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Thread: Zero Hedge: Dollar to be Replaced with IMF's SDR as Reserve Currency?

  1. #1

    Zero Hedge: Dollar to be Replaced with IMF's SDR as Reserve Currency?

    Will The USD Be Replaced By The SDR Or The CNY As The Next Reserve Currency?


    Zero Hedge
    May 27, 2010


    SOURCE:
    http://www.zerohedge.com/article/wil...serve-currency
    ---


    Flashback:


    Confirmed: International Monetary Fund (IMF) set to be the World's Federal Reserve!
    The G20 Push to "Supersize" the IMF

    William F. Jasper | The New American
    06 March 2009


    SOURCE:
    http://www.ronpaulforums.com/showthread.php?t=182725



    Flashback 2:



    UN: International Monetary Fund presses for authority to become the Federal Reserve of the world. The plan is to tie all the world's fiat currencies together so that, when one country gets deeper in debt than the others, the IMF can rush money from frugal countries to the reckless ones. Yes, that will do it! Yahoo News 2010 Feb 26 (Cached)

    - G. Edward Griffin


    IMF wants new power to supervise global financial system

    AFP / Yahoo News
    Feb 26, 2010


    SOURCE:
    http://news.yahoo.com/s/afp/20100226...myimfsupervise
    ----

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  3. #2
    It's the bottom of the 9th folks. Hope you all have SHTF plans.

    Hope mine are sufficient.
    "The journalist is one who separates the wheat from the chaff, and then prints the chaff." - Adlai Stevenson

    “I tell you that virtue does not come from money: but from virtue comes money and all other good things to man, both to the individual and to the state.” - Socrates

  4. #3
    SDRs are basically dollars (44%) and Euros (34%). The Japanese Yen and British Pound both comprise 11% each. What would a country gain which wanted to get away from holding dollars and Euros go with SDRs?
    http://en.wikipedia.org/wiki/Special_Drawing_Rights
    Potential pitfalls as a reserve currency
    There are potential pitfalls of using the SDR as a reserve currency.

    The current SDR is a relatively small basket of currencies, this is both a strong point and weak point of the SDR.
    The US Dollar, Euro and UK Pound are contained in the SDR—these currencies have been losing value against a larger basket of secondary reserve currencies since the late 2000s recession started in 2007.
    The SDR does not contain the Chinese Yuan, Indian Rupee, Australian Dollar, Swiss Franc or Canadian Dollar, which are important benchmark or secondary global reserve currencies.
    The lack of global banking support for consumers (that is to say private persons and businesses) for the SDR.
    The possible loss of national sovereignty of the nations involved.[16][17]
    The potential harm of further centralization of power over monetary policy. See inflation.[16][17]
    Other important externalities that have been occasionally cited by economists, but where economic research relating to these externalities may not be readily available

    China & India's (Gold/Silver/Platinum/Palladium) Physical Reserves are not equivalent in size to those of the US with respect to SDR conversion.
    The Gulf States, that is to say the Petrodollar states, have (Gold/Silver/Platinum/Palladium) Reserves that are potentially undersized for the current recessionary conditions.
    Many other nations that could move over to the SDR have (Gold/Silver/Platinum/Palladium) Reserves that are too small for the size and importance of their economies.

  5. #4

    This isn't new.

    Many major investors including George Soros can be qouted saying the SDR will replace the USD. I mean we really have to seperate commercial banking and investment banking, protect the commercial legit debt, and let the waste go...we are screwed.

    The SDR is probably seen as a Plan B to Germany's push against Derivatives and the Euro in general. We had the chance with the SA 3884 Cantwell-McCain Amendment to the so called "FInancial Reform Bill". We could have joined with Germany against this speculative madness. Such measures found in that ammendment have to be applied immediately.

    So yea its the move being made to dodge the fight to restore Glass-Steagal. Germany is doing it, we had a chance and have some-what blown it but still have time. Obama sent Geithner over there to probably try and stiff arm Merkel for what shes doing.

