IMF to sell its Gold (That tech that Janszen Bloke)

[Guest]

Re: IMF to sell some gold..

XXXXXXXXXXXXX

Moved down to end of thread.

[Guest]

Re: IMF to sell its Gold (That tech that Jansen Bloke)

Our information is that the IMF will talk about selling gold but not actually do it. This is consistent with central banks which have for years announced gold sales but have not followed through with sales.

Extracts from an article by Prof. Antal Fekete on the 'Paper Tiger' of Gold sales whom we call the "International Monetary Fund". (full article at Safehaven.com)
______________

Paper Tiger Preying on Gold Bugs - ( The IMF and Its Phantom Gold Sales ) - by Antal E. Fekete - February 29, 2008

The IMF as the linchpin of the fixed exchange rate regime

The International Monetary Fund (IMF) was set up in 1944 by the victorious allied powers at Bretton Woods, N.H. It was designed to serve as the linchpin of the post World War II international monetary system based on fixed exchange rates. It was well-understood that there could be no fixed exchange rate system without a gold anchor. Thus gold was retained as a bedrock, but multiple credit expansion was permitted, even encouraged. The U.S. dollar was to be treated as equivalent of gold. This meant that gold was double-counted in the system. ...

The system worked tolerably well for some 25 years. But it was flawed on the strength of double-counting the gold reserve. ... The bad penny (the dollar) drove the good penny (gold) out of circulation. Gold hoarding by governments and individuals snowballed. By 1968 the dollar was being dumped all over the world in anticipation of a dollar devaluation (the favorite bet was the doubling of the statutory price of gold from $35 to $70 per oz. which was supposed to pacify the market at the time.) ...

On August 15, 1971, in a surprise move President Nixon, instead of devaluing the dollar, defaulted on the obligation of the U.S. to pay its debt to foreign governments and central banks in gold at a fixed statutory rate of exchange. ... The dollar became vulnerable to open-ended debasement and depreciation. ... It released the genie of world-wide inflation from the bottle, never to be able to put it back. ... Like the wrecker's ball, swinging interest rates were to demolish productive capital. ...

Nixon was badly advised. [ BY ] His mentor Professor Milton Friedman, the high priest of monetarism, ... in a single-minded pursuit of his obsession with the Quantity Theory of Money. This theory teaches, falsely, that the value of the dollar can be maintained by a "quantity-rule" in the face of chicanery, default, and reneging on promises, by means of keeping the annual rate of increase in the stock of "high-powered money" at a moderate 3 percent. Apart from the fact that it may not be possible to fix the rate at 3 percent because of the tendency of debt- accumulation to accelerate under the regime of irredeemable currency, the idea that the value of dishonored promises can be maintained through the stratagem of restricting their quantity is preposterous. If it were true, poverty could be abolished by training the poor to ration lies.

Time has proved other theories of Friedman wrong, too. His theory of equilibrating the balance of trade through the floating exchange rate mechanism is utterly wrong. Friedman asserted that there is such a mechanism which works analogously to that of the gold standard. According to him, if the foreign exchange value of the dollar falls, that will automatically decrease imports to the U.S. as well as increase exports from the U.S., and the favorable balance of trade will soon stop the fall of the dollar. Alas, that's not what has happened. ...

The fact is that the value of dishonored promises cannot be artificially upheld by a "quantity rule". Predictably, the floating dollar turned out to be a sinking dollar, an insurmountable handicap on producers trying to compete in the world market. Their terms of trade is deteriorating while that of their competition is improving. Incredibly, mainstream economists and financial journalists still find it possible to treat the suggestion with respect that the weak dollar is a prop to the export industry, even after the devastation of America's export industry through the disastrous experiment with the falling dollar.

The IMF as the anti-gold war-horse in the Treasury's stable

In 1971 the question arose what to do with the IMF ...

Policymakers at the U.S. Treasury (which still controlled the world's largest hoard of gold ever assembled) were girding up their loins to keep the gold price in check. The demand for gold was increasing by leaps and bounds after the American default and there was a clear and distinct danger that the dollar would in short order go the way of the Assignat of 1790 France and the Reichsmark of 1923 Germany. Policymakers thought that it would be a shame to dissipate the IMF gold by returning it to members. The IMF gold could come handy in suppressing the price of gold. ...

