Gold Dinar - Fantasy vs Reality - Part 3 - Prof Dr Zubair Hasan

goldimf kameel zubair Malaysia gold dinar

goldimf kameel zubair Malaysia gold dinar

Gold Dinar - Fantasy vs Reality - Part 3 - Prof Dr Zubair Hasan

Gold Dinar : Fantasy or Reality - Part 4

Gold in the IMF

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 its use 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 its obligatory use in transactions between the IMF and its member countries. It furthermore required the IMF, when dealing in gold, to avoid managing the price of gold, or establishing a fixed price.

Transactions. The Second Amendment to the Articles of Agreement limits the use of gold in the IMF’s operations and transactions. The IMF may sell gold outright according to prevailing market prices. It 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 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.

September 21, 2016

Gold played a central role in the international monetary system until the collapse of the Bretton Woods system of fixed exchange rates in 1973. Since then, its role has diminished. But it remains an important asset in the reserve holdings of several countries, and the IMF is still one of the world’s largest official holders of gold. In line with the new income model for the Fund agreed in April 2008, profits from limited gold sales were used to establish an endowment, and used to boost the IMF’s concessional lending capacity to eligible low-income countries (LICs).

How the IMF acquired its gold holdings

The IMF holds around 90.5 million ounces (2,814.1 metric tons) of gold at designated depositories. On the basis of historical cost, the IMF’s total gold holdings are valued at SDR 3.2 billion (about $4.5 billion), but at current market prices, their value is about SDR 80.1 billion (about $112.7 billion).

The IMF acquired its gold holdings through four main channels:

• 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.
• all payments of charges (interest on member countries' use of IMF credit) were normally made in gold.
• 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.
• 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 its use 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 its obligatory use in transactions between the IMF and its member countries. It furthermore required the IMF, when dealing in gold, to avoid managing the price of gold, or establishing a fixed price.

Transactions. The Second Amendment to the Articles of Agreement limits the use of gold in the IMF’s operations and transactions. The IMF may sell gold outright according to prevailing market prices. It 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 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.

Over the last six decades of the IMF’s existence, there have been several instances when the IMF has decided to return gold to member countries, or to sell some of its holdings. The reasons for this are varied: between 1957-70, the IMF sold gold on several occasions to replenish its holdings of currencies. During roughly the same period, some IMF gold was sold to the United States and invested in U.S. Government securities to offset operational deficits.

In December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance the IMF’s participation in the Heavily Indebted Poor Countries (HIPC) Initiative. Most of the gold was sold in transactions between the IMF and two members (Brazil and Mexico) that had financial obligations falling due to the IMF.

The IMF’s strictly limited gold sales (2009-10)

On September 18, 2009, the Executive Board approved the sale of 403.3 metric tons of gold (12.97 million ounces)—one-eighth of the Fund’s total holdings of gold at that time. This move was part of a new income model agreed in April 2008 to help put the IMF’s finances on a sound, long-term footing. Key to this new income model was the creation of an endowment funded by the profits from the sale of this gold.

The first phase in the Fund’s gold sales was exclusively off-market transactions to interested central banks and other official holders, at market prices. In October and November 2009, the Fund sold 212 metric tons of gold in separate off-market transactions to three central banks: 200 metric tons were sold to the Reserve Bank of India; 2 metric tons to the Bank of Mauritius, and 10 metric tons to the Central Bank of Sri Lanka.

In February 2010, the IMF announced the beginning of sales of gold on the market. At that time, a total of 191.3 tons of gold remained to be sold. In order to avoid disrupting the gold market, sales were phased over several months.

In December 2010 the IMF concluded the gold sales program with total sales of 403.3 metric tons of gold (12.97 million ounces). Total proceeds amounted to SDR 9.5 billion (about $14.4 billion), of which SDR 6.85 billion constituted profits over the book value of the gold and SDR 4.4 billion of this was used to establish an endowment as envisaged under the new income model.

In February 2012, the Executive Board approved a first distribution of SDR 700 million of reserves from windfall gold sales profits (realized because of a higher gold price than the assumed price when the new income model was endorsed by the Executive Board), subject to assurances that at least 90 percent of the amount would be made available for the Poverty Reduction and Growth Trust (PRGT). This distribution, which became effective in October 2012, was part of a financing package endorsed by the Executive Board to boost the IMF’s lending capacity. To date, members whose shares represent 95 percent of the amount distributed have pledged to transfer these shares to the PRGT (or make an equivalent budgetary contribution) and 87 percent of the amounts distributed have been transferred.