  6. #5
    Quote Originally Posted by FrostyLeaf View Post
    Many major investors including George Soros can be qouted saying the SDR will replace the USD. I mean we really have to seperate commercial banking and investment banking, protect the commercial legit debt, and let the waste go...we are screwed.

    The SDR is probably seen as a Plan B to Germany's push against Derivatives and the Euro in general. We had the chance with the SA 3884 Cantwell-McCain Amendment to the so called "FInancial Reform Bill". We could have joined with Germany against this speculative madness. Such measures found in that ammendment have to be applied immediately.

    So yea its the move being made to dodge the fight to restore Glass-Steagal. Germany is doing it, we had a chance and have some-what blown it but still have time. Obama sent Geithner over there to probably try and stiff arm Merkel for what shes doing.
    I opened a thread trying to understand why Glass Steagal Act was important but nobody answer and the evidences are against restoring Glass Steagal Act. Maybe you can join and give your opinion: http://www.ronpaulforums.com/showthread.php?t=246747

  7. #6
    YouTube - Managing Market Volatility, SDR's or Gold?

    Jim Rickards at 1:50 in the video explains the OP back on May 5th on cnbc.
    "Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson to Edward Carrington, 1788.
    WWW.APPLESEEDINFO.ORG

    Appleseed Project - "Common folks teaching common folks to shoot uncommonly well"

  8. #7

    Economy Kept On Life Support While Global Governance Is Organized

    Nice overview with section on SDR's mid way down.

    http://neithercorp.us/npress/?p=268
    "Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens....Lenin was certainly right....The process (of inflation) engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."- John Maynard Keynes

  9. #8
    The only way the FRN's will become worthless in the U.S. is if people refuse to accept them. FRN's can't be too bad. The guy I bought my gold from took FRN's from me. He should have kept the gold, shouldn't he?
    "..and on Earth anguish of nations, not knowing the way out...while men become faint out of fear and expectation of the things coming upon the inhabited Earth." -- Jesus of Nazareth



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  11. #9
    Quote Originally Posted by YumYum View Post
    The only way the FRN's will become worthless in the U.S. is if people refuse to accept them. FRN's can't be too bad. The guy I bought my gold from took FRN's from me. He should have kept the gold, shouldn't he?
    No. My guess is that he smiled, took his profit and bought more gold.

  12. #10
    Quote Originally Posted by Travlyr View Post
    No. My guess is that he smiled, took his profit and bought more gold.

    Correct. It is our country's medium of exchange. Not gold. Since I bought my gold I have talked to it, played with it, took a bubble bath with it, tickled it, cried to it and told all my problems to it, shared a laugh with it...even watched movies with it. But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.
    "..and on Earth anguish of nations, not knowing the way out...while men become faint out of fear and expectation of the things coming upon the inhabited Earth." -- Jesus of Nazareth

  13. #11
    Quote Originally Posted by YumYum View Post
    Correct. It is our country's medium of exchange. Not gold. Since I bought my gold I have talked to it, played with it, took a bubble bath with it, tickled it, cried to it and told all my problems to it, shared a laugh with it...even watched movies with it. But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.
    And some people claim that gold does not have intrinsic value... sheesh.

  14. #12
    another flashback

    http://www.ronpaulforums.com/showthread.php?t=180514

    here is the link I posted still good read.

    http://news.goldseek.com/MillenniumW...1235315243.php

    I stand by my prediction.


    1.) US Banks are "officially nationalized."
    2.) The Fed sends trillions of greenbacks over seas to stabilize Europe in exchange for new Special Drawing Rights Bonds. This reinvigorates demand for SDR Bonds and the US begins monetizing debt exponentially.
    3.) The Euro collapses as debt is retired using USD flooding the markets with what appears to be a strong US currency.
    4.) As the fallout from the collapse of the Euro reverberates in China, Russia, and Japan, those and other nations begin to dump ALL their currency reserves into the IMF and convert to SDR Bonds.
    5.) As the currency trade completely unwinds, the demand for inflated dollars dries up and the value of the dollar plummets.
    6.) The IMF quickly realizes the disaster and calls in the SDR Bonds issued to the US and then the mighty American Power makes its last fail by pushing for SDR Bonds to become the new reserve currency, effectively creating
    7.) A one world currency.
    point 1 is about to happen with the new Fin Reg in the pipe. Tho we won't hear it called "nationalized". Instead, it will be "regulated".

