debtor countries repay their Fund loans early.
    The committee was chaired by Andrew Crockett, former head of the Bank for International Settlements, and also included European Central Bank president Jean-Claude Trichet and People's Bank of China governor Zhou Xiaochuan.

    It said the IMF should also broaden its investment mandate, with a view to generating extra income of 45 million dollars a year on capital markets.
    And the IMF could invest part of the annual dues paid by its 185 members, yielding a potential 300 million dollars a year, the panel's report said.
    "If adopted, the measures would set the Fund's finances on a sustainable basis, and ensure a solid financial foundation for the Fund's important role in the international community," Crockett said.

    Rato welcomed the recommendations, which will be taken up for debate by the IMF's executive board.

    "The report represents a key milestone in our work and is an important step in developing an appropriate new income model," he said.

    Money from the gold sales should be put in an endowment fund, which could yield annual investment profits of 195 million dollars, the report by Crockett's panel said.

    "The committee emphasizes that these limited gold sales should be handled in a way to avoid causing disturbances to the functioning of the gold market and, accordingly, should be coordinated with current and future central bank gold agreements so as not to add to the volume of sales from official sources."

    The IMF's finances have become strained as more and more clients emerge from years of economic crisis, during which they became reliant on its bailouts, to stand on their own feet.

    The latest country to exit IMF supervision is Ecuador, whose new leftist government said this month it would pay back its 33-million-dollar debt early, so depriving the Fund of income from interest repayments.
    The IMF expects to post an operating shortfall of 105 million dollars in its current fiscal year through April, with 67 million of that linked to early repayments from Indonesia, Serbia and Uruguay.

    To plug an immediate shortfall, the IMF said last May it would transfer its reserves of 8.7 billion dollars into a new investment account to generate extra returns on the bond markets.

    But Rato noted at the time that the IMF needed to come up with long-term solutions to its funding problems.

    http://www.turkishpress.com/news.asp?id=161122

    Wowl, Sir Alan Greenspan the closet goldbug himself saying to unload the shiny yellow metal.
    "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
    - Charles Mackay

  • #2
    Re: IMF urged to sell gold to battle cash crunch

    So if the IMF can't find any suckers at today's interest rates, which way should we suppose interest rates go? Myself I'm more inclinded to borrow at lower rates, but those third world cesspools with CIA sponsored tinpot dictators might not know any better.
    "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
    - Charles Mackay

    Comment


    • #3
      Re: IMF urged to sell gold to battle cash crunch

      Originally posted by Tet
      Wowl, Sir Alan Greenspan the closet goldbug himself saying to unload the shiny yellow metal.
      Alan is so kind to want to protect the gold market like that... especially when the most likely buyers are either central banks or very wealthy big buyers just waiting for a place from whom they can buy large quantities at low transaction costs to increase their ownership. It's exactly what happened in the '70s, and in my opinion will not work even close to as well as it did then.

      "Central banks stand ready to lease gold in increasing quantities should the price rise."
      -- Alan Greenspan, testimony to Congress on July 24, 1998
      That was when gold was under $300...


      I think he and the IMF need to change their breakfast cereal. ;)

      http://www.NowAndTheFuture.com

      Comment


      • #4
        Re: IMF urged to sell gold to battle cash crunch

        Originally posted by bart
        Alan is so kind to want to protect the gold market like that... especially when the most likely buyers are either central banks or very wealthy big buyers just waiting for a place from whom they can buy large quantities at low transaction costs to increase their ownership. It's exactly what happened in the '70s, and in my opinion will not work even close to as well as it did then.


        That was when gold was under $300...


        I think he and the IMF need to change their breakfast cereal. ;)

        What was gold in 1945? $35 62-years later gold sits at $650 for a return of 4.7% per year. I would hope the big players and the Central Banksters have better portfolio managers than that. I would think 400 tons finds it's way into Chinese fake Rolex watches and Indian costume jewelry, those are the only countries I can think of that wouldn't mind getting rid of several billion d0llars of green pieces of paper.
        "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
        - Charles Mackay

        Comment


        • #5
          Re: IMF urged to sell gold to battle cash crunch

          google had volume of 12.4 million shares today, and closed a tad over $500. there's your worrisome $6billion in volume, which would buy 400 tons of gold. one stock, one day.

          Comment


          • #6
            Re: IMF urged to sell gold to battle cash crunch

            Originally posted by jk
            google had volume of 12.4 million shares today, and closed a tad over $500. there's your worrisome $6billion in volume, which would buy 400 tons of gold. one stock, one day.
            Looks to me like the shiny metal is going to have to compete with Google, Dell Computer and the new tech bubble tomorrow. I'm pretty sure between China and India they can pick up $6 billion in gold tomorrow and put it to some good use.
            "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
            - Charles Mackay

            Comment


            • #7
              Re: IMF urged to sell gold to battle cash crunch

              IMF would sell gold because European central banks won't anymore

              Submitted by cpowell on 06:50PM ET Wednesday, January 31, 2007. Section: Daily Dispatches
              By Michael Kosares
              Centennial Precious Metals, Denver
              http://www.usagold.com/
              Wednesday, January 31, 2007

              I don't think we are going to see any sale of gold by the International Monetary Fund. It looks like the Central Bank Gold Agreement's inability to reach the 500-tonne quota for the 2006 agreement year (only 350 tonnes were sold) left more of an impression than any of us realized.

