And if the pending U.S. healthcare bill, which projects a cost of about $1 trillion through government subsidies, is passed, the U.S. debt is likely to climb higher and faster than at anytime in U.S. history.
All these large expenses while the U.S. is in the longest recession (22 months, since December 2007) since the Great Depression of the 1930s have prompted India, China and Russia to take precautions by reducinb its load of U.S. Treasury securities: debt in the form of U.S. treasury bills, bonds and notes.
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WASHINGTON D.C., September 21, 2009 - Almost 20 years after it was forced to pawn its gold reserves to keep defaulting on its international debt, India is now looking to buy some IMF gold.
The International Monetary Fund has approved the sale of a limited amount of its gold to shore up its finances. India, along with China and Russia, have indicated interest in such purchases as a way of reducing their position in dollar-denominated securities.
The purchase of the gold will also help these countries to increase their role in IMF operations as they have often complained the IMF is dominated by the United States, its largest shareholder, and European nations.
The fund’s executive board said it decided to sell “a volume strictly limited to 403.3 metric tons”, 1/8th of its holdings in a way that does not disrupt the sale of gold in commodity markets, which already were expecting and discounted the IMF decision.
The IMF, a 186-nation Washington-based lending organisation, is the third largest official holder of gold in the world with 3,217 metric tons, after the United States and Germany.
The board said the IMF could sell its gold directly to its members’ central banks if any were interested or it could put the gold on the open market in phases.
If the gold is sold on the open market, the IMF said it would inform these markets before any sale begins and report regularly to the public on the progress of gold sales.
The IMF said it also would coordinate its sales with major central banks, which agreed last month on ceilings of gold sales amounting to 400 tonne annually and 2,000 tonne in total over five years.
The sale of the gold was authorised by the G-20 countries at their summit in London in April as part of efforts to provide up to $6 billion in easy-term loans to low-income countries.
The IMF decision comes in advance of next week’s G-20 summit in Pittsburgh, which will review IMF lending, and the fund’s annual meeting early next month in Istanbul, Turkey.
The G-20 countries decided at their April summit in London to approve the gold sales as part of efforts to provide up to $6 billion in concessional loans to low-income countries.
In recent years, some countries with thriving economies managed to pay off their IMF loans ahead of time, reducing income the IMF derived from loan interest and putting a strain on its finances.
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