    point 2 we already see our money getting shipped overseas now that some of the covers have been pulled back on the bailouts. Also the European debt death spiral has started.

    point 3 the Euro is in the process of collapsing and it appears as the Dollar is gaining strength

    point 4 China Russia and Japan are going to want chunks of SDRs or add to their chunks in the case of Japan also, add the more stable Eurozone countries namely Germany and possibly the other two BRICs Brazil and India

    point 5 currency trade is gyrating wildly now

    we are somewhere between point 4 and point 5 with some minor tweaks to the points.

  15. #13

    Exclamation

    Quote Originally Posted by YumYum View Post
    But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.
    there's this nasty little thing called "legal tender laws" that coerce her into accepting them

  16. #14
    Quote Originally Posted by hugolp View Post
    I opened a thread trying to understand why Glass Steagal Act was important but nobody answer and the evidences are against restoring Glass Steagal Act. Maybe you can join and give your opinion: http://www.ronpaulforums.com/showthread.php?t=246747
    http://www.ronpaulforums.com/showthr...06#post2724906

  17. #15
    Quote Originally Posted by YumYum View Post
    Correct. It is our country's medium of exchange. Not gold. Since I bought my gold I have talked to it, played with it, took a bubble bath with it, tickled it, cried to it and told all my problems to it, shared a laugh with it...even watched movies with it. But, the lady at the convenience store would only accept my worthless, dirty FRNs. Little does she know.
    I'll trade you $20 worth of food for a $20 gold piece right now if you want. Steak, lobster. No problem. Your coin is marked in dollars and so is the meat. Wanna deal?

  18. #16
    "US Dollar Alternatives" is on the upcoming Bilderberg agenda according to Daniel Estulin. See the thread with videos in Foreign Policy forum.

    The "panic" on the Euro over Greece is probably a test run to see what happens when a large currency is suddenly thrown under the bus. The destruction of the USD is the real prize.
    Been following it here: http://www.ronpaulforums.com/showthr...ht=destruction

    Quote Originally Posted by Zippyjuan View Post
    SDRs are basically dollars (44%) and Euros (34%). The Japanese Yen and British Pound both comprise 11% each. What would a country gain which wanted to get away from holding dollars and Euros go with SDRs?
    http://en.wikipedia.org/wiki/Special_Drawing_Rights
    A big thing I've learned is to just plain start thinking outside of the box. It's the box they keep you confined inside by defining everything for you, such as what an SDR is worth or comprised of, through some Wiki entry. The people in charge change the rules whenever they see fit (when it benefits them) so what's to prevent an SDR from being suddenly changed to be 1:1 with gold? Or silver? Or a mix of USD, yen, and gold? Or whatever the hell else they can dream up to benefit THEM. Think outside of the box zippy. You're allowing those people to set the limits of your thinking. ETA: The SDR was originally valued solely in gold. See? They can and will change the rules whenever it fits their long term goals.
    Last edited by devil21; 05-30-2010 at 06:43 AM.
    "Let it not be said that we did nothing."-Ron Paul

    "We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book



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  20. #17
    Quote Originally Posted by Zippyjuan View Post
    I'll trade you $20 worth of food for a $20 gold piece right now if you want. Steak, lobster. No problem. Your coin is marked in dollars and so is the meat. Wanna deal?
    I don't have $20 gold pieces. I own 24 ct gold.

    Besides, we were discussing the FRNs as a medium of exchange.

    As long as our current government remains in power, we are forced to use the FRNs as a medium of exchange.