The U.S. Treasury started dropping broad hints that the scrap metal at the IMF should be auctioned off without further ado. Soon it became clear that members did not have a stomach for the Treasury's plan. They argued that the IMF gold belonged to them and was not available, even for such a noble effort as to save the face of the dollar. ... Member countries agreed not to press their claim to ownership. Instead, they agreed to extending the life of the IMF under a modified Charter, against U.S. commitment to auction Treasury gold instead of IMF gold ... This was done to scare the wit out of gold bugs. ... Needless to say that this was an empty threat based on the idiotic notion that the price of gold could permanently fall below $35. The financial annals fail to show a single instance in which dishonored paper of a banker went to a premium, instead of a discount! ...

Apparently, the compromise is still in effect. Treasury-inspired hints are occasionally dropped about future IMF gold sales trying to placate the stirring gold market, but no actual sales are conducted. At one point the Clinton administration asked Congress to approve an IMF gold sale, but it was voted down. In vain was the proposed sale couched in the language of a grant to developing countries, an odd combination of banking and charity. The puerile idea that "barren" gold reserves ought to be replaced by "productive" interest-bearing dollar reserves has been floated from time-to-time, but did not fly, in view of a negative return to capital after inflation is taken into account. ...

The old Treasury war horse of looming IMF gold sales is trotted out from time to time more as a scare-tactic to threaten gold bugs than a serious proposal. [ However ] Apublic showdown with the membership over the ownership [ of their gold ] is to be avoided at all cost. The latest episode was the announcement in early February, 2008, that the IMF plans to sell gold from its reserves. ... It was not mentioned where the authority to sell would come from. These announcements are hardly credible. The established pattern shows that the IMF is maintained strictly as a paper tiger to prey on jittery gold bugs. ... As the gold price climbs, selling IMF gold becomes less and less appealing to members. It appears that the U.S. Treasury is again flogging a dead horse for its propaganda value. ...

Quite clearly, the only reason the expensive IMF apparatus is maintained is the dubious proposal that gold bugs can be kept in check forever with threatened periodic gold sales, even if these sales never materialize. It is hoped that after a decent period of time the threat can be repeated, will be believed, gold bugs will retreat and, above all, the gold hoard will remain intact and could be used again and again for intimidation purposes.
On the subject of Treasury gold sales, they seem to be blocked by the top brass of the U.S. military, who know something about the sinews of war. They are fully backed by remarks uttered by Alan Greenspan while he was still in charge at the Fed reminding the forgetful that Nazi Germany could secure war materiel from abroad only against payment in gold after fortune has forsaken its armies in the field. ...

The U.S. Treasury is at the end of the rope of its anti-gold crusade. It painted itself into a corner: whatever it does will help gold and hurt the dollar. Its only way to escape from the trap of its own making is to come clean and admit the foolishness of its gold policies for the past 35 years, and open the U.S. Mint to the unlimited and free coinage of gold and silver on customer account. It would be a coup that would forestall the challengers of the U.S. monetary hegemony, the Russians and the Chinese among others, provided that it was pulled off before they did it. In this way the U.S. could retain its monetary leadership in the world. ...

There does not seem to exist a grain of intelligence or wisdom in the Treasury how to meet the current financial and banking crisis, not even to the extent of keeping a contingency plan on file for the mobilization of Treasury and IMF gold in a reconstruction of the international monetary system ...

Friedman's floating exchange rate system has served the U.S. and the world badly. It's been an unmitigated disaster. A return to the regime of fixed exchange rates should be considered most seriously, in order to fend off the collapse of the international monetary and payments system. The idea is resisted by a reactionary alliance between the policymakers at the Treasury, the Fed, and mainstream economists in academia, as such a plan would put gold back right into the center of the universe. These reactionaries have vested interest to hang on to their usurped power, enriching themselves and their friends in the process at the expense of the public at large. ...

However, there is silver lining to the IMF gold saga. It does have some effect in slowing down the meteoric rise in the price of gold. In my opinion this effect is positive. A sudden death of the dollar is not desired by any serious observer, nor is it in the interest of the savers and producers of the world. A more controlled decline may spare many innocent people from utmost economic pain, and give a chance to latecomers to the gold party to gear up for the ultimate showdown.


Antal E. Fekete - Professor, Institute of Science & Applied Mathematics, Missoula, MT 59806, U.S.A.

