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The bailout package for Greece is $146 billion offered jointly by the
International Monetary Fund (IMF) and the European Union (EU). If the IMF is taking
half the responsibility for this loan package, it is on the hook for $73
billion.
The IMF's sale of 212 tonnes of gold in 2009
to India, Sri Lanka, and Mauritius netted $7.1 billion. So to raise all the
IMF's share of the Greek bailout package, the IMF would have to sell a
further 1,773 tonnes or 59 percent of IMF gold
reserves. If the IMF subsequently has to bail out Spain or Portugal, it would
then have no gold at all.
But this is just hypothetical because the IMF doesn't have 3,005 tonnes of gold to sell. It has only 168 tonnes, which is what remains from the 403 tonnes it declared it was selling in 2009. This gold is
what the IMF claims it earned through transactions it made after the Second
Amendment to its Articles in 1978. The IMF is authorized to sell only this
gold, and the IMF's Internet site shows that this is the only gold it
actually has.
GATA has long maintained that the IMF has little to no gold. It has
only pledges of gold that are part of the central bank gold reserves of IMF
member countries. This view is supported by the inability of the IMF in 2008
to tell GATA Secretary/Treasurer Chris Powell exactly where the IMF's gold is
stored and if it is audited. (See http://www.gata.org/node/6242.) Business Insider's
Vince Veneziani was also stonewalled when he
recently asked the IMF about the whereabouts of its gold. (See http://www.gata.org/node/8583.)
The IMF Internet site notes that the gold that had been pledged to the
IMF before the Second Amendment, approximately 2,800 tonnes
is subject to "restitution" to the IMF's founding members. (See http://www.imf.org/external/np/exr/facts/gold.htm.)
"Restitution. The Articles also provide for the restitution of
the gold the Fund held on the date of the Second Amendment (April 1978) to
those countries that were members of the Fund as of August 31, 1975.
Restitution would involve the sale of gold to this group of member countries
at the former official price of SDR [Special Drawing Rights] 35 per ounce,
with such sales made to those members who agree to buy it in proportion to
their quotas on the date of the Second Amendment. A decision to restitute
gold requires support from an 85 percent majority of the total voting power.
The Articles do not provide for the restitution of gold the Fund has acquired
after the date of the Second Amendment."
The former official price of SDR 35/oz equates today to about $68/oz.
So this means that however you look at it, the IMF has no gold. IMF member
countries pledged gold to the IMF and at any time they can buy it back for
$68/oz.
Yes, restitution of the gold requires an 85 percent majority vote at
the IMF, but would anyone vote against buying gold at $68/oz?
This means that there is no way that the 2,800 tonnes
of gold the IMF was pledged before the Second Amendment will ever be sold by
the IMF to anyone except the member countries that pledged it.
So how could anyone think that the original gold ever physically
changed geographic location?
The gold almost certainly has been left in IMF member central bank
vaults and double-counted, first as IMF member gold reserves and then as the
IMF's own gold reserves.
Is this just guesswork? Absolutely not. In February 2008 the IMF
approved gold sales guidelines that are explained at the IMF's Internet site:
"The IMF's Executive Board has reaffirmed the long-standing
principle that the Fund has a systemic responsibility to avoid causing
disruptions that would adversely affect gold holders and gold producers, as
well as the functioning of the gold market. To that end, in February 2008,
the Board endorsed the following guidelines to govern the envisaged gold
sales:
"(i)
Sales should be strictly limited to the amount of gold that the Fund has
acquired since the Second Amendment of the Articles of Agreement
(12,965,649 fine troy ounces or 403.3 metric tons, which represent one-eighth
of the Fund's total holdings)."[Emphasis added.]
So by its own executive board resolution the IMF cannot sell any gold
beyond the 403.3 tonnes it has already announced,
leaving the only possible method of disposal of the remaining 2,800 tonnes as a resale to the founding members at the
original Special Drawing Right price.
IMF gold is clearly just a ledger entry.
The 403 tonnes that the IMF obtained since
the Second Amendment probably is real gold and that explains why the IMF was
obliged to sell it: Because the Western central banks and their bullion bank
cartel allies are desperate for liquidity to keep their gold price
suppression scheme going. Once that 403 tonnes are
gone, there is no more gold available from the IMF. And the IMF's balance
sheet can be squared away with just $6.9 billion to cancel out those 2,800 tonnes of ledger-entry gold if at any point the IMF
wishes to do so.
It is comical that the IMF's gold sales were spun as a way to raise
money to set up an endowment fund that could be a better-performing asset
than gold itself, which generates no income stream. So what is in the
endowment fund that will perform better than 200 tonnes
of gold?
Greek bonds!
The IMF must have got investment advice from Gordon Brown on that one.
In a dispatch on May 4 GATA reported that the World Gold Council (WGC)
had discovered that the IMF sold 5.6 tonnes of gold
in February and 18.5 tonnes in March. This was
discovered by the WGC staff examining the monthly financial statements of the
IMF. This is astonishing news.
The IMF has always announced at least 500 times its vague
determinations that it might want to sell gold, and when it decided to
actually sell 403.3 tonnes this too was announced
many times, followed by an announcement of the approval to do so then,
followed by the announcements it had actually sold gold to India, Sri Lanka,
and Mauritius.
Suddenly in complete contrast the IMF now is apparently selling gold in
large amounts in total silence. This even appears to contravene the IMF
Executive Board's guidelines approved in February 2008, which state:
"(v) A strong governance and control framework, together with a
high degree of transparency, would be essential for gold sales conducted by
the Fund. A clear, transparent communications strategy, including regular
external reporting on sales, should be adopted, in order to assure markets
that the gold sales are being conducted in a responsible manner."
So why has the IMF not followed its own guidelines? Why is the IMF not
announcing these sales multiple times as before?
My interpretation is that such announcements now would require the IMF
to report to whom the gold has been sold. I believe that the bullion banks are
having trouble meeting surging demand for real metal. Some of this demand has
been stimulated by GATA's recent revelations about how the London Bullion
Market Association's OTC market operates on a fractional reserve basis, where
much more gold is sold than could possibly be delivered.
If this is the case, it is clear that the IMF would not announce who
received the gold, just as the Federal Reserve refuses to reveal which banks
received TARP money.
If my interpretation is correct, the IMF's sudden silence about the
disposal of its gold is another indication that a short squeeze of epic
proportions is fast approaching. This would fit with the extensive market
study made for GATA by Frank Veneroso in 2000 that
concluded that the Western central banks would deplete their gold available
for suppressing the market in seven to 10 years.
Adrian Douglas
Marketforceanalys.com
Adrian Douglas is proprietor of the Market Force
Analysis newsletter (www.marketforceanalysis.com) and a member of GATA's Board of
Directors.
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