              The IMF's Committee of Eminent Persons, which interestingly included the head of the Chinese central bank and former Fed Chairman Alan Greenspan, is saying essentially that the IMF "could" supply the shortage left if the Central Bank Gold Agreement can't meet the 500-tonne allotment in the future. This translates to market neutral because, theoretically, whether the IMF sold gold or not, no more than 500 tonnes would go on the market over the CBGA year.

              It seems that the gold banking system needs roughly 50 tonnes of gold liquidity each month to keep from locking up. There is a natural deposit attrition rate in the gold banking business. In the natural flow of things, individuals and entities request their gold deposits back, and somehow 50 tonnes seems to get the job done. That 50 tonnes has to come from somewhere, and lately the European Central Bank system has been stepping up when the liquidity gets tight -- as the gold supplier of last resort. It may that the European banks have signalled their intent to withdraw further from the CBGA allotments (maybe France is about to back out of sales?), and the IMF group is trying to fill the gap.

              And maybe more depositors might want their gold back, since many of them are stretched Third World banks and depositors from places like the Persian Gulf and fewer central banks are willing to part with their gold.

              At any rate, it's an odd assortment of "eminent persons" in this IMF group, and we should take note of its composition: Andrew Crockett, former director general of the Bank for International Settlements and currently president of JPMorgan Chase International; Mohamed A. El-Erian, president and CEO of Harvard Management Co.; Greenspan; Tito Mboweni, governor of the South African Reserve Bank; Guillermo Ortiz, governor of the Bank of Mexico; Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency; Jean-Claude Trichet, president of the European Central Bank; and Zhou Xiaochuan, governor of the People's Bank of China.

              You can always tell that Greenspan has had a hand in the festivities when you read sentences like the following: "The limited sale of fund gold should be ring-fenced to exclude further sales and subject to strong safeguards to limit their market impact."

              There is no doubt in my mind that China would like to see the IMF sell ALL its 3,217 tonnes of gold, particularly if China might become a primary recipient. Without any fanfare China would happily write the check for all 3,217 tonnes. Otherwise, I can't imagine why the Chinese central bank might have been included on this IMF committee, unless it was to demonstrate that the system is at least trying to get them some gold. Perhaps the Harvard Management Co. is thinking similarly (smile).

              To round this off, we should remember that the last time British Chancellor Gordon Brown tried to get his hands on the IMF's gold, he was stopped dead in his tracks by the U.S. Congress. This new attempt to shake loose the IMF's gold may be happening because the new Congress might be more amenable than the last.

              From the view of these "eminent persons," it's at least worth a try. But they may be in for some rough sledding. Key Democrats were opposed to the last IMF gold sale proposal because suppression of the gold price meant reducing the income of Third World gold-mining countries. That's probably why this IMF committee assiduously addressed the price-suppression concerns. We should remember that the United States holds virtual veto power over IMF actions. We'll see if Congress is more amenable this time around, but we have our doubts.

              Comment


              • #8
                Re: IMF urged to sell gold to battle cash crunch

                Originally posted by metalman
                IMF would sell gold because European central banks won't anymore


                There is no doubt in my mind that China would like to see the IMF sell ALL its 3,217 tonnes of gold, particularly if China might become a primary recipient. Without any fanfare China would happily write the check for all 3,217 tonnes. Otherwise, I can't imagine why the Chinese central bank might have been included on this IMF committee, unless it was to demonstrate that the system is at least trying to get them some gold. Perhaps the Harvard Management Co. is thinking similarly (smile).

                From the view of these "eminent persons," it's at least worth a try. But they may be in for some rough sledding. Key Democrats were opposed to the last IMF gold sale proposal because suppression of the gold price meant reducing the income of Third World gold-mining countries. That's probably why this IMF committee assiduously addressed the price-suppression concerns. We should remember that the United States holds virtual veto power over IMF actions. We'll see if Congress is more amenable this time around, but we have our doubts.
                Something to keep in mind here, China's Central Bank doesn't collect gold, China's industry does. Gold plated electronics, fake Rolex watches, military gear all use gold. China will purchase this gold for consumption, not to stick in the ground someplace. But yep, that's why the Chinese Central Banker was there. When you consider the Federal Reserve has approved everyone of our 535 representatives plus our VP and President, when the BIS tells you to do something, certainly conngress knows better than to get in the way.
                "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
                - Charles Mackay

                Comment


                • #9
                  Re: IMF urged to sell gold to battle cash crunch

                  Originally posted by Tet
                  Something to keep in mind here, China's Central Bank doesn't collect gold, China's industry does.
                  Do you have any links that show that?

