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To: Rarebird who wrote (33851)	5/14/1999 1:54:00 AM
From: Alex	Respond to of 117321

Religious wars kill value of gold Gold is in a time warp. For the past 21 years, snubbed and disowned, it has had no formal role as money. Members of the International Monetary Fund are even forbidden from tying their own currencies to a gold standard. You would not know. A quarter of the entire world gold stock, worth about $320 billion, is still held as official reserves by central banks and the IMF itself. Even the brand new European Central Bank has 15 per cent of its initial reserves in gold. World finance ministers have been haggling heatedly over a proposal to sell up to $3 billion of IMF gold. Far bigger auctions of official gold were held in the 1970s. Yet the initiative, intended to finance modest symbolic aid to "heavily indebted poor countries" (HIPCs) had to be shelved until October. Meanwhile, Gordon Brown thirsts for action. So the Chancellor has upset the markets, sent the already flagging dollar value of gold back to a 20-year low and attracted multilateral flak by announcing unilaterally that the Treasury will auction most of the gold it holds in Bank of England's vaults. None of the proceeds are destined for the poor. Mr Brown says it is just sensible to swap gold reserves that earn little income and are hard to use in an emergency for dollars, euros and yen. It sounds like a routine, if questionable, exercise in treasury management. The sterling value of gold has in reality been more stable over the past 20 years than any other significant exchange rate, even if restricted trading makes it more volatile day to day. Such is the mystique of gold, however, that hardly anyone takes the Chancellor's move at face value. Critics accuse him of a cunning plot to pre-empt sterling's entry into the euro. It only holds up in the sense that the ECB would have to approve any changes in reserves after entry. So if he wants to sell, he had better not hang around. A better gripe is that the Treasury is acting incompetently if the motive is to maximise the value of reserves for the pound. He would surely have been advised, from experience, that you get far more by minting gold into sovereigns sold at a premium than by dumping it on the market. The millennium offers the ideal chance to market a heavier new series. Fans of the modernising Chancellor will be equally sure that he is making a deeply correct political statement rather than tidying the cellar. Gold has long been anathema to anyone brought up in a left of centre tradition. Folk memories still lurk of the 1920s, when Chancellor Churchill restored the gold standard at its prewar parity and British workers were "nailed on a cross of gold". By reverse alchemy, the yellow metal came to symbolise the power of the privileged classes. Economists were appalled that expansion of world trade and prices should depend on whether some gnarled prospector struck pay-dirt in the Australian outback. Postwar, it became doubly offensive for liberals that gold sustained alike apartheid South Africa and Stalinist Russia. Sadly, liberation from the cross of gold brought decades of inflation. It spawned a generation of gold bugs, inflation hawks who sought refuge in old certainties. They drove the price up from its 1960s fixed monetary value of $35 an ounce to its ludicrous 1979 peak of $700, before monetarists found new ways to keep prices stable. Attitudes to gold are relics of the era of ideology. At the IMF, gold is frozen in an old geopolitical impasse. The IMF originally aimed to manage fixed parities against the dollar, which was in turn convertible into gold at $35 an ounce. Gold was central to the postwar system because America said so. When inflation gradually forced the dollar off its gold standard in the early 1970s, all was reversed. Gold became the great enemy, to be dethroned, stripped of all official titles, locked up and left to rot.Both the US and the IMF sold vast quantities, the UK lesser sums. Germany, France and Switzerland clung to the old symbol of stability. In the ensuing trench warfare, new IMF rules forbade any official price for gold, yet IMF gold has been valued at a fixed-rate equivalent to the last official US price of about $42 an ounce. Arguments about selling IMF gold for the poor revolve round this blatant piece of false accounting, to which auditors solemnly put their names each year. If IMF gold was marked to market value, as proper accounting requires, world liquidity would be enhanced and the IMF would be able to help poor members far more effectively. If Gordon Brown wants to set a good example, that should be first among the reforms he rightly wants at the IMF. He should set religious wars aside and take a strictly practical view of gold's role. The World Gold Council claims that a quarter of HIPC's are already significant gold exporters and that the fall in the gold price since the UK Treasury announcement would cost southern African countries alone $200 million a year in lost revenue. Being able to dig up your own reserves is a matter of luck. It happens, however, that South Africa, Russia and China, perhaps the three most crucial countries for the spread of economic growth in the least developed regions of the globe, are all among the top gold producers. The ability to create collateral for loans and some solid backing for the rouble is vital to Russia's future. Common sense suggests that we should treat gold as a freely floating extra currency that central banks and the IMF should wish to be as stable and convertible as any other. That form of trade would help developing countries far more than the "aid" IMF gold sales are supposed to finance, let alone the Treasury's cruel spoiler. the-times.co.uk

To: Rarebird who wrote (33851)	5/14/1999 2:08:00 AM
From: PaulM	Respond to of 117321

Blanchard Comment on Rubin Proposal for IMF Gold Sale- May 1996 goldnewsletter.stockscape.com Here's two occasions (1996 and now) that the Clinton administration proposes IMF gold sales. Yet, it was less than a year ago when, in order to secure billions in additional IMF money (i.e., to use the taxpayer to bailout major financial institutions), Rubin took precisely the OPPOSITE position before Congress. That is: the IMF COULD NOT sell gold to raise the money, because it was too important to its creditworthiness and credibility. Nobody of consequence ever seems to notice these things. (Then again, maintaining a stock market bubble buys you alot of good will).