-->
Canada resists British plan to revalue IMF gold reserves

http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20041004/RWORBANK04/TPBusiness/?query=mckenna

I was encouraged to read of your position with regard to the proposal by Minister George Brown regarding the revaluation of gold held by the IMF. Thank you for taking that position.

While I will not go into any lengthy reason for my support for that position, let me make a couple of points. To add credence to you comment ("We need absolute assurances that [revaluing the gold] should not be disruptive to the international gold industry or international markets for gold," ), let me remind you of the action that George Brown took in 1999. On May 7, 1999, the British announced that the Bank of England on behalf of the British Treasury would sell 435 tonnes of gold in a series of public auctions ostensibly to diversify its international monetary reserves. The manner of the British sales -- periodic public auctions instead of hidden sales through the BIS -- belie any effort to get top dollar and smack of intentional downward manipulation of the gold price. All indications are that these sales were ordered by the British government over the objection of BOE officials. Palpably spurious and inconsistent reasons for the sales are offered, but no persuasive ones. There is only one logical conclus
ion: the gold sales were directly ordered by the Prime Minister for unknown political or other reasons. What is more, his reasons are unlikely to have been frivolous. As leading supporters of the proposed IMF gold sales, back in 1999, the British clumsily put themselves in the position of front-running them, and ultimately the British sales were an important catalyst in forcing the IMF to change tack.

I find your statements encouraging, but do not find Canada's position regarding gold overall or its actions regarding its holdings at all helpful. May I remind you that in 1980 the price of oil was well north of $30, gold around $670, and Canada was sitting on 660 tonnes of gold. Canada, under the leadership (?) of Mulroney, and in close cooperation with the Reagan Government undertook to manage the price of oil and drive down the price of gold (not unlike the actions of George Brown and Tony Blair in 1999 and its containing cooperation with the Bush government) and sold of Canada's gold reserve so that we now have just a tiny amount of gold in our reserves.... lest than 20 tonnes I believe.

May I also remind you that Argentina has just purchased about 55 tonnes of Gold and done so after having sold its gold in the 1990's at the encouragement of the IMF and the US FED Reserve. After tying its currency to the US Dollar, Argentina was essentially driven to bankruptcy as its export position went to hell in a hand basket as its currency rose in concert with the Clinton/Ruben strong dollar policy. They have now completely reversed their position on gold reserves and for bloody good reason, and in the face of IMF objections. You should also be aware that China is accumulating gold as fast as it can, and may be well over 1700 tonnes accumulated at this point... having essentially bought it from western reserve banks (Canada included) who try stupidly to depress gold by selling it at as low a price as possible in support of their fiat currencies.

All of this is to make a few points. Canada must look out for its own currency and that should be based upon our own gold reserve. Canada is not here to support a British or US position of currency manipulation in order to support their own debt based and unsupported fiat currencies. Canada should be watching what China and other newly emerging countries are taking with regard to gold. China will uncouple from the US dollar when it has the gold reserves and domestic markets in place to support its own economy and currency. They have also opened the gold market to private investors and that market will drive the price of physical gold beyond anything we have ever seen. When they reach the equilibrium they need, they will then dump the US dollar. Gold will in concert revalue upwards as fast or faster than the US dollar drops and Canada had better be prepared for that eventuality. Canada has great gold producers and the Canadian government should be buying all that it can from them as fast as it can.

I am old enough and wise enough (from the prairies and having listened to my parents and grandparents tell and retell their depression and banking horror stories coming out of the 1930's) to not trust the banking sectors in this country beyond the day to day utility they offer and to trust governments and central bankers even less as they try to manipulate the currencies to their own political benefit.

For those reasons, I applaud your comments to the IMF and George Brown (who is dealing from a predisposed position and with what has to be considered unmitigated gaul) and to further encourage you to start to consider Canada's position vsv its gold holdings and the possibility that we will soon have to contend with countries that will have a gold reserve (China in particular) to back its currency and will use that position... on that there is no doubt!!

I am also attaching the translation of a speech on the subject of gold and central banks as was delivered by Oleg V. Mozhaiskov, Deputy Chairman, Bank of Russia on June 3-4, 2004 to The London Bullion Market Association - Bullion Market Forum, at the Baltschug Kempinsky Hotel in Moscow. This is a translation of the speech given that day. It is absolutely appropriate given the subject of gold reserves and You Sir, should be aware of it and its contents.