    By the time the FRNs are useless and have no purchasing power, hoarding gold will be a Capital offense.
    "..and on Earth anguish of nations, not knowing the way out...while men become faint out of fear and expectation of the things coming upon the inhabited Earth." -- Jesus of Nazareth

  21. #18
    [QUOTE=devil21;2725758


    A big thing I've learned is to just plain start thinking outside of the box. It's the box they keep you confined inside by defining everything for you, such as what an SDR is worth or comprised of, through some Wiki entry. The people in charge change the rules whenever they see fit (when it benefits them) so what's to prevent an SDR from being suddenly changed to be 1:1 with gold? Or silver? Or a mix of USD, yen, and gold? Or whatever the hell else they can dream up to benefit THEM. Think outside of the box zippy. You're allowing those people to set the limits of your thinking. ETA: The SDR was originally valued solely in gold. See? They can and will change the rules whenever it fits their long term goals.[/QUOTE]

    Sorry. SDRs were not in gold. They were created to REPLACE gold and silver.
    http://www.imf.org/external/np/exr/facts/sdr.htm
    The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

    The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR, serves as the unit of account of the IMF and some other international organizations.
    There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.

  22. #19
    [QUOTE=devil21;2725758


    A big thing I've learned is to just plain start thinking outside of the box. It's the box they keep you confined inside by defining everything for you, such as what an SDR is worth or comprised of, through some Wiki entry. The people in charge change the rules whenever they see fit (when it benefits them) so what's to prevent an SDR from being suddenly changed to be 1:1 with gold? Or silver? Or a mix of USD, yen, and gold? Or whatever the hell else they can dream up to benefit THEM. Think outside of the box zippy. You're allowing those people to set the limits of your thinking. ETA: The SDR was originally valued solely in gold. See? They can and will change the rules whenever it fits their long term goals.[/QUOTE]

    Sorry. SDRs were not in gold. They were created to REPLACE gold and silver.
    http://www.imf.org/external/np/exr/facts/sdr.htm
    The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.However, only a few years later, the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime. In addition, the growth in international capital markets facilitated borrowing by creditworthy governments. Both of these developments lessened the need for SDRs.

    The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR, serves as the unit of account of the IMF and some other international organizations.
    It was defined as, but not backed by, an amount of gold which happended to be the same value as the dollar at the time. There was no gold in the "basket" of currency which made up the SDRs.
    The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system in 1973, however, the SDR was redefined as a basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF's website. It is calculated as the sum of specific amounts of the four currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day in the London market.
    There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.

  23. #20
    ^^^^
    Hmm, ok I stand corrected, assuming your link is accurate. I read the tidbit previously that the SDR was originally called "paper gold" and I could research deeper but who cares? Way to ignore the real point of my post and focus on minutae footnotes added later.
    (here's a Mises link on it:http://blog.mises.org/9761/imf-paper...gold-standard/)

    POINT:
    STOP LETTING OTHERS DEFINE THE BOUNDARIES OF YOUR THINKING! They change the rules whenever they want. They've done it many, many times during the current financial mess already. SDRs aren't immune.

    There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.
    Others have already thought well past your boundaries. The comments in the ZH article cover it pretty well. IMF bonds are the answer, some of which have already been floated. Pour in the USD, euros, etc and come out with IMF bonds. Money printing made quick and easy. This also assumes the $324B figure you quote is accurate. I tend to not believe "official figures" since they tend to be "lies".
    Last edited by devil21; 05-30-2010 at 01:15 PM.
    "Let it not be said that we did nothing."-Ron Paul

    "We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book

  24. #21
    Hmm, ok I stand corrected, assuming your link is accurate. I read the tidbit previously that the SDR was originally called "paper gold" and I could research deeper but who cares? Way to ignore the real point of my post and focus on minutae footnotes added later.
    (here's a Mises link on it:http://blog.mises.org/9761/imf-paper...gold-standard/)

    POINT:
    STOP LETTING OTHERS DEFINE THE BOUNDARIES OF YOUR THINKING! They change the rules whenever they want. They've done it many, many times during the current financial mess already. SDRs aren't immune.


