This week the International Monetary Fund (IMF) announced plans to sell a portion of its gold reserves.  It seems the IMF is not needed as much as it use to be – many developing countries in Asia and Latin America possess large reserves of foreign currency, alleviating the risk of economic crisis and consequently the need for emergency loans from the IMF.  Thus, the bank has a shortfall of revenues and wants to liquidate some gold so it will have cash to invest to cover the current and any future shortfalls.

It is refreshing that the IMF is not “hitting up” its member countries for the funds needed to cover the shortfall.  After all the U.S. contributes a bunch of dough to the IMF already and with the Fed induced recession, and the endless wars we fight (e.g. poverty, illiteracy, Iraq, Afghanistan, terrorism, poppies, other drugs, etc…), things are a little tight there at home (For new readers I currently reside in Zambia).  Instead it is selling assets to do the job.  However, the proposed sale raises several questions in my mind.

First, I find the timing of the proposed sale of IMF gold curious.  Why at this moment when the worldwide economy looks like it is about to go into the toilet?  Six billion dollars is not a lot of money.  The IMF estimates that the Fed induced subprime crisis will cost the world economies over one trillion dollars.  So it can’t be that the IMF is planning to use the six billion dollars to help its members through this crisis.  I suppose the IMF will use the funds from the sale to invest in government and corporate bonds to make a profit to cover current and future shortfalls.  Question is, if the IMF is needed less and less for their services, why not just cut back operations to the bone like other businesses do that experience revenue loss and expect future revenue losses?

Second, why does the IMF have such large assets?  IMF gold reserves alone at current market prices are worth ninety-five billion dollars.  How can the IMF have amassed such a large endowment if its mission is humanitarian?  After all, the IMF’s purpose is to stabilize economic situations by providing emergency loans to developing countries that are in over their heads.  Further, if their business is that profitable why does Congress still commit the American taxpayer to contribute billions of dollars to them each year?

Third, even though the Fed and IMF are not directly linked, is the IMF not guilty of a form of insider trading?  The Fed caused the price of gold to skyrocket by debasing the dollar.  Along comes the IMF ready and willing to “dump” gold on the market to realize a windfall profit, as the politicians would call it. 

The sale of the gold is not automatic as it must be approved by the member countries of the IMF.  Given Congress’ inability to say no to the Fed I have little hope it will squash this sweetheart deal.  With tax day less than a week away, we should be demanding that Congress pull out of the IMF.  While the IMF can realize its golden opportunity by making a killing in the gold trade, the Congress should protect American taxpayers from the fiends that used our money to get rich.  

Kenn Jacobine teaches History and English for the American International School of Lusaka, Zambia.  Send him email at lovesliberty@gmail.com.