                  The PBoC bought 12.7 million ounces in 1999, another 3.1 million in 2001 and another 3.2 million in 2002, and still show the entire quantity on their balance sheet.
                  http://www.NowAndTheFuture.com

                  Comment


                  • #10
                    Re: IMF urged to sell gold to battle cash crunch

                    Originally posted by bart
                    Do you have any links that show that?

                    The PBoC bought 12.7 million ounces in 1999, another 3.1 million in 2001 and another 3.2 million in 2002, and still show the entire quantity on their balance sheet.
                    By comparison to the over 100 million ounces that just the IMF holds that's not doing a very good job of collecting. China runs several economic systems, the government one is Chartalist and as such there is no need for gold. I'd be more interested in knowing who China purchased that gold from and what currency was used for the transaction. Probably came from South Africa and if so it wasn't a d0llar transaction.
                    "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
                    - Charles Mackay

                    Comment


                    • #11
                      Re: IMF urged to sell gold to battle cash crunch

                      Originally posted by Tet
                      By comparison to the over 100 million ounces that just the IMF holds that's not doing a very good job of collecting. China runs several economic systems, the government one is Chartalist and as such there is no need for gold. I'd be more interested in knowing who China purchased that gold from and what currency was used for the transaction. Probably came from South Africa and if so it wasn't a d0llar transaction.

                      They've only been at it for less than 7 years, the IMF used to have hundreds of millions of ounces and their trend is nothing but down since the '60s, that's only what the PBoC is admitting to, and the PBoC proxy folk are on record multiple times with interest in purchasing more gold.

                      Nothing that I've seen or heard of has any data on where is came from but it wouldn't surprise me if some of it came from the BoE.

                      I gather you don't have any links that show that China's Central Bank doesn't collect gold?
                      http://www.NowAndTheFuture.com

                      Comment


                      • #12
                        Re: IMF urged to sell gold to battle cash crunch

                        lately the European Central Bank system has been stepping up when the liquidity gets tight -- as the gold supplier of last resort.
                        bart, how does this phrase reconcile with your own work on the ecb and gold?

                        Comment


                        • #13
                          Re: IMF urged to sell gold to battle cash crunch

                          Originally posted by bart
                          They've only been at it for less than 7 years,
                          China is a 4K year old society, maybe they more than anyone understand the history of gold, silver and opium.
                          the IMF used to have hundreds of millions of ounces and their trend is nothing but down since the '60s, that's only what the PBoC is admitting to, and the PBoC proxy folk are on record multiple times with interest in purchasing more gold.
                          Gold has many uses, the best ones have nothing to do with money. Looks like the IMF is going to have 400 tons less gold pretty soon and as Sir Alan suggests that gold will not sell on the market but will be a private affair and the Chinese guy being there tells us who will privately buy it.

                          Nothing that I've seen or heard of has any data on where is came from but it wouldn't surprise me if some of it came from the BoE.
                          South Africa or Central Asia more than likely. China gets about 500K barrels a day of crude from Central Asia and Central Asia probably used the capital from the gold sale that they have plently of, to increase crude capacity. China has no need to protect their currency from the BoE, or Wall Street or George Soros so what purpose does gold serve except that's what the Austrians and the Ancap boyz would like you to believe.

                          I gather you don't have any links that show that China's Central Bank doesn't collect gold?
                          I gather you have absolutely no clue what a Chartalist System is and why there is no need for gold to run it. The only hype I've read for the last five years is how any day now China is going to convert their trillion d0llars of reserves to gold and the end result every year for the last five years is it never happens. Obviously your motitvation is you'd like to be holding a bag of gold that is worth more a year or ten years from now. Best of luck with that.
                          "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
                          - Charles Mackay

                          Comment


                          • #14
                            Re: IMF urged to sell gold to battle cash crunch

                            Originally posted by jk
                            bart, how does this phrase reconcile with your own work on the ecb and gold?
                            There's no conflict. Most of it seems to be paper gold ("receivables") though, and I also note that it seems that they're trying to defend the 500 Euro level... and will also lose on the longer term.
                            http://www.NowAndTheFuture.com

                            Comment


                            • #15
                              Re: IMF urged to sell gold to battle cash crunch

                              Originally posted by Tet
                              I gather you have absolutely no clue what a Chartalist System is and why there is no need for gold to run it. The only hype I've read for the last five years is how any day now China is going to convert their trillion d0llars of reserves to gold and the end result every year for the last five years is it never happens. Obviously your motitvation is you'd like to be holding a bag of gold that is worth more a year or ten years from now. Best of luck with that.
                              As I noted above, you seem to not have any links that show that China's Central Bank doesn't collect gold when they have 600 tonnes on their balance sheet, Adam Smith and Knapp and Minsky and legal tender issues etc. notwithstanding.
                              http://www.NowAndTheFuture.com

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