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is this japans biggest mistake or saviour?

  1. 1,937 Posts.
    Over the past 10 years, Japan has increased her reserves with the IMF to a world beating $700Billion SDR's. Note the small text at the bottom -
    IMF international reserves - click image

    "Note: International reserves consists of monetary authorities’ holdings of gold (at SDR 35 per ounce), SDRs, reserve positions in the International Monetary
    Fund, and foreign exchange."

    Somehow, the IMF converts SDR's to gold using SDR$35 per ounce. This number hails from 1960's POG when the IMF was created prior to the par value adjusted $42.2 via the US modification act of 1972.

    Somehow IMF SDR's determine exchange rates back to a foreign currency when deposits are called.

    Just a handful of really simple questions -
    a) what return is the IMF providing on these deposits? are the returns uniform across all depositors or do they differ?
    b) how and where does the IMF source the funds to provide these returns?
    c) do the depositors and their deposits determine the rate of echange to SDR's on withdrawal?
    d) what is the opportunity cost to Japan for not purchasing real physical gold reserves since 2001?
    e) how and who decides in the SDR conversion rate, and how does this rate differ to official FX rates?
    f) how will the IMF release the $700BnSDR's when Japan comes calling on it?
    g) when will the IMF officially re-rate the SDR$35 POG?
    h) if gold is a barbaric unimportant element, why not just back the IMF SDR by the "faith and credit of mankind"? (rhetorical, as the answer is obvious)

    The answer to d) is 640% on $300Bn - has been Japans missed opportunity for not buying physical since the low if $250 in 2001.

    But, just as the USTreasury is going to revalue her reserves, so too will the IMF. Amidst some fanfare and loud trumpets will be the revelation that the IMF was a great investment providing steady 8% annual interest to her depositors.

    Only 8%? The exchange rates to SDR's is a shocker when the mechanics are revealed. It this the final Ponzi credit factory.
 
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