India and China want IMF to sell all of its gold

The IMF holds a staggering 3200 tonnes of gold in its reserves which is sitting idle while the world's poorest are facing the fallout of the global economic crisis and the IMF itself is facing a liquidity crunch.

A report in the Financial Chronicle says that draft papers have been exchanged between Delhi and Beijing proposing that the IMF sell off its huge gold reserve which is an idle asset with a book value of $9.3 billion. But which would fetch close to $100 billion at current prices. Both countries are proposing that this amount be used to improve IMF's liquidity as well as to help the world's poorest countries tackle poverty. An earlier announcement after the G20 summit in London, by IMF, to sell gold to raise $6 billion, caused gold prices to slump. Now this proposed sale is going to be 16 times bigger than the earlier proposal.

This might seem bearish for the price of gold in the short term, but it is being proposed that the sale be staggered over a two or three year period. And if this sale comes to pass, most of this gold will never enter the retail market. Central banks of China, Saudi Arabia, Russia and India will use their dollar reserves to buy it off and increase their gold reserves. This will be a wise step towards a future where the USD will be vacating its seat as the world's reserve currency. One or some or all of the above countries, with some sort of understanding amongst them, may provide an alternative with a partially gold backed currency.

This sale if approved by the member countries of the IMF will improve its short term liquidity and will remove the pressure on both China and India whose economies have grown substantially in the recent past, to finance it.

Creative thinking and education

I had the pleasure of interacting with a young educated couple during a train journey recently. The husband was working for a BPO, while the young lady had done her masters in history and was studying towards getting a Ph.D.

What was disturbing was her reason for pursuing a Ph.D. According to her, she was doing it to get a job teaching history to undergraduate students. What was apparent was the clear lack of critical thinking on her part. She had accepted everything that had been taught to her unquestioningly during her studies earlier and was doing the same with the preparation of her doctoral thesis. Especially with a subject like history, which is very subjective and open to different interpretations according to the ideological leanings of the interpreter.

Our current education system encourages regurgitation of prescribed information and discourages critical thinking. Compare that to the objectives of an Australian school that I received in an email from Sanjeev.

"We want our students to become lifelong learners who are reflective, creative thinkers, as well as responsible and active citizens."

He has further proposed that the following is included in FTI's education policy:

"FTI believes that school education policies should ensure that all school students in India become lifelong learners who are critical, reflective, creative thinkers, as well as responsible and active citizens."

What will be required is the complete overhaul of the education system to ensure that not rote learning or cramming but creative thinking is rewarded. This is the best possible path to create a better citizenry for the future. And this process will have to begin with the educators, not the students.