The Death of Money (43 page)

After being vetted and groomed in midlevel positions . . .
:
See William D. Cohan, “Rethinking Robert Rubin,”
Bloomberg Businessweek,
September 30, 2012, http://www.businessweek.com/articles/2012-09-19/rethinking-robert-rubin;
and Jonathan Stempel and Dan Wilchins, “Robert Rubin Quits Citigroup amid Criticism,”
Reuters, January 9, 2009, http://www.reuters.com/article/2009/01/09/us-citigroup-rubin-idUSN0930738020090109.

Min Zhu believes the world . . .
:
Min Zhu, conversation with the author.

“Central bankers like to say . . . ”
:
Ibid.

IMF economists such as José Viñals . . .
:
IMF Monetary and Capital Markets Department, “Macrofinancial Stress Testing—Principles
and Practices,” August 22, 2012, http://www.imf.org/external/np/pp/eng/2012/082212.pdf.

“Each member shall deal with the Fund . . .”
:
IMF Articles of Agreement, Article V, Section 1, http://www.imf.org/external/pubs/ft/aa/index.htm.

Today the IMF website touts loans . . .
:
“IMF Lending Arrangements as of May 13, 2013,” International Monetary Fund, http://www.imf.org/external/np/fin/tad/extarr11.aspx?memberKey1=ZZZZ&date1key=2020-02-28.

the SDR-to-dollar exchange rate . . .
:
This analysis uses an exchange rate of one U.S. dollar to 0.667 SDRs. Updates to
the exchange rate are available at “Exchange Rate Archives by Month,” International
Monetary Fund, http://www.imf.org/external/np/fin/data/param_rms_mth.aspx.

President Obama sent letters to the congressional leadership . . .
:
“Letters from the President to the Bipartisan Leadership on NAB Fund,” Office of
the Press Secretary, White House, April 20, 2009, http://www.whitehouse.gov/the-press-office/letters-president-bipartisan-leadership-nab-fund.

203 The president’s letter said
:
Ibid.

“significant step forward”
:
“IMF Managing Director Dominique Strauss-Kahn Welcomes U.S. Congressional Approval
of IMF-Related Legislation, Including U.S. Financial Commitment of up to US$100 Billion,”
International Monetary Fund, Press Release no. 09/220, June 18, 2009, http://www.imf.org/external/np/sec/pr/2009/pr09220.htm.

“Why Is the U.S. Bankrolling . . .”
:
John Gizzi, “Why Is the U.S. Bankrolling IMF’s Bailouts in Europe?”
Human Events
, April 25, 2011, http://www.humanevents.com/2011/05/02/why-is-the-us-bankrolling-imfs-bailouts-in-europe.

“We will miss them”
:
Sandrine Rastello and Timothy R. Homan, “Lagarde Boosting China IMF Clout Requires
New Allies,”
Bloomberg,
April 10, 2013, http://www.bloomberg.com/news/2013-04-10/lagarde-boosting-china-imf-clout-requires-new-allies.html.

However, President Obama did not include the new requests in his 2012 or 2013 budgets . . .
:
Lesley Wroughton and David Lawder, “Senate Rebuffs Obama Request to Shift Fund for
IMF,” Reuters, March 12, 2013, http://www.reuters.com/article/2013/03/12/us-usa-imf-reforms-idUSBRE92B04K20130312.

“I am here with my little bag . . .”
:
Pan Pylas, “Christine Lagarde at Davos 2012: ‘I Am Here with My Little Bag, to Collect
a Bit of Money,’”
Huffington Post,
January 28, 2012, http://www.huffingtonpost.com/2012/01/28/christine-lagarde-davos-2012_n_1239050.html.

“We have been able to significantly increase . . .”
:
Howard Schneider, “Q & A with IMF Director Christine Lagarde,”
Washington Post,
June 29, 2013, http://articles.washingtonpost.com/2013-06-29/business/40269400_1_christine-lagarde-imf-former-french-finance-minister.

object to the use of the term
money
 . . .
:
“Easy Money: Consequences of the Global Liquidity Glut,” Milken Institute 2012 Global
Conference, May 1, 2012, http://www.milkeninstitute.org/events/gcprogram.taf?function=detail&EvID=3353&eventid=GC12.

