Was the IMF Involved in Gold Price Manipulation?
After years of being called crackpots in tin -- or gold -- foil hats, GATA (the
US based Gold Anti-Trust Action Committee) seems to look saner by the day, next
to the thorough going loopiness of the financial establishment. The latest evidence
is an IMF report that shows how IMF rules wink -- if they do not actually blow
kisses -- at central banks which double count gold reserves they have actually
lent out for sale in the open market.
Apparently, being a central bank means never having to say you’re
Aha, says GATA, which has charged all along that the IMF along with the US
Federal Reserve and other government banks have done a financial two-step that
has kept down gold prices until recently. The shady rules suggest that when
they lent gold out for cash, the banks actually got to double their reserves
by counting the leased gold as an asset too. Which means they got to lend, or
sell, more gold than showed up on their books. That was pretty sweet both for
the lenders -- the central banks, who got a small return for their gold -- and
for the borrowers, the bullion banks that got to sell and reinvest the proceeds
for a higher return in what’s called a carry trade.
Of course, it’s dollar holders who’ve done the real carry trade
-- carrying water for the lucky sods at both ends of the deal by clutching the
ever diminishing paper that allows the lucrative game to go on at their expense.
Sort of as if you or I or the rest of the peons who supply the tax funds for
this financial musical chairs were to blow our money at Las Vegas and then write
our losses down as collateral when we asked for a loan at the local credit union.
Sounds good, huh?
Or as the IMF report admits delicately, IMF rules have encouraged “overstating
reserve assets because both the funds received from the gold swap and the gold
are included in reserve assets.” (1)
But except for a lone article in India, the mainstream media hasn’t exactly
fallen over itself with this news. (2) Could that have anything
to do with the Fed’s stated desire to bring the dollar down gently? Or
the recent appointment
to Treasury Secretary of Wall Street heavy weight Henry Paulson, CEO of
one of the leading bullion banks, Goldman Sachs? The idea seems to be to goose
the dollar up enough to prevent banks and dollar holders the world over from
dumping the two-timing greenback . . . and one way to do that is to goose down
This week spot gold, already pulling back from the 26-year high of $732 an
ounce it hit on May 11, slid below $620 to two-month lows. Sell-and-go-away
summer begins to look interesting. Stay tuned.
(1)“Treatment of Gold Swaps and Gold Deposits (Loans),”
Hidetoshi Takeda, April 2006. The paper appears to have been first presented
in the second week of May to an IMF reserve accounting committee with the findings
to be made public at the end of July.
(2)“Double counting of gold may have aided the price
suppression,” Sangita Shah, The Financial Express, June 7, 2006.
Lila Rajiva is a freelance writer in Baltimore, and the author
of the must-read book The
Language of Empire: Abu Ghraib and the US Media (Monthly Review Press, 2005)
She can be reached at: email@example.com.