- Global Watch
I.M.F. - Gold sales or
Dec 4, 2006
We were surprised to hear that
the employees of the International Monetary Fund have actually
suggested sales of gold from their stocks to cover income shortfalls
they have. We are even more surprised to hear silence from the
Members of the International Monetary Fund. The calls they made
echoed the calls from the German government and the French government
to sell national gold for the same reasons, to shore up shortfalls
Of course in the case of the
I.M.F. the calls were made by people completely unqualified
to make the call, as the gold is the property of their individual
members and not the I.M.F. per se.
of the members is needed before such sales can take place to
the extent of 85% of the votes of the members including the U.S.
Hence they well know that there are virtually zero chances of
The IMF holds 3,217 tonnes
of gold [103.4million ounces of gold], valued at today's prices
at over U.S.$66 billion. The I.M.F. acquired its holdings from
member states through the original Articles of Agreement. [The
Articles were amended in 1978, eliminating the direct use of
gold in the exchange rate system]. The Articles of Agreement
require any gold transaction to have an 85% majority of total
voting power. The U.S. alone has 16.83% of the voting rights.
For the US to support a sale, Senate approval is necessary. They
have rejected any such call in the past and are more so likely
to do so now. Other countries are also known to be against any
sale. So these calls are likely to be ignored as ere the last
In the past the I.M.F. did
sell gold after the U.S. ceased to do so. The U.S. then supported
the call to sell. Since then the U.S. has not sold its own gold
or persuaded the I.M.F. to do so. The present I.M.F. attitude
to Gold is:
"It is an undervalued
asset held by the IMF, and provides a fundamental strength to
its balance sheet. Gold holdings provide the IMF with operational
maneuverability both as regards the use of its resources and
through adding credibility to its precautionary balances. In
these respects, the benefits of the I.M.F.' gold holdings are
passed on to the membership at large, to both creditors and debtors.
The IMF should continue to hold a relatively large amount of
gold among its assets, not only for prudential reasons, but also
to meet unforeseen contingencies. "
said that the function of the I.M.F. is to act as a central monetary
body. As part of this function it issued what it had hoped would
be the ultimate currency, the "Special Depository Receipt"
or S.D.R. against which, nations could issue their own currencies.
The I.M.F. would simply issue more S.D.R.'. But few nations fell
for this as it would be another paper currency, but under the
effective control of the U.S. That horse didn't run and the S.D.R.
is certainly not accepted as the globe's pivotal currency. But
we do expect the battle between government controlled paper currencies
and independent gold to continue, ad nauseum.
-Julian D.W. Phillips
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