More Evidence of "Gold Swaps" in the ESF SDR Account and the IMF

August 21, 2001
The Honorable Paul Sarbanes
Chairman Senate Banking Committee
534 Dirkson Senate Office Building
Washington, DC 20510
cc: The Honorable Senator Phil Gramm
The Honorable James E. Clyburn
Congressional Black Caucus
VIA FAX: 202-225-2313

 

Mr. Chairman:

 

Questions of inappropriate gold market intervention by the Federal Reserve, Treasury and the IMF are gaining greater attention as each week passes.

I wrote to you on July 17, 2001 regarding the change from "Gold bullion reserve" to "custodial" status of 1,700 tonnes of US gold (20% of the US total reserves) held at the West Point Depository in New York. Now it seems that far more US gold has been encumbered by the sale of SDRs in the ESF's account.

Reading IMF Document "Classification of Financial Assets" contained in the IMF Monetary and Financial Statistics Manual at Section #123, page 37, I find that "SDR holdings represent unconditional rights to obtain foreign exchange or other reserve assets from other IMF members." [Emphasis added]. Combine this definition with Section #121, "Monetary gold and SDRs issued by the IMF are financial assets for which there are no corresponding financial liabilities." Therefore, the ESF's depleted SDR account, shown below in the associated chart, represents a depleted gold account since the owners of these transferred ESF SDRs have a valid claim against ESF gold. I respectfully suggest to you that the sale of these SDRs or SDR Certificates represents evidence of gold price manipulation.

IMF Gold Swaps and Gold Loans

Also described in the above IMF document, I find much more about the "gold swaps" to which Mr. Mattingly1 asserts the FOMC transcribers "misquoted" him. Indeed, there are nine substantial paragraphs covering gold swaps (#154, #156), gold loans, collateralization of gold loans, gold as repos, etc (#156, #157, #159, #160. #161, #163, #164).

Referring briefly to the gold swap example shown in #161:

"Consequently, for repos and gold swaps, four financial transactions would be recorded: a loan (payable/receivable) with a commensurate change in currency and deposits, plus a transaction in the asset, coupled with the recognition of the obligation (right) to return (receive) the asset at the termination of the repos life as an entry in accounts receivable/payable. For security lending and gold loans, a transaction in the underlying asset would be recorded, coupled with the recognition of the obligation (right) to return (receive) the underlying asset at the termination of the borrower's (lending's)[sic] life as an entry in the accounts receivable/payable."

Mr. Chairman, the above procedural excerpt stands in direct conflict with the IMF policy listed below regarding gold operations:

Appendix I: Role of Gold in the IMFhttp://www.imf.org/external/pubs/ft/pam/pam45/APPENDIX/API.htm

"Gold is reported as an asset in the IMF's balance sheet and financial statements but is not used in its regular operations and transactions. The IMF does not have the authority to buy gold; it may only accept payments from a member in gold at a price agreed upon for each operation or transaction on the basis of market prices, with Executive Board approval by a majority of 85 percent of the total voting power. With the same majority, the IMF may decide to sell gold at market prices (see Box 4) or to "restitute" gold.75 In any operation or transaction in gold, the IMF must avoid managing its price or establishing a fixed price in the gold market.Furthermore, the IMF may not engage in such gold transactions as loans, leases, or swaps and may not use gold as collateral.76" [Emphasis added].

It now seems clear that the ESF's gold account is substantially encumbered by equivalent gold sales (SDRs). It is also clear that the IMF has detailed rules for engaging in various gold market operations…operations it formally denies. Which of the above IMF procedures is valid? The one that denies gold market involvement or the one that stipulates rules to govern them?

The Victims of Gold Gate

Sub Saharan precious metals producers have been economically savaged by a decades long low gold price. Has this been due to a hidden US/IMF policy? Has the vaunted US prosperity come at the expense of innocents?

The Fed Chairman and his Chief Counsel deny what their own FOMC transcripts say1: That the Fed engages in long dated gold swaps and other financial instruments (puts) which have a suppression effect on the price of gold.

Their denials ought to raise legislative red flags.

Sincerely,

Michael Bolser

A one-ounce gold nugget is rarer than a five-carat diamond.

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