IMF Confirms Plan to Sell 403 Tonnes Gold
By - February 13, 2009

The International Monetary Fund said it does not intend to alter plans to sell just over 400 tonnes of gold to fund changes to its financing base, an IMF spokeswoman said on Wednesday. A recent surge in IMF lending to countries facing balance of payments crises related to the global economic slowdown and financial turmoil has led analysts to question whether the Washington-based institution will proceed with the plan. But a spokeswoman for the IMF — the third largest official holder of gold — said the sale would still go ahead. "There are no plans to change the proposal for a new income model," she said. "The package of IMF governance reforms, including gold sales, was submitted to the U.S. Congress last November, but will need to be reintroduced as a formality," the IMF spokeswoman said. – Reuters

Dominant Social Theme: Grave steps must be taken to salvage global financial institutions.

Free-Market Analysis: This story is a bit odd in that it is a news story about news that is not happening. The IMF is still going to sell gold. "There are no plans to change." So what is the big deal? Why does it warrant a story?

Are the money masters again trying to talk down the price of gold? With gold at US$940 and headed even higher sooner or later (maybe sooner) the monetary elite could be revving the propaganda war. Gold up too far and too fast – not good! The trouble with a rising price of gold, after all, is that it is looked on as a barometer of the health of fiat money worldwide. That's why when monetary authorities announce a new plan these days, the reaction of the bigger stock markets and the reaction of the gold price often becomes part of the larger story – certainly on the Internet and in blogs and in some cases in the mainstream media.

Of course, gold bugs like to see manipulation under every rock and every cranny. (Are we gold bugs?) But step back and look at the big picture and it is hard not to decide that some sort of manipulation is ongoing. Trading patterns, supply and demand manipulations and, of course the overriding necessity for honest money to be controlled within a larger fiat environment all lead to this kind of conclusion.

In fact, the best way to manipulate money is to legalize the manipulation. You've got to because otherwise it becomes a secretive conspiracy and you can't run the world with a secret mechanism. Your plans can be secret, but not your basic activities. Some things have got to be out in the open. In fact, the more the better. The less that is hidden, the less it seems you have to hide, which is important if you are trying to run the world in a certain way and are not sure people would be thrilled about all of it.

Extrapolate this just one step further and you end up with a rationale for gold and silver manipulation. In fact, given a fiat money economy, it is almost impossible to fathom a scenario that does not include manipulating the price of gold and silver. It is part and parcel of credit control. Fiat is the enemy of specie. One is issued by a handful of central bankers, the other can be dug up anywhere by enterprising individuals.

Central bankers control the credit and money-volume spigot; thus they have every reason to try to manipulate. If gold and silver prices get too high, then people begin to question the efficacy of the larger arrangement. If people trust in gold and silver more than they trust fiat paper, then the Masters of the Universe begin to lose moral authority.

Which brings us back to the IMF. We are old enough to remember the days of the late 1990s when the price of gold was being crushed. Every day a central bank was announcing a new sale of gold, driving the market lower and lower – even as the tech bubble was expanding faster and faster. Curiously, not all of those central banks ended up selling their gold, even though they announced they would.

Is this news about the IMF gold sale more of the same? We have noticed in the past that central banking types may be good with numbers but they are not necessarily the most imaginative individuals. They tend to repeat what has gone before. Thus we wonder if this IMF non-news marks the start of another campaign to "talk gold down." We note another article has come out at almost the same time – one that has received quite a bit of play on the Internet – this one from a Chinese perspective as follows:

China to stick with U.S. bonds: China will continue to buy U.S. Treasury bonds even though it knows the dollar will depreciate, because such investments remain its "only option" in a perilous world, the Financial Times cited a senior Chinese banking regulator as saying. China would continue to buy Treasuries in spite of its misgivings about U.S. finances, Luo Ping, a director-general at the China Banking Regulatory Commission, told the paper after a speech in New York on Wednesday. "Except for U.S. Treasuries, what can you hold?" Luo was cited by the paper as saying. "Gold? You don't hold Japanese government bonds or UK bonds. U.S. Treasuries are the safe haven. For everyone, including China, it is the only option." (Reuters)

See, bonds are the only option for China. The story says so twice. The only mention of gold appears with a question mark immediately after it, as if those writing the article can hardly restrain their skepticism. Both the China and the IMF stories are Reuters stories; we're not drawing any conclusions, just pointing it out. Here's some more:

Luo said China intends to maintain its separation of investment and commercial banking based on its observations of the United States after repeal of the Glass-Steagall Act that enforced a similar division of banking activities, according to the paper. "To some extent Glass-Steagall has fueled the crisis," the paper quoted Luo as saying. "The separation of commercial and investment banking is likely to stay longer in China than before." Luo also spoke out against what he called America's laissez-faire capitalism, the paper said. "Deregulation in the U.S. has gone a little bit too far. The market can't be omnipotent," Luo said, according to the paper.

Hey, Americans, say thank you! It's nice to know that the Chinese are interested in holding American Treasuries, but they have grave concerns about American management skills. They point out the current havoc has taken place because of fiat money deregulation. Not only are the Chinese the biggest single overseas holders of US Treasuries, they have distinct ideas about what needs to be done to ensure that the value of these instruments doesn't fall precipitously.

After Thoughts

We're not sure these two articles add up to a trend. But decades of gold-watching gives us the idea that while the monetary elite may be resigned to higher gold prices, they are not likely to give up "input." Slow or fast, the ascent of gold and silver will arrive only with considerable massaging from central banking types working feverishly behind the scenes – at least in our opinion. Yet note, too, that not everything is easily controllable, Not even the price of gold, not now anyway.

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