Today, IMF MANAGING DIRECTOR CHRISTINE LAGARDE announced that she would try to raise more capital to shore up the IMF‘s balance sheet as to be able to aid the peripheral nations of the European Union. Ms. Lagarde was going to approach the members of the G-20 to provide additional funds to prevent a further assault on the European sovereign debt by securing funds to support the troubled sovereigns. The IMF director will be depending on the BRICS and Japan to increase their contributions so as the IMF may actually be able to help GREECE and PORTUGAL meet immediate funding needs and let the ECB and EFSF do the heavy lifting for Spain and Italy. (At this time, the U.S. said they will not be contributing.)
IT WAS ONLY DECEMBER 28, 2011 when the U.S. TREASURY chided Japan for stepping into the currency markets to stem the YEN’S RISE, while at the same time giving the CHINESE A PASS AS A SERIAL CURRENCY MANIPULATOR. IF I RAN JAPANESE FOREX POLICY I WOULD EXACT A LARGE PRICE FOR THE AUDACITY OF THE OBAMA ADMINISTRATION TO CHIDE THE BOJ/MOF INTERVENTION TO HALT THE RECORD HIGH OF THE YEN.
IF THE EUROPEANS AND THE U.S. WISH FOR JAPANESE COOPERATION FOR INCREASED IMF FUNDING FOR EUROPE THE PRICE HAS TO BE A POLICY OF GLOBAL ACCEPTANCE OF YEN INTERVENTION. ANYTHING SHORT OF THIS DEMAND BY THE JAPANESE AUTHORITIES IS RECKLESSNESS. JUST LAST WEEK FINANCE MINISTER JUN AZUMI WAS OPENLY DISCUSSING THE EURO/YEN CROSS RATE AS BEING A PROBLEM. IT IS TIME TO WAKE THE GODZILLA OF INTERVENTION AND PUT A HALT TO THE BURDEN OF AN OVERLY STRONG CURRENCY.
Taking the IMF desire for additional funds to build a fortress balance sheet, I again advise LAGARDE to move to put the IMF’S GOLD HOARD TO WORK. Again, I openly advise leveraging up the world’s third largest GOLD RESERVES and put it to work by issuing IMF GOLD-BACKED BONDS. Yes, I am well aware that this will require a bylaws change as present IMF rules prevent the use of GOLD to SECURE DEBT ISSUANCE, but GOLD sitting idly in the TIME OF DERIVATIVE CREATIVITY is negligence on a massive scale.
GOLD is in great demand and many investors would gladly buy a debt instrument secured by some GOLD: IMAGINE A 3% IMF 5-YEAR NOTE SECURED BY 1/10 an ounce of GOLD. The IMF would be a much more diligent lender if poor loan analysis meant the losing of its PRECIOUS GOLD HOLDINGS. This would be the best ETF going and the GOLD is secured by the world’s funding organization. It is time for all these high-priced bureaucrats to get creative in their thoughts and stop merely passing the hat. Just for knowledge, the IMF has a GOLD HOARD of 2,814 Metric TONS. The largest GOLD HOLDINGS ARE:
- United States…………………8,133 metric tons
- Germany……………………….3,400
- IMF………………………………2,814
- Italy………………………………2,451
- France…………………………..2,435
- China…………………………….1,054
Tags: 2/10 yield curve, 3-year LTRO, BRICS, China, Christine Lagarde, ECB, EFSF, Gold, gold reserves, Greece, IMF, Italy, Jun Azumi, Portugal, serial currency manipulator, Spain, U.S. Treasury, Yen
January 18, 2012 at 7:56 pm |
Great stuff Yra-
Loved the Pawn Stars allusion… need more perceptive dealers indeed at the top of the global financial food chain.
What do you think about the latest German/IMF madness that the countries with the problems… should put up the funding for expanded rescue efforts!??? A Jerry Maguire Moment for peripheral Europe? Hey, if they could “show me the money”, they woulkdn’t need the rescue.
What a bunch of losers parading around as financial luminaries. Where’s Karl Otto Pohl when we need him?
Best-
-Alan
January 19, 2012 at 12:37 am |
Yra, I wouldn’t buy an IMF Gold backed ETF.
If Germany and other countries have problems bringing their gold back home from US, how could we possibly expect to get our money back from the IMF??
Next thing you know is that GS will own the IMF! And they’ll have all the gold and our money, too!!
January 19, 2012 at 5:09 am |
Egan Jones cut its rating on Germany to double-A-minus from double-A http://blogs.wsj.com/marketbeat/2012/01/18/ach-du-lieber-germany-downgraded/
January 19, 2012 at 7:03 am |
Peter–don’t want an IMF ETF just some GOLD backed bonds that would have a yield and be backed by some GOLD which would mirror the GOLD ETF but with a bond yield.An IMF default on its GOLD segment would be the catastrophe for the financial system—that GOLD is not ever coming home —
January 19, 2012 at 2:18 pm |
Another excellent post. Seems to me a bit ridiculous for a union which has been a slight net exporter of capital to be going hat in hand for emergency funds from the G20, hence my sympathy for the US reluctance to pony up more capital to IMF (although the gold-backed lending idea is a great one).
I wonder what will cause the sea change, if anything, for the German side to realize/admit that capital flows and sudden stops probably contributed much more to the crisis more than profligate sovereigns (ex-Greece). The burden could be shared once all accept the fact that there were benefits to the core as well as the periphery from integration, converged borrowing costs, and currency depreciation/exports. Was it too many Spanish villas driving the boom & bust or excess capital leaving the core and creating artificially loose money in the periphery followed by a sudden stop? Although I doubt this realization happens anytime soon, I wonder if it’s a matter of enough pain bringing that moment of clarity to the German contingent, or they really do continue down this road at great cost.
I’ll be looking for a change in the EBA 9% capital ratio as a sign the Eurocrats are starting to ‘get it.’ Here’s to staying humble in one’s analysis with so many variables at play…
January 19, 2012 at 3:32 pm |
MattW— a very Godd post and i agree with you on the EBA changes ,for if the Tier 1 RATIO is lowered then the need for the highest level collateral will be effected.Also look to see what Draghi says about the type of collateral that the ECB will accept for that will be as significant as a cut in the RATIO–but nobody ever siad this is easy and your post is a tribute to that.The Germans certainly bear responsibility but now they are going to squeeze to get what Otto Pohl and Schlesinger wanted from the very beginning—Chancellor Merkel is no Helmut Kohl.
January 19, 2012 at 5:58 pm |
Yra- Speaking of Herr Pohl, I stumbled across this Der Speigel interview from May 18th …2010!! http://bit.ly/xJiVnA The guy’s clarity on what needed to be done right away from the top if the crisis (and even not admitting Greece in the first place) is striking.