“The SDR may be allocated by the IMF . . .”
:
International Monetary Fund, Annual Report 2012, Appendix VI: Financial Statements
for FY 2012, Independent Auditors’ Report on the Special Drawing Rights Department,
June 21, 2012, p. 31, http://www.imf.org/external/pubs/ft/ar/2012/eng/pdf/a6.pdf;
emphasis added.

“The SDR differed from nearly all prior proposals . . .”
:
Kenneth W. Dam,
The Rules of the Game: Reform and Evolution in the International Monetary System
(Chicago: University of Chicago Press, 1982), pp. 151–52.

the Price-adjusted Broad Dollar Index . . .
:
This index is available as part of the statistical series published by the board
of governors of the Federal Reserve System and available as part of the Foreign Exchange
Rates H.10 data series at http://www.federalreserve.gov/releases/h10/summary/indexbc_m.htm.

a multiyear, multistep plan . . .
:
IMF Strategy, Policy, and Review Department, “Enhancing International Monetary Stability—A
Role for the SDR?” January 7, 2011, http://www.imf.org/external/np/pp/eng/2011/010711.pdf.

Beyond the SDR bond market creation . . .
:
Ibid. See also IMF Finance and Strategy, Policy, and Review Departments, “Criteria
for Broadening the SDR Currency Basket,” September 23, 2011, http://www.imf.org/external/np/pp/eng/2011/092311.pdf.

“If there were political willingness to do so . . .”
:
IMF Strategy, Policy, and Review Department, “Enhancing International Monetary Stability—A
Role for the SDR?”

“non-members . . . and other official entities”
:
IMF Articles of Agreement, Article XVII, Section 3(i), http://www.imf.org/external/pubs/ft/aa/index.htm#a5s1.

The BIS is notorious for facilitating Nazi gold swaps . . .
:
Adam
Lebor,
Tower of Basel: The Shadowy History of the Secret Bank That Runs the World
(New York: Public Affairs, 2013), chap. 3
.

China had acquired the equivalent of $1.24 billion . . .
:
Annual Report 2012, International Monetary Fund, Appendix VI: Financial Statements
for FY 2012, Independent Auditors’ Report on the Special Drawing Rights Department,
June 21, 2012, Schedule 2, http://www.imf.org/external/pubs/ft/ar/2012/eng/pdf/a6.pdf.
The IMF also records the positions of those members whose holdings of SDRs are less
than their allocations because they have swapped SDRs for convertible currencies with
other members. Such members are subject to a requirement of “reconstitution” in accordance
with Article XIX, Section 6(a) of the IMF Articles of Agreement, which means that
the shortfall in SDRs must be made up at some future date, presumably through repurchases
of SDRs with convertible currency earned subsequent to the liquidity crisis that gave
rise to the initial issuance. However, the IMF Articles of Agreement are extremely
flexible with regard to how the reconstitution requirement will be applied, and Article
XIX, Section 6(b) allows the rules to be changed at any time. The United States does
not have effective veto power with respect to proposed changes of this kind.

“They are fake money . . .”
:
Min Zhu, conversation with the author.

“In all its decisions with respect to the allocation . . .”
:
IMF Articles of Agreement, Article XVIII, Section 1(a), http://www.imf.org/external/pubs/ft/aa/index.htm.

Chapter 9: Gold Redux

paranoid, fear-based
 . . .
:
Nouriel Roubini, “After the Gold Rush,”
Project Syndicate,
June 1, 2013, http://www.project-syndicate.org/commentary/the-end-of-the-gold-bubble-by-nouriel-roubini.

“I only know of two men who . . .”
:
Quoted in Gary Dorsch, “What’s Behind the Global Flight into Gold?”
Financial Sense Observations,
June 30, 2010, http://www.financialsensearchive.com/Market/dorsch/2010/0630.html.

220 “
Money is gold, and nothing else”
:
J. P. Morgan,
Testimony of J. P. Morgan Before the Bank and Currency Committee of the House of Representatives
at
Washington, D.C.,
December 18–19, 1912, http://memory.loc.gov/service/gdc/scd0001/2006/20060517001te/20060517001te.pdf.

President Nixon ended U.S. dollar convertibility into gold . . .
:
For a learned review of the workings of the Committee for Reform of the International
Monetary System, the “Committee of 20,” its recommendations, and the eventual entry
into force of the Second Amendment to the IMF Articles of Agreement in 1978, see Kenneth
W. Dam,
The Rules of the Game: Reform and Evolution in the International Monetary System
(Chicago: University of Chicago Press, 1982), pp. 211–90.

the United States dumped 412 tons of gold on the market . . .
:
Ibid., p. 273n92.

