On the Turk hypothesis, the gold-lending business, and the future of gold

9:48a ET Saturday, August 18, 2001

Dear Friend of GATA and Gold:

GATA consultant Michael Bolser has found that the rules
of the International Monetary Fund in regard to gold
are contradictory, putting the IMF in the gold lending
business even as they forbid that business to the IMF.
His memo to a financial journalist follows. The chart
contained in the memo cannot be reproduced here, but it
should be posted soon at www.GATA.org.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

By Michael Bolser
gmbolser@atlantic.net
August 17, 2001

To: A major financial news service journalist
familiar with GATA, Washington, DC

RE: A Depleted SDR Account is a Depleted Gold Account,
and More on Gold Swaps and Gold Loans in the
International Monetary Fund

As James Turk has reported in his essay, quot;The Mystery
of the Disappearing SDRs,quot; SDRs and SDR Certificates
represent claims against U.S. gold reserves. Reading
further in the operative International Monetary Fund
document, quot;Classification of Financial Assetsquot;
contained in the IMF Monetary and Financial Statistics
Manual at Section 123, Page 37, one finds that quot;SDR
holdings represent unconditional rights to obtain
foreign exchange or other reserve assets from other IMF
members.quot;

Combine this with Turk's observation in Section 121
that quot;monetary gold and SDRs issued by the IMF are
financial assets for which there are no corresponding
financial liabilities.quot;

We can now confidently state that the depleted SDR
account of the U.S. Treasury Department's Exchange
Stabilization Fund, shown below in the associated
chart, represents a depleted gold account, since the
new owners of these transferred ESF SDRs have a valid
claim against ESF gold.

[CHART OMITTED]

Why has the United States sold its gold?

Why are the Federal Reserve and Treasury denying the
obvious?

Also in the IMF quot;Classification of Financial Assetsquot;
document cited above, I find much more about the quot;gold
swapsquot; about which Federal Reserve lawyer Virgil
Mattingly says the Federal Open Market Committee
transcribers misquoted him. Indeed, there are nine
substantial paragraphs covering gold swaps (154, 155),
gold loans, collateralization of gold loans, and gold
as repos, etc. (156, 157,159,160,161,163, and 164).

Referring briefly to the gold swap example shown in
161:

quot;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
repo's 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 (lender's) life as an entry in the
accounts receivable/payable.quot;

The above procedural excerpt stands in direct conflict
with the IMF policy listed below regarding gold
operations, from Appendix I: Role of Gold in the IMF,
a href=http://www.imf.org/external/pubs/ft/pam/pam45/APPENDIX/API.htm.http://ww...

quot;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. 76quot;

We now know the ESF's gold account is substantially
encumbered by equivalent gold sales (SDRs) and we also
know that the IMF has rules for engaging in varied gold
operations -- operations it formally denies.

Empty denials by the Treasury, Federal Reserve, and the
IMF should raise journalistic red flags.

Which of the above IMF gold procedures is valid? The
one that sets out the IMF rules for gold swaps, etc.,
or the one that forbids the gold activity?