[c1ue]

Re: IMF to sell its Gold (That tech that Jansen Bloke)

The International Monetary Fund (IMF) was set up in 1944 by the victorious allied powers at Bretton Woods, N.H. It was designed to serve as the linchpin of the post World War II international monetary system based on fixed exchange rates. It was well-understood that there could be no fixed exchange rate system without a gold anchor. Thus gold was retained as a bedrock, but multiple credit expansion was permitted, even encouraged. The U.S. dollar was to be treated as equivalent of gold. This meant that gold was double-counted in the system. ...

Again, the tin foil hat prof strikes.

The IMF was set up by the United States and Britain, and its purpose was the use of loans to further building up of industrial production in other nations. This is a clear historical record based on the voting power within the IMF: US with veto, Britain with theoretical veto. Furthermore Britain was loaned large sums of money by the United States right before the formation of the IMF (and World Bank).

The understanding stated above is complete BS. The US at the end of WWII had most of the world's gold reserves; the choice of gold as an anchor was simply to preserve the primacy of this position, nothing else.

Finally the double-counting of IMF reserves as US reserves did not occur until the 60's - well after the French and other nations started drawing down the US gold reserves after the Korean conflict and beginning of Kennedy/Great Society shenanigans.

This is all documented by Dr. Michael Hudson, and independently verified in my own research.

The system worked tolerably well for some 25 years. But it was flawed on the strength of double-counting the gold reserve. ... The bad penny (the dollar) drove the good penny (gold) out of circulation. Gold hoarding by governments and individuals snowballed. By 1968 the dollar was being dumped all over the world in anticipation of a dollar devaluation (the favorite bet was the doubling of the statutory price of gold from $35 to $70 per oz. which was supposed to pacify the market at the time.) ...

On August 15, 1971, in a surprise move President Nixon, instead of devaluing the dollar, defaulted on the obligation of the U.S. to pay its debt to foreign governments and central banks in gold at a fixed statutory rate of exchange. ... The dollar became vulnerable to open-ended debasement and depreciation. ... It released the genie of world-wide inflation from the bottle, never to be able to put it back. ... Like the wrecker's ball, swinging interest rates were to demolish productive capital. ...

As noted previously, the price of gold was spiking due to the drawdown on US gold reserves via the Bretton Woods arrangement. Specifically, that any nation with an excess of another BW signatory's currency, could exchange it for gold at a rate fixed by the BW arrangement. As the US had started running deficits starting with the Korean War and exacerbated by the above mentioned Kennedy/LBJ reigns, the latter part of LBJ and beginning of Nixon saw the US perilously close to violating its gold reserve margin requirements (another part of BW) - even with the double counting shenanigans.

Nixon's move was a surprise only to morons; the US simply did not have the gold to continue to stay in BW given the continuing deficits being run.

As for the dollar being the bad penny, this is only true in the sense of the dollar representing the economic policies behind it.

Yet another example of the mad prof using convenient facts to push his own Gold University agenda while omitting the truth.

[Guest]

Re: IMF to sell its Gold (That tech that Jansen Bloke)

C1ue -

You wrote:

<< The understanding stated above is complete BS. ... Nixon's move was a surprise only to morons; the US simply did not have the gold >>

Your objections to Mr. Fekete's admittedly perfunctory and brief description of the basis for Bretton Woods, and the IMF seem of the "nitpicking" variety here, in that none of his comments expressly take positions exclusive to what you wish to add in any substantive way.

You give the impression ("only to morons", and complete BS" ) of someone ascribing to themselves significantly sounder insights in the process, yet there seems to be no point you raise which clearly delegates Prof. Fekete's description of a "paper tiger" IMF in terms of gold sales, to the ranks of the "complete BS" you've described ?

I appreciate your input, and clarifications. To some extent I was aware of the finer points you raise. Perhaps this rescues me from the class of hapless morons you refer to.

You can certainly call me foolish for posting this as even remotely interesting, and have a banner day with whatever you can wring out of that, but it seems to me you'd need to go at it a little more concertedly to render Fekete a mere fool? Is it perhaps his slightly "over-enthusiastic" respect for gold in our present environment which strikes you as the mark of his ingenuity perhaps?

How about "giving it a rest" in my regard at least though, eh? All this reflexive pugnaciousness must be real tiring.

[EJ]

Re: IMF to sell its Gold (That tech that Jansen Bloke)

Nixon's move was a surprise only to morons; the US simply did not have the gold to continue to stay in BW given the continuing deficits being run.