In September 2012, the Executive Board approved a second distribution of SDR 1,750 million of reserves from windfall gold sales profits, subject to the same assurances as the first one. This distribution became effective in October 2013. To date, members whose shares represent 95 percent of the amount distributed have pledged to transfer these shares to the PRGT (or make an equivalent budgetary contribution) and 86½ percent of the amounts distributed have been transferred. The successful distributions of gold windfall profits were a key step toward making the PRGT sustainable over the medium and longer term, and assuring an annual lending capacity of about SDR 1¼ billion on average on an ongoing basis.

ernst wolff imf Pillaging the World: The History and Politics of the IMF

Pillaging the World: The History and Politics of the IMF

The History and Politics of the IMF with Ernst Wolff

 19. July 2016 Zain Raza

The History and Politics of the IMF with Ernst Wolff

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In this video we interview journalist and author Ernst Wolff. Wolff’s latest book is called “Pillaging the World: The History and Politics of the IMF” which is also available in German and Arabic. This video series aims to provide context behind the International Monetary Fund (IMF) and the role it has played in world affairs since its formation up until the current period.

The following questions are addressed in the following video:

• What motivated Ernst Wolff to write the book “Pillaging the World: The History and Politics of the IMF“?
• Under what context was the International Monetary Fund (IMF) founded?
• Why was the International Monetary Fund founded? What role has it played in the past?
• What effects do the IMF’s policies have on the social and cultural fabric of a country?
• What terminology does the IMF employ and is there Orwellianism at play which cloaks its actual practices?

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VIDEO: Ernst Wolff on the History and Politics of the IMF

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To read the transcript of the video, Click here.

The rules for membership in the IMF were simple: Applicant countries had to open their books and were rigorously screened and assessed. After that they had to deposit a certain amount of gold and pay their financial contribution to the organization according to their economic power. In return, they were assured that in the case of balance of payments problems they were entitled to a credit up to the extent of their contribution – in exchange for interest rates determined

Wolff, Ernst (2014-11-18T22:58:59). Pillaging the World: The History and Politics of the IMF (Kindle Locations 181-184). Tectum Wissenschaftsverlag. Kindle Edition. 

In implementing these measures, which were tightened after Britain’s defeat in Suez led to a rise of tensions in Anglo-American relations, the IMF’s strategists developed a strategy that helped them to cleverly deceive the public. Starting in 1958, they obliged the governments of debtor countries to draw up “letters of intent” in which they had to express their willingness to undertake “reasonable efforts” to master their balance of payments problems. This made it seem as though a country had itself proposed the measures that were actually required by the IMF.

But even that did not go far enough for the IMF. As a next step, loans to be disbursed were sliced into tranches (“phasing”) and thus made conditional upon the respective debtor country’s submissiveness. In addition, the IMF insisted (and still insists) that agreements between the IMF and its debtors should not be considered international treaties and therefore should not be subject to parliamentary approval. Finally, the IMF decreed that any agreements with it were not intended for the public eye and had to be treated as classified information – a scheme that applies to this day.

Pillaging the World. The History and Politics of the IMF

By Ernst Wolff

Global Research, January 02, 2016

Theme: Global Economy, Poverty & Social Inequality

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The following text is the forward to Ernst Wolff‘s book entitled : Pillaging the World. The History and Politics of the IMF, Tectum Verlag Marburg, 2014, www.tectum-verlag.de. The book is available in English and German.

No other financial organization has affected the lives of the majority of the world’s population more profoundly over the past fifty years than the International Monetary Fund (IMF). Since its inception after World War II, it has expanded its sphere of influence to the remotest corners of the earth. Its membership currently includes 188 countries on five continents.

For decades, the IMF has been active mainly in Africa, Asia and South America. There is hardly a country on these continents where its policies have not been carried out in close cooperation with the respective national governments. When the global financial crisis broke out in 2007, the IMF turned its attention to northern Europe. Since the onset of the Euro crisis in 2009, its primary focus has shifted to southern Europe.

Officially, the IMF’s main task consists in stabilizing the global financial system and helping out troubled countries in times of crisis. In reality, its operations are more reminiscent of warring armies. Wherever it intervenes, it undermines the sovereignty of states by forcing them to implement measures that are rejected by the majority of the population, thus leaving behind a broad trail of economic and social devastation. 

In pursuing its objectives, the IMF never resorts to the use of weapons or soldiers. It simply applies the mechanisms of capitalism, specifically those of credit. Its strategy is as simple as it is effective: When a country runs into financial difficulties, the IMF steps in and provides support in the form of loans. In return, it demands the enforcement of measures that serve to ensure the country’s solvency in order to enable it to repay these loans.

