IMF Gold reserve is worth $92 billion...
By Adrian Ash
Will the US Congress approve a sale of IMF gold to help shore up IMF finances? Gold prices now sit at all-time record highs. Whereas the International Monetary Fund (IMF) finds itself short of $400 million per year.
Can you guess what comes next? "The IMF is rich if it wants to be," says Stephen Jen at Morgan Stanley, recommending IMF gold sales just before the idea was agreed by leaders of the world's top seven economies on Feb. 9th.
IMF gold – the third largest hoard after the US and German government gold reserves – is now worth around $92 billion, reports Reuters, tripling in value since the start of this decade.
And if you were spending $1 billion a year but only bringing in $600m, as the IMF is today, wouldn't you want to sell a little of your 3,217 tonnes in Gold Bullion?
IMF Gold Sales: A Flow of Income
It's the simple solution, agreed leaders of the G7 wealthy nations in Tokyo. But will IMF gold sales happen – and would it matter to the Gold Market anyway?
"The current Gold Price means a flow of income can be ensured," said the head of the IMF's steering committee, Italian finance minister Tommaso Padoa-Schioppa.
Meeting with his US, Japanese, German, British, French and Canadian colleagues for the last time at the end of last week (he has to stand down after losing his government post in Italy to the collapse of Romaro Prodi's administration), Padoa-Schioppa led discussion of "stability and growth in our economies", the fast-approaching US recession, stock market volatility, and the losses caused by reckless investments in US subprime mortgages – losses which German finance minister Peer Steinbrueck now reckons could total $450 billion.
And gold sales or not, the IMF certainly needs all the extra cash it can claw back right now, as well.
New managing director Dominique Strauss-Kahn wants to save $100 million per year by cutting 15% of his staff, mostly middle management according to The Economist. He'd like most of those 380 job-cuts to be voluntary – but it's actually the IMF which is starting to look redundant.
IMF Gold Sales: Why Now?
Founded at the end of World War II with donations of cash and gold from its member nations, the IMF works at "crisis prevention" – monitoring and hoping to avoid policy mistakes that could lead to big financial problems.
Using the $338 billion or so in cash that it holds (but never the gold, which exists as a ballast of "fundamental strength" in all official wealth reserves, as the IMF explains), the IMF also lends to countries facing balance of payments problems. This is where the IMF earns its keep, charging interest on these short-terms loans.
The IMF also makes loans to low-income countries implementing poverty reduction programs, currently helping 23 countries from Afghanistan to Sierra Leone. But more famously, the IMF offers advice and technical expertise to help developing economies stabilize their exchange rate and re-structure government finances to get out of crisis.
Since the Argentine crisis of 2001, however – blamed on the IMF's advised policies (and coincidental with the start of gold's bull market) – new IMF lending, the source of its income, has shrunk dramatically. The world's developing economies have simply developed too fast; they don't need so many hand-outs from the IMF.
Indeed, many former clients are now so busy piling up foreign exchange reserves from the United States, you have to wonder why the IMF doesn't ask for help instead. Or the US, for that matter.
The world's largest economy is now running a trade deficit worth 6.5% of its annual turnover (economists get nervous about any figure above 3%). The US government has run up $9 trillion in debt, and the US Dollar has dropped one-third of its value in the last five years to reach all-time record lows against the rest of the world's currencies.
By Adrian Ash
Will the US Congress approve a sale of IMF gold to help shore up IMF finances? Gold prices now sit at all-time record highs. Whereas the International Monetary Fund (IMF) finds itself short of $400 million per year.
Can you guess what comes next? "The IMF is rich if it wants to be," says Stephen Jen at Morgan Stanley, recommending IMF gold sales just before the idea was agreed by leaders of the world's top seven economies on Feb. 9th.
IMF gold – the third largest hoard after the US and German government gold reserves – is now worth around $92 billion, reports Reuters, tripling in value since the start of this decade.
And if you were spending $1 billion a year but only bringing in $600m, as the IMF is today, wouldn't you want to sell a little of your 3,217 tonnes in Gold Bullion?
IMF Gold Sales: A Flow of Income
It's the simple solution, agreed leaders of the G7 wealthy nations in Tokyo. But will IMF gold sales happen – and would it matter to the Gold Market anyway?
"The current Gold Price means a flow of income can be ensured," said the head of the IMF's steering committee, Italian finance minister Tommaso Padoa-Schioppa.
Meeting with his US, Japanese, German, British, French and Canadian colleagues for the last time at the end of last week (he has to stand down after losing his government post in Italy to the collapse of Romaro Prodi's administration), Padoa-Schioppa led discussion of "stability and growth in our economies", the fast-approaching US recession, stock market volatility, and the losses caused by reckless investments in US subprime mortgages – losses which German finance minister Peer Steinbrueck now reckons could total $450 billion.
And gold sales or not, the IMF certainly needs all the extra cash it can claw back right now, as well.
New managing director Dominique Strauss-Kahn wants to save $100 million per year by cutting 15% of his staff, mostly middle management according to The Economist. He'd like most of those 380 job-cuts to be voluntary – but it's actually the IMF which is starting to look redundant.
IMF Gold Sales: Why Now?
Founded at the end of World War II with donations of cash and gold from its member nations, the IMF works at "crisis prevention" – monitoring and hoping to avoid policy mistakes that could lead to big financial problems.
Using the $338 billion or so in cash that it holds (but never the gold, which exists as a ballast of "fundamental strength" in all official wealth reserves, as the IMF explains), the IMF also lends to countries facing balance of payments problems. This is where the IMF earns its keep, charging interest on these short-terms loans.
The IMF also makes loans to low-income countries implementing poverty reduction programs, currently helping 23 countries from Afghanistan to Sierra Leone. But more famously, the IMF offers advice and technical expertise to help developing economies stabilize their exchange rate and re-structure government finances to get out of crisis.
Since the Argentine crisis of 2001, however – blamed on the IMF's advised policies (and coincidental with the start of gold's bull market) – new IMF lending, the source of its income, has shrunk dramatically. The world's developing economies have simply developed too fast; they don't need so many hand-outs from the IMF.
Indeed, many former clients are now so busy piling up foreign exchange reserves from the United States, you have to wonder why the IMF doesn't ask for help instead. Or the US, for that matter.
The world's largest economy is now running a trade deficit worth 6.5% of its annual turnover (economists get nervous about any figure above 3%). The US government has run up $9 trillion in debt, and the US Dollar has dropped one-third of its value in the last five years to reach all-time record lows against the rest of the world's currencies.