Here is the famous speech that Nixon made August 15, 1971:

"We must protect the position of the American dollar as a pillar of monetary stability around the world." Apparently his idea of how to do that was to allow the trade-weighted value of the dollar to decline precipitously.

We all know what happened next. I remember what my father did. Here are a few gold coins that he purchased in 1972 for $79, still in their original holders.

At the peak gold price on $850 on Jan. 18, 1980 each of these coins was worth $425 in 1972 dollars for an 11x return over eight years.

That was, of course, the day to sell. The low price that year was $560 and the average was $675.

Gold bullion ownership was not technically "legal" for US citizens until 1975 when the gold price averaged $161 and these coins sold for approximately $200. In other words, Dad would have missed out on the first 2x.

Gold ownership became legal March 2007 in the country of Pridnestrovie, once part of the Soviet Union.

Gold ownership legal, retail sales by PMR banking sector

In Pridnestrovie, gold ownership has been fully legalized. The first local bank to offer gold is Pridnestrovie's Sberbank. The move is part of a series of sweeping reforms taking place in the new and emerging country.

TIRASPOL (Tiraspol Times - 03.04.2007) - Citizens of Pridnestrovie can now freely own and trade gold without restriction. Individual ownership of gold and silver bullion has been legalized in Pridnestrovie, also known alternately as Transnistria or Transdniestria. The first local bank to offer precious metals for investment purposes is Pridnestrovie's Sberbank, one of eight large private banks in the new and emerging country.

Sberbank's chairman Yuri Tverdokhlib says that this is the first time a bank in Pridnestrovie is offering gold and silver, and that the bank will allow customers to purchase precious metals on installment plans. Initially, Sberbank will be offering gold ingots ranging from 1 gram to 500 grams. Later in the year, if there is demand, gold bars of 1 kg will also be for sale.

" - We advice citizens to diversify, and put some of their assets in precious metals," says Yuri Tverdokhlib. He notes that gold, as well as silver, is currently in an upwards trend, with prices already having risen more than 30% in the past year.

The lifting of gold ownership restrictions is part of a series of reforms bringing Western-style economic freedom to the small and unrecognized country located in what was formerly a part of the Soviet Union. Because of gold's use as a reserve store of value, the possession of gold is sometimes restricted or banned. This is usually a feature of Communist countries, countries that are in war, or countries with low levels of individual economic freedom. Within the United States, the private possession of gold except as jewelry and coin collecting was banned between 1933 and 1975.

In the Soviet Union, gold ownership was taboo and ownership of gold or "valuta" (foreign currency) could - in the times of Stalin - be reason enough for death by firing squad.

The best line in the article: "Restrictions on gold ownership are "a feature of Communist countries, countries that are in war, or countries with low levels of individual economic freedom."

[GRG55]

Re: IMF to sell its Gold (That tech that Jansen Bloke)

Here is the famous speech that Nixon made August 15, 1971:

"We must protect the position of the American dollar as a pillar of monetary stability around the world." Apparently his idea of how to do that was to allow the trade-weighted value of the dollar to decline by more than 50%.




The best line in the article: "Restrictions on gold ownership are "a feature of Communist countries, countries that are in war, or countries with low levels of individual economic freedom."

Ya, well be thankful you can still legally pump your own gas.

Unless you live in Oregon...:rolleyes:

[c1ue]

Re: IMF to sell its Gold (That tech that Janszen Bloke)

You can certainly call me foolish for posting this as even remotely interesting, and have a banner day with whatever you can wring out of that, but it seems to me you'd need to go at it a little more concertedly to render Fekete a mere fool? Is it perhaps his slightly "over-enthusiastic" respect for gold in our present environment which strikes you as the mark of his ingenuity perhaps?

How about "giving it a rest" in my regard at least though, eh? All this reflexive pugnaciousness must be real tiring.

The best lie is one which uses part of the truth.

I have zero patience for those who seek to manipulate others into actions which benefit themselves - by lies and selective use of the truth.

Dr. Fekete, as a 'professor' of 'Gold University', fits all the criteria mentioned above. As someone supposedly knowledgeable, it is all the more unforgiveable for such theories to be backed up by half-truths and convenient omissions.

As such, I will not relax my 'pugnaciousness', nor will I succumb to either being either an acquiescing sheep or an apostle for a cause conveniently in line with previously held conviction.