-Caveat Lector- from alt.conspiracy ----- As always, Caveat Lector. Om K ----- <A HREF="aol://5863:126/alt.conspiracy:537705">IMF Gold Sale - from oneworld </A> ----- Subject: IMF Gold Sale - from oneworld From: [EMAIL PROTECTED] (E Right) Date: Sun, 18 July 1999 12:05 PM EDT Message-id: <[EMAIL PROTECTED]> ER. The idea to sell gold and let the third worlders off the hook has been around for a while... this debt relief is from w ww.oneworld.org... can't we all just get along and not pay our debts? How to Finance Multilateral Debt Reduction http://www.oneworld.org/eurodad/is1_gb.htm EURODAD Information Sheet April 1996 <this is old - we are doing it now!> Rue Dejoncker 46, B-1060 Brussels, Belgium Tel 32-2 543 9060 / Fax 32-2 544 0559 / Email [EMAIL PROTECTED] Multilateral debt reduction should be financed primarily from additional multilateral resources. The World Bank and the IMF dispose of a large amount of resources that could be used for debt relief, without endangering their financial standing. How much money is needed? A rough estimate of the amount of money that will be needed to finance multilateral debt reduction is US$11bn - the amount mentioned in the July 1995 World Bank proposal to create a multilateral debt facility. This amount does not have to be paid up front. If there is a commitment to reduce the debt burden to sustainable levels, the debt overhang can be reduced by financing the debt repayments as they fall due. Annual costs would be around US$400-500m in the first three years, increasing to US$850m in 2001-02 and up to US$1.4bn in 2002-06, after which the costs decline to US$200m a year in 2006-10. The World Bank Using some of the World Bank resources to finance multilateral debt reduction will not endanger the financial standing of the Bank. It is financially very strong, and the amount of 'bad debts' is a relatively small part of the total amount of debt outstanding. Moreover, the financial standing of the Bank is based on the financial and political guarantees of the member states rather than on the financial performance. In 1986, when the World Bank made loan loss provisions for the first time, thereby recognising the possibility of a loss, its standing actually increased. Its rating was neither affected by the Mexican crisis of 1994 - while Mexico was the largest recipient of loans in 1994. Acknowledging 'bad debts' and acting accordingly is sound financial policy. It will improve the portfolio and enhance rather than endanger the market perception of the World Bank. The Bank's contributions to a multilateral debt Trust Fund could come from part of its reserves, loan loss provisions, future net income and the 1995 windfall, and the Interest Subsidy Account. The reserves of the World Bank amounted to US$14.7bn in 1994, or 13.8% of total outstanding loans. The reserves to loan ratio, which was 10% in 1986, has now been set at 14.25%. A reduction of three percent, yielding an amount of about US$3bn, will not endanger the rating of the Bank. The loan loss provisions (US$3.3bn in 1994) are earmarked for potential losses, mainly the risk of default by countries in non-accrual status. Such provisions would not be needed if the debt is written off. About US$500m might become available. Net income, currently running at about US$1bn a year, is mainly used to strengthen the reserves and to finance IDA. If future net income is used, this should not lead to a reduction of flows to IDA. During 2000-10, IDA reflows will increase substantially, thereby freeing some of the Bank1s income for debt relief. Annually, about US$100m could be used for debt relief, adding up to a total of US$1bn over a period of ten years. In addition, the windfall of US$850m of 1995 (minus the US$350m used for Rwanda and Bosnia) could be used. The US$154m in the Interest Subsidy Account, created in 1975 to finance interest rates on IBRD loans for the poorest IBRD borrowers, will be available in 2001. The IMF Selling part of the over 100m ounces of gold of the IMF could be the major contribution of the IMF to multilateral debt relief. The IMF fears that the sale of gold will depress the world price of gold, and that it will affect its financial base. However: If selling gold would depress prices, this means that gold is of little value as a financial base. In that case, it would be wiser to exchange the gold for usable assets. The rationale for holding a large part of reserves in gold, which is based in the Bretton Woods system of fixed exchange rates, does no longer count. The gold price is a financial bubble. Since exchange rates are no longer linked to gold, the value of gold is its perceived value. If people do no longer see gold as a save investment, massive sales will be the result, leading to sharp price falls. Gold is not only a risky investment, it also performs poorly as an investment: the rate of return is very low. Combined with the present strong gold price, these arguments all suggest that gold should be sold. In addition, selling gold will not undermine the financial base of the IMF. Actually, gold sales do not affect the notional value of the Fund's resources, because it is valued at SDR35 per ounce - the amount required to be paid in the general resources account after gold sales. As explained in the box, the actual value will only be slightly affected. IMF gold sales: a safe option If gold is valued at the market price, reserves amount to US$52bn (compared to US$17 if gold is valued at SDR35). If about 50m ounces would be sold, and SDSR35 would be retained, the value of the reserves would fall to US$35bn - compared to total loans outstanding of US$33bn (this excludes SAF and ESAF loans, which are not financed by the general resources). Assuming a lower gold price of $200 per ounce, the value of the reserves after sale would be US$25bn. If IMF credit outstanding reaches a peak of US$70bn over the next few years, reserves would still be about one third of the outstanding credit. Taking into account the Fund's strong record of loan recovery, and the political and financial support of the major developed countries, this is more than adequate. Selling 10% of the gold stock over a period of 15 years would free about US$4bn for debt relief. Gold pledging is a second option. ER> Hey, why not melt the gold down into 5g coins and give it to the poor people directly? [...] The African Development Bank The third largest multilateral creditor, the African Development Bank (AfDB), is dealing with huge financial and institutional problems. Different from the situation of the World Bank and the IMF, 'bad debts' make up a large part of the AfDB's portfolio. The AfDB will hardly be able to contribute to multilateral debt relief. ER> This is the problem... forgiving BAD loans does not improve the credibility of the third world for more loans. [...] ===== Subject: Re: IMF Gold Sale - from oneworld From: "J.Wagoner" <[EMAIL PROTECTED]> Date: Sun, 18 July 1999 12:18 PM EDT Message-id: <7msut0$bn2$[EMAIL PROTECTED]> As I understand it the Biggest problem with this idea is that many of the countries to receive this assistance are producers/exporters of raw material (eg *gold*) and that by making the sale and dropping the value of gold in the world market they may very well and up hurting the economies they are trying to help. As to future loans... I am also under the impression that the money comes with some very large strings attached. While it is true that the loans are to be written off the countries in question will be required to use the money that was going into repayments for things such as education and infrastructure. If this plan can be implemented it would be a huge boon for the poorest countries. J. ====================== Calvo turpius est nihil compto ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance�not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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