Because of its global status as “lender of last resort” governments usually have no choice but to accept the IMF’s offer and submit to its terms – thus getting caught in a web of debt, which they, as a result of interest, compound interest and principal, get deeper and deeper entangled in. The resulting strain on the state budget and the domestic economy inevitably leads to a deteriorat

Here's How to Make a Million Dollars an Hour...

the international monetary system history aaa

Abstract

Although the financial and economic crisis did not directly hit the international monetary system, it has lead to the rethinking of the overall architecture that underpins the world economy. Can the current system of floating currency blocs with dollar-based trade and reserves withstand the strains of the global adjustment ahead? It is time to consider alternatives. This article argues that the existing system needs to evolve into a multicurrency one in which a number of international currencies, ideally representing the main trading areas, have the function of storing value and providing the unit of measure. A multicurrency system would respond more flexibly to the demand for liquidity and would provide a way to diversify the accumulation of reserve assets. It is also more appropriate for the increasingly multipolar world economy. The article discusses how in today's larger and more integrated world economy the dependence on the dollar as the basis of both trade flows and financial reserves has become excessive, creating some fundamental imbalances. However, while the rationale for change is clear, the current system is locked in a form of stable disequilibrium where the status quo carries the lowest risk for most players in the short-term. Any abrupt move away from the dollar could trigger trade flow disruption and exchange value losses. Policy cooperation should keep the imbalances under control and manage the transition to a more stable system. The system will evolve, albeit gradually. Looking at the steps taken by some countries, notably China, there is the gathering impression that this decade is one of transition, rather than a 'Bretton Woods moment'. Any reshaping will have to bring in the views of the 'rising powers', China in particular, and their concerns about the limitations of the existing system and the increasingly asymmetric burden of adjustment that it imposes.

International Affairs (Royal Institute of International Affairs 1944-) © 2010 Royal Institute of International Affairs

https://www.princeton.edu/~ies/IES_Studies/S12.pdf

The Evolution of the International Monetary System: Historical Reappraisal and Future Perspectives Robert Triffin 

The cancer of bankers

Rudo de Ruijter
Independent researcher
Netherlands
In The magic of bankers you have been able to read how bankers create balances for loans with a simple line of bookkeeping. There is no money involved. The money for the balances doesn't even exist. This extremely lucrative trick incites the bankers to supply as many loans as possible, but there is more. There are specific growth impulses which makes it impossible to stop the growth of the outstanding loans. Not even with regulations. This has tremendous consequences for our society.

• The creation of the real money

Banks need only a little bit of money to pay the differences between incoming and outgoing payments among them. [1] They also need some money for customers who ask for bank notes, for instance at ATM's. Banks obtain this money by selling securities (like state obligations / treasury bills) to the central bank, where each bank has an account.

The latter then adds the value into the account of the bank. This way, the official money comes about as numbers at the central bank. The central bank is the only bank entitled to print banknotes. Also, the banks can withdraw money from their central bank account in the form of bank notes, to keep them ready for customers who ask for them.

• Repro-contract

The sale of securities to the central bank is not an ordinary sale. There is a condition attached to it: The banker must promise to buy back these securities at an agreed date at an agreed higher price. Thus, the banks dispose of the money just temporarily and they have to sell and buy back securities regularly.
The first growth impulse
The fact that each time the central bank demands more money back than it has initially created, means that the banks never have enough money to buy back the securities. They have to sell more securities to buy back the preceding ones.
This causes increasing costs to the banks. To compensate these costs they will have to generate more income, thus supply more loans all the time.

Note, when customers keep bank notes at home, the bank which supplied them will bear the cost for them permanently. For the banks this is one of the reasons to reward customers when they deposit their money in a savings account.

• Inflation: increasing prices

When supplying loans, the banks create new balances out of their hat, but they don't have a magic stick to create more goods to buy. And when consumers have more 'money' to spend for the same amount of goods, prices will simply go up. Each unit of money becomes less worth and with that also our bank balances.

• Inflation: increasing working pressure

And if we don't want to get poorer, we will have to work harder to make up for the loss of value of our money. It is a permanent race against impoverishment.

You can also see it this way: By working harder we try to obtain a part of the newly created bank balances.

• The fairy-tale of economic growth

The tale that an economy should grow to be healthy comes out of the need of the bankers to supply more loans all the time. More loans means more balances in circulation and loss of value of our money. To prevent impoverishment we have to produce more in order to earn more all the time. That is nice for the bankers, but not for us and not for the Earth.