    Quote:
    There are currently $324 billion worth of SDRs distributed among the IMF and many countries so there is not presently enough of it to act as a reserve currency.

    Others have already thought well past your boundaries. The comments in the ZH article cover it pretty well. IMF bonds are the answer, some of which have already been floated. Pour in the USD, euros, etc and come out with IMF bonds. Money printing made quick and easy. This also assumes the $324B figure you quote is accurate. I tend to not believe "official figures" since they tend to be "lies".
    My link is to the IMF so they probably would know about their own product I should think.

    And let me quote from the ZeroHedge article:
    •Although the Dollar will probably not be as dominant in 2020 as it is today, it is far from clear that it needs to be replaced by the SDR—or by anything else—as the main reserve currency.

    •For the SDR to be attractive to private users, it will need to include the CNY and possibly other BRIC currencies. However, this alone would not guarantee that the SDR would be more attractive to private investors.
    Do you have any alternative numbers for the quaitity of SDR's issued? I would be curious to look at them. Thank you.
    Last edited by Zippyjuan; 05-30-2010 at 01:26 PM.

  25. #22
    Quote Originally Posted by devil21 View Post
    POINT:
    STOP LETTING OTHERS DEFINE THE BOUNDARIES OF YOUR THINKING! They change the rules whenever they want. They've done it many, many times during the current financial mess already. SDRs aren't immune.
    Why would they make them redeemable for gold though? You said they'll do what benefits them, but how would accountability benefit them? If you've ever read a thing about the IMF, you know that they're in favor of deficit spending, of printing lots of paper - a gold backing would be in complete contrast to this. And besides, EVEN IF they were changed to a gold-backing, as you said, they could just change the rules. So, like the US under Nixon, they could just as well remove the gold backing again leaving all of us with worthless currency once again.

  26. #23
    Quote Originally Posted by Zippyjuan View Post
    My link is to the IMF so they probably would know about their own product I should think.

    And let me quote from the ZeroHedge article:
    Lots more comments than those two. The IMF knows their own product just like the Fed knows their product. Oh wait, they're basically one and the same, aren't they? You still continue to ignore the point that whatever you think you know today may very well be changed tomorrow. That includes the valuation of the SDR. They revalue currencies and change pegs all the time. Why do you assume the SDR will be the exception?

    Do you have any alternative numbers for the quaitity of SDR's issued? I would be curious to look at them. Thank you.
    Nope I don't. Feel free to trust whatever the Fed...err IMF tells you.


    Quote Originally Posted by LibertarianfromGermany View Post
    Why would they make them redeemable for gold though? You said they'll do what benefits them, but how would accountability benefit them? If you've ever read a thing about the IMF, you know that they're in favor of deficit spending, of printing lots of paper - a gold backing would be in complete contrast to this. And besides, EVEN IF they were changed to a gold-backing, as you said, they could just change the rules. So, like the US under Nixon, they could just as well remove the gold backing again leaving all of us with worthless currency once again.
    Please point out where I said they would make them redeemable for gold. I didn't. I was making the point that they could do whatever they want with the SDR, including changing the valuation to a 1 to 1 with gold (or anything else they can dream up). It's called a hypothetical example. Zippyjuan assumes that whatever the SDR currently is pegged to is what it will always be pegged to and therefore any discussion of SDRs replacing the USD is impossible due to that peg. They change the rules as they see fit and changing the SDR valuation is certainly within the realm of possibilities, particularly if a revaluation (whatever it may be) of the SDR is beneficial to the bankers pulling the strings.
    Last edited by devil21; 05-31-2010 at 04:18 AM.
    "Let it not be said that we did nothing."-Ron Paul

    "We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book

  27. #24
    Nope I don't. Feel free to trust whatever the Fed...err IMF tells you.
    I see. They are releasing false information but you have no idea that it is indeed false or what any correct information might be. Yet you know that you have the correct perspective on the situation. Hmm. Who to believe? It is a quandry.

