IN THE NEWS
A great example today of the children’s game Chinese whispers (or Telephone for our America friends) and poor journalism in the gold blogosphere (thinking the internet is about journalism is idealistic of me, I know). I’ll focus on Zero Hedge as the example because they are a high profile website from which many other bloggers and commentators pick up stories. Knowing how influential they are, you’d expect them to at least apply some basic journalism fact checking before breaking news.
Yesterday Zero Hedge posted
the following heading “Meet The Latest Converted Gold Bug: The IMF”. Its key “news” is this republished quote from a Commodity Online post
, also dated the 14th
“The International Monetary Fund (IMF) is planning to purchase more than $2 billion worth of gold on account of rising global risks.”
Rather than being the source, Commodity Online’s story is just a rehash of a May 12th Bloomberg story. Note that the above quote is Commodity Online’s take on the Bloomberg story, not a direct quote from the IMF.
Zero Hedge were aware of this, because they also quote directly from the Bloomberg story, but that is where they left what is quite significant news. As Zero Hedge themselves noted, the IMF had previously been selling its gold. You would think such a major policy shift would at least warrant some more investigative work. Apparently not.
What I found interesting in the Commodity Online story is this line: “Bloomberg quotes a report by an IMF staff while also adding that a $2.3 billion gold purchase is in the planning.” So this is Commodity Online’s take on the Bloomberg story but they don’t provide any more details on why the IMF has made such a dramatic policy shift.
I want to know more, so I go to the Bloomberg story. However, there is no mention of the IMF planning to buy gold in that story. The only mention of gold is “a profit of about $4.9 billion from gold sales”. Sales, not purchases. So where did Commodity Online get the purchase idea from? I’m aware Commodity Online is an Indian based operation, so I’m starting to think there may have been some language misinterpretation going on. But maybe they got it directly from the IMF.
The Bloomberg article doesn’t provide any direct link for their IMF quotes, just saying that “IMF staff wrote in a report released today.” So off to the IMFs press release page for something prior to May 12th. There we find “IMF Executive Board Reviews Fund's Income Position and Sets Margin for Lending Rate for Financial Years 2013-14” which makes reference to the “estimated net income of $2.3 billion” as reported in the Bloomberg article. There is no mention of gold in the press release, but two links are provided at the bottom, the key one being the 39 page “Review of the Fund’s Income Position for FY 2012 and FY 2013‒14”. A text search finds the direct IMF quotes Bloomberg used in its article on page 13, so I know this is the report that Bloomberg based their story on.
So I eagerly type in “gold” into the text search box, anticipating a revelatory explanation by the IMF for this significant policy shift in respect of gold, from which I will write today’ Blog Watch post. There are 46 references to gold, but alas, not one about gold purchases. The only references to gold are about gold sales, specifically: “Gold profits portfolio. A separate work program is underway, in the context of the work on the new Rules and Regulations for the expanded investment authority of the IA, to establish an endowment of SDR 4.4 billion funded with gold sale profits. The IA currently also includes gold windfall profits of SDR 2.45 billion, pending a partial distribution of the general reserve to the membership of SDR 0.7 billion to be funded with these resources and further discussions later this year on the use of the remaining gold windfall profits.10 Staff proposes that, consistent with the approach taken last year, the earnings from this portfolio (about SDR 31 million) be retained in the IA pending further discussions by the Executive Board. No Board decision is required for reinvestment of the earnings.”
Did your eyes just glaze over? And that’s the most exciting bit.
So what we have here is a dry Bloomberg story about the IMF and precautionary reserves with a side reference to gold, which is picked up and misinterpreted by Commodity Online, which is blindly picked up by Zero Hedge who doesn’t investigate it further because it confirms their pro-gold editorial position.
I’ll let Wikipedia make the final point “how easily information can become corrupted by indirect communication. The game has been used in schools to simulate the spread of gossip and its supposed harmful effects”.