A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. Since the work has been expanded to include potential solutions to the growing list of seemingly insoluble dilemmas, the working title of the book has been revised to 'REVERSING THE WAY IN!"   MELMAN MINUTE - April 21, 2010 - - - - - Perhaps the single most influential international financial organization "out there" is the International Monetary Fund (IMF).  From somewhat humble beginnings, it has transformed itself into an international financial powerhouse and now appears to be on the verge of further enlarging its influence on the international financial community. The IMF was founded in 1946 under the auspices of the newly-formed United Nations and charged with the goal of stabilizing exchange rates and assisting in the reconstruction of the world's economic systems following the devastation of WWII.  It originally involved some 45 members, but through the years has grown to 186, but, by far the most influential and greatest contributor is the United States of America. Our concern in terms of the precious metals is this:  as the IMF has grown through the years, the demands on it to finance ever-greater measures around the world has also grown.  Since it has no income-generating capacity of its own, there are only two sources of income now available - and we at TMR believe both sources play into our argument for strengthening precious metals prices down the road.  As we have seen through the years, particularly in the 1970s and again during the past couple of years, one of those sources is the periodic sale of its gold assets, originally contributed by founding nations during the post-war period.  As we have noted in previous articles, we regard the auctioning of those gold holdings to be long-term positive for gold as it releases the yellow metal from weak hands and places it in stronger hands. The second means of obtaining funds to disburse according to the organization's priorities is to levy on member nations to contribute their host currencies or to purchase the IMF's self-created Special Drawing Rights (SDRs), which are literally a completely artificial currency created entirely by the IMF itself.  Accord to the organization's own records, it is the United States that is by far the largest contributor (purchaser?) and this is, in fact, a major draw-down on the assets of America.  However, America is already deep in debt, already drowning in deficits and, therefore, utterly unable to contribute their IMF portion from current earnings or assets and, therefore, must enlarge their already-significant levels of debt, deficits and currency creation.  Ergo, we believe the IMF's requirements are an additional force which will drive gold and silver higher over time. What is most interesting to note is that during the past year - particularly since the ascendancy of Barak Obama - the reach of the IMF has expanded enormously.  It is now the 'critic of choice' when international financial directives are to be publicized, it is the arbiter of what information should be distributed to the world's media, and we fear it is in the process of becoming a virtual supra-national international financing and regulatory body, almost a de facto central bank about to acquire international enforcement authority. This growing role of the IMF is clearly evident in both the number and scope of its press releases during the past few days.  Most importantly, they have been issuing warnings about the situation regarding Greece's debt and, in their latest release stated, "...Greece's upheaval could mark the starting point of a new phase in the global financial crisis", also warning that, "...debt levels among advanced countries have already risen to levels not seen since the end of WWII."  The IMF has also taken on the role of an international economic forecaster and commentator with their statement that they have cut their growth estimate of the British economy for 2011.  According to the UK Telegraph newspaper, "...The Washington-based fund said it expected the UK economy to grow at 2.5% next year compared to an earlier forecast of 2.7%..."  Most interestingly, the IMF also commented on the forthcoming British election and they warned that if the election produced a 'hung' Parliament (minority government), Britain might face severe problems and, according to the Telegraph, "...the IMF would have to tackle our problems for us."  Does that sound like a benign agency to you?  It doesn't to me.  In fact, it sounds like a hugely influential body ready to exercise its growing influence in a coercive, powerful manner, whether the Brits like it or not.  We ask this simple question:  "Is this kind of statement an opening salvo toward the introduction of the concept that the IMF is clearly moving toward becoming a powerful, one-world type of international financial governing body?" As if that were not enough, the IMF is telling the G-20 organization of advanced economic nations that they should enact laws requiring the imposition of two new taxes on the banks of various nations.  The first would be to enforce a "financial stability contribution" based on the size of their balance sheets and the second would be a "financial activities tax.", levying against excess' profits, bonuses, etc.  G-20 finance ministers will be meeting this Friday and the new taxes will definitely be on the agenda. This organization bears watching.  It is almost as if a new and powerful organization is taking place which could have the capacity of undermining the authority of individual nations and replacing it by a powerful international body.  We believe that kind of radical change, if it takes place, would be unsettling for millions and upheaval has usually been a positive ingredient of past bull markets for gold and silver. .................. We are watching a story develop gradually, one with seemingly irresistible power, which we truly regard as the greatest threat since WWII, capable of opening the doors for a worldwide military conflict. The threat is what could ensue should Iran continue its progress toward developing weapons-grade uranium while also acquiring the means to deliver nuclear warheads over great distances.  The situation is made more ominous by the degree of rhetoric emanating from Tehran aimed at Israel, rhetoric which threatens to incinerate that small nation.  Just in case anyone has failed to look at a map lately, the State of Israel, even including the West Bank, is so small that it could be tucked into a small corner of a province such as Manitoba or Saskatchewan or a state such as Montana or Arizona.  Therefore, one or two nuclear explosions similar to those in Hiroshima or Nagasaki would wipe out huge portions of their population. Obviously, Israel believes they cannot tolerate such a risk and they cannot understand America's lack of energy in demanding Iran abandon such plans.  In fact, the Wall Street Journal just published an article this morning indicating that American officials seem willing to accept Iran as a nuclear power, believing that it can be 'contained'. It is our opinion that, aside from any other consideration, as this situation grows toward crisis levels, the precious metals trading community will be paying close attention. As of 9:30 AM PDT, precious metals continue to rebound after their sharp losses following the Goldman Sachs story of a few days ago.  Gold is now once again nearing $1,150 and silver has moved above the $18.00 per ounce level.  Platinum and palladium are also higher with the latter reaching its highest level of the year, $567 per ounce.  Base metals are higher on balance as are mining share indexes while crude oil is close to unchanged.  Financial markets are mixed with the Dow Industrials up by about 20 points while Canada's TSX is off by about 40.  Currency markets show little strength in either direction so far today. - - - - - All quotes US$ unless otherwise noted. Next Melman Minute scheduled for Friday, April 23, 2010.         ◄  Previous Minute                                                                                                        Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.