    SDRs are revised every five years and the allocation may change. True. Let's suppose that they decide to include gold in their basket of currency and it becomes a world reserve currency- thinking outside the box. How much gold could they get their hands on? China alone has over two trillion in US dollar reserves and that is projected to double in a few years. Can the IMF come up with enough gold to replace that in the Chinese reserves? http://www.project-syndicate.org/com...goff61/English The money the IMF has (and any gold they would have) comes from member countries. Perhaps the US should give up all of our gold to the IMF so that the US dollar is no longer used as a global reserve currency? Get Europe to join us?
    http://en.wikipedia.org/wiki/Gold_re..._gold_holdings
    IMF gold holdings
    As of June 2009, the International Monetary Fund held 3,217 tonnes (103.4 million oz.) of gold,[3][4] which had been constant for several years. In Fall 2009, the IMF announced that it will sell one eighth of its holdings, a maximum of 12,965,649 fine troy ounces (403.3 tonnes) based on a new income model agreed upon in April 2008, and subsequently announced the sale of 200 tonnes to India,[5] 10 tonnes to Sri Lanka[6], and 2 tonnes to the Bank of Mauritius.[7] These gold sales were conducted in stages at prevailing market prices.

    The IMF maintains an internal book value of its gold that is far below market value. In 2000, this book value was SDR 35, or about US$47 per troy ounce.[8] An attempt to revalue the gold reserve to today's value has met resistance for different reasons. For example, Canada is against the idea of revaluing the reserve, as it may be a prelude to selling the gold on the open market and therefore depressing gold prices.[9]
    I know you do not like the IMF as a source about the IMF but here is some of what they say about gold: http://www.imf.org/external/np/exr/facts/gold.htm
    The IMF held 96.6 million ounces (3,005.3 metric tons) of gold at designated depositories at end January 2010. The IMF’s total gold holdings are valued on its balance sheet at SDR 4.4 billion (about $6.9 billion) on the basis of historical cost. As of February 1, 2010, the IMF's holdings amounted to $105.0 billion at current market prices.

    A portion of these holdings was acquired after the Second Amendment of the IMF's Articles of Agreement in April 1978. This portion, which amounted to 12.97 million ounces (403.3 metric tons) prior to the sales agreed in September 2009, is not subject to restitution to IMF member countries (see below), unlike gold the IMF acquired before 1978. In September 2009 the Executive Board authorized the sale of this post-Second Amendment gold, and at end January 2010, a total of 191.3 metric tons of this portion of gold remained on the Fund’s books.

    The IMF acquired the majority of its gold holdings prior to the Second Amendment through four main types of transactions.

    •First, when the IMF was founded in 1944 it was decided that 25 percent of initial quota subscriptions and subsequent quota increases were to be paid in gold. This represents the largest source of the IMF's gold.
    •Second, all payments of charges (interest on member countries' use of IMF credit) were normally made in gold.
    •Third, a member wishing to acquire the currency of another member could do so by selling gold to the IMF. The major use of this provision was sales of gold to the IMF by South Africa in 1970–71.
    •And finally, member countries could use gold to repay the IMF for credit previously extended.


    The IMF's legal framework for gold
    Role of gold. The Second Amendment to the Articles of Agreement in April 1978 fundamentally changed the role of gold in the international monetary system by eliminating the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right (SDR). It also abolished the official price of gold and ended the obligatory use of gold in transactions between the IMF and its member countries. It furthermore required that the IMF, when dealing in gold, avoid managing its price or establishing a fixed price.

    Transactions. Following the Second Amendment, the Articles of Agreement limit the use of gold in the IMF's operations and transactions. The IMF may sell gold outright on the basis of prevailing market prices, and may accept gold in the discharge of a member country's obligations (loan repayment) at an agreed price, based on market prices at the time of acceptance. Such transactions require Executive Board approval by an 85 percent majority of the total voting power. The IMF does not have the authority under its Articles to engage in any other gold transactions—such as loans, leases, swaps, or use of gold as collateral—nor does it have the authority to buy gold.

    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 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.
    Last edited by Zippyjuan; 05-31-2010 at 11:07 AM.



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