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Fool’s gold and the IMF

The alchemists sought to transform base metals into gold, but the IMF seems bent on turning ingots into dross. When president Bill Clinton's millennial offer to forgive the debts of the globe's poorest nations was blocked by mining interest protests against IMF gold sales, US Treasury strategists stayed up late over the Bunsen burners. Had the accounting subterfuge they cooked up to fulfil their promise been designed by one of the big five auditing firms for a megabank client, the US Treasury itself, the Securities&Exchange Commission and the Federal Reserve would have been lining up to clamp on the handcuffs.

The IMF stash of 103 million ounces has a current market value of $280/oz or a total value of $29 billion. These holdings date back to the gold standard days before 1973 when the reserve tranches of members' quotas were subscribed in gold, then with a fixed value of SDR 35/oz ($48). Three-quarters of these holdings were contributed by members of the G5 - France, Germany, Japan, the UK and the US.

Ownership of the $232/oz gain (from a book value of $48 to a market value of $280), a total windfall of $24 billion, demands serious debate.

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