The total gold supply in the world today . . .
:
This measure of total gold and all further reference to specific gold quantities
in this chapter are as of July 2013 and are available from the World Gold Council,
www.gold.org.

money supplies of the ECB, the Bank of Japan, . . .
:
These figures are taken from the websites of the Federal Reserve System, http://www.federalreserve.gov;
the European Central Bank, http://www.ecb.int/home/html/index.en.html; the Bank of
Japan, http://www.boj.or.jp/en; and the People’s Bank of China, http://www.pbc.gov.cn/publish/english/955/2013/20130313140427964275661/20130313140427964275661_.html,
as of July 11, 2013. Japanese yen were converted to U.S. dollars at 100 to 1; euros
at 0.77 to 1; yuan at 6.1 to 1.

chose to return sterling to gold at the prewar rate. . .
:
For an extended analysis of this topic, from which this section is partly drawn,
see Murray N. Rothbard,
What Has Government Done to Our Money?
part 4, “The Monetary Breakdown of the West, 3. Phase III: The Gold Exchange Standard
(Britain and the United States) 1926–1931,” at Ludwig von Mises Institute, http://mises.org/money/4s3.asp.

he recites it
ad nauseam 
. . .
:
See, for example, Paul Krugman, “Golden Instability,”
New York Times,
August 26, 2012, http://krugman.blogs.nytimes.com/2012/08/26/golden-instability.

The facts speak for themselves . . .
:
Statistics on gold production, gold demand, and gold supply in this section are from
the World Gold Council, www.gold.org.

No such prearranged central bank or IMF sales to China have been reported . . .
:
The closest correspondence to potential prearrangement appears in the fourth quarter
of 2002, when China’s reported gold reserves
increased
99.84 tonnes and Switzerland’s
declined
70.4 tonnes at the same time; see World Gold Council, www.gold.org. However, no evidence
of prearrangement between Switzerland and China has been found. If a Switzerland-to-China
trade were prearranged, it would likely have been handled through the facilities of
the Bank for International Settlements (BIS) in Basel. The central bank of Switzerland,
the Swiss National Bank, has been a member of the BIS since its inception in 1930;
see the Swiss National Bank website at http://www.snb.ch/en/iabout/internat and UN
treaty archives at http://treaties.un.org/Pages/showDetails.aspx?objid=0800000280167c31.

The agents are principally located . . .
:
Senior bankers and asset managers with firsthand knowledge of China’s global gold-buying
operations, conversations with the author, Hong Kong, September 2012.

In a masterpiece of market savvy . . .
:
China’s gold purchasing agents, conversations with the author, New York City, August
7, 2013; Perth Mint, e-mail to the author, dated September 25, 2013.

Partly as a result of these large-scale covert operations . . .
:
Brendan Conway, “China: Soon to Be World’s Biggest Gold Importer, If It Isn’t Already,”
Barron’s,
February 6, 2013, http://blogs.barrons.com/focusonfunds/2013/02/06/china-soon-to-be-worlds-biggest-gold-importer-if-it-isnt-already.

By 2012, China was producing over 370 tonnes per year . . .
:
See U.S. Geological Survey, “Gold,” Mineral Commodity Summaries, January 2013, http://minerals.usgs.gov/minerals/pubs/commodity/gold/mcs-2013-gold.pdf.

Russia is the world’s fourth-largest gold producer
:
Ibid.

The Federal Reserve vaults hold approximately 6,400 tonnes . . .
:
See Scott Mayerowitz, “Welcome to the World’s Largest Gold Vault,” ABC News, September
19, 2009, http://abcnews.go.com/Business/story?id=5835433&page=1; and Mike Hanlon,
“The Big Picture: This Vast Vault of Gold Under the Bank of England Should Weather
Credit Crunch,”
Daily Mail,
October 22, 2008, http://forums.canadiancontent.net/news/78369-vast-vault-gold-under-bank.html.
Since the
Daily Mail
report, which cites a figure of 4,600 tonnes, approximately 100 tonnes have been
repatriated to Venezuela.

an eight-year plan to repatriate all the gold . . .
:
“Deutsche Bundesbank’s New Storage Plan for Germany’s Gold Reserves,” Deutsche Bundesbank,
press notice, January 16, 2013, http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2013/2013_01_16_storage_plan_gold_reserve.htm.