IMF GOLD = HOT AIR

How do you spell HOT AIR. Gold Bugs spell it IMF GOLD. Case in point, yesterdays blather from the US Treasury regarding "pending IMF Gold sales. Note that the Gold the IMF supposedly holds is "signatory Gold" contributed by member states upon it's inception...and thus it needs approval by 85% of the voting members to sell said Gold.

US to support IMF gold sales if linked to cost-cutting, reforms
WASHINGTON (Thomson Financial) - The US Treasury, in a significant policy shift, has decided it will support gold sales from the International Monetary Fund's reserves if they are part of a comprehensive package of reforms in the way the international financial organization operates.

'The IMF must reform to remain relevant,' Under Secretary for International Affairs David McCormick said in a speech in Washington today. 'The world economy is constantly changing, and the IMF must now change with it.'

In particular, the Bush administration wants major cost-cutting and a change in the IMF's mission, 'placing greater emphasis on surveillance and financial stability and less emphasis on lending.'

Mr. McCormick forgot to mention the dog collar the IMF would have to wear as the currency lapdog of the USA. Be careful what you wish for Dave, financial stability is nothing the USA can brag about right now.

In response to questions today, McCormick said the administration has done a 'fair amount of work' in getting congressional support for the change, but again stressed that Congress and the administration will want to see the IMF's plans for reform before the sales are approved. He also said he hopes this could be achieved while the Bush administration is still in office.

He "hopes this could be achieved while the Bush administration is still in office"? David, why not just come right out and say the IMF is barking up a tree? Congress can barely pass a spending bill these days for one, and the IMF is a broken institution. Reform the IMF in 8 weeks? Convince Congress to vote yes on anything President Bush backs? David, save the hot air for the balloons at Mr. Presidents going away party.

Now there is a flip side to this "story". What if the gold the IMF proposes to sell is actually theirs to sell? Julian D.W. Phillips in his essay below explains that possibility, and why the IMF Gold sale may be allowed to proceed "this time".

Why the I.M.F. Believes the 400 tonnes of Gold it Wants to Sell is its Own!

The first question that will be asked is just whose gold do they want to sell, after all the gold held by the I.M.F. belongs to each individual nation that contributed it, so how dare the administrative side of the I.M.F. propose selling its members gold and how dare some members of the I.M F. approve of the sale without getting the OK from other members?

The answer is quite simple. The I.M.F. does not believe that the gold they propose selling belongs to any member at all, but in fact, belongs to the I.M.F itself. Consequently, the only discussion surrounds the disposal of the I.M.F.’s own assets! How could the I.M.F. get its own gold?

The purchase of two members gold by the I.M.F.

Between December 1999 and April 2000, separate but closely linked transactions involving a total of 400 tonnes [12.9 million ounces] of gold were carried out between the I.M.F. and two members (Brazil and Mexico) that had financial obligations falling due to the I.M.F.

But this was not a sale into the open market, but an “internal sale”. In the first step, the I.M.F. sold gold to the members at the prevailing market price and the profits were placed in a special account and then invested for the benefit of the HIPC Initiative.

In the second step, the I.M.F. immediately accepted back, at the same market price, the same amount of gold from the member in settlement of that member's financial obligations falling due to the Fund. The net effect of these transactions was to leave the balance of the I.M.F.' holdings of physical gold unchanged. However, ownership of that gold moved from Brazil and Mexico to the I.M.F.

To emphasize the point and giving it relevance to the present proposals, this 400 tonnes of gold no longer belongs to Brazil or Mexico it now belongs to the I.M.F. itself!
This could change the attitude of the members of the I.M.F. as it has changed the attitude of the largest members, the G-7 countries, the Group of Seven rich nations [U.S. Japan, Germany, Britain, France, Italy and Canada] already.

This increases the chances of a sale this time, while not affecting any other member’s gold. To give you a little more background on the I.M.F. so as to make sense of this, a brief look at the I.M.F. and its business will help.
http://www.kitco.com/ind/AuthenticMoney/feb192008.html

All Gold Bugs should know that all previous sales of IMF Gold have proceeded major moves higher in the price of Gold. And should this meager sale of IMF Gold actually come to pass, it will only help in meeting the growing demand for the metal. For all we know, this sale will make up for the lost supply coming from South Africa this year due to the electricity crisis there. I'm certain the Chinese, the Russians, or the Saudis would jump at the chance to snap up this amount of Gold without pressuring spot prices higher. This IMF Gold sale, even the threat of it, is INSIGNIFICANT in the Big Picture. The only thing left to slow the rise in the price of Gold now is ignorance.