Important article about gold consumption and short position

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By Reginald H. Howe
www.goldensextant.com
February 12, 2001

Not until 80 years after the war began did Thomas Pakenham publish
his authoritative history, "The Boer War" (Weidenfeld &
Nicholson, 1979; Abacus paperback edition, 1992, reprinted 2000, to
which all page cites refer). Relying on material largely unavailable
earlier, Pakenham emphasizes at the outset that he uncovered four new
themes. Two of them are particularly relevant today, as is a third
point summarized by the heading "Milner's War," given to
Part 1 of the book.

Cecil Rhodes conceived and funded the notorious Jameson Raid, now
generally perceived as the war's opening battle, although it
preceded the declaration of war by almost four years. However, prior
historians assumed that Rhodes, Alfred Beit, and Julius Wernher, who
collectively controlled the richest gold mines of the Rand, were not
directly involved in causing the war in 1899. "But directly
concerned they were," says Pakenham (p. xvi), who adds (pp.
xvi-xvii): "I have found evidence here of an informal alliance
between Sir Alfred Milner, the British high commissioner, and the
firm of Wernher-Beit, the dominant Rand mining house. It was this
secret alliance, I believe, that gave Milner the strength to
precipitate the war."

The gold mining companies were prepared to endure the certain
disruptions and costs of war to secure two important long-term
advantages they expected a British administration to deliver: 1) more
favorable tax treatment than under President Kruger's Boer
government; and 2) a plentiful and reliable supply of cheap black
labor. "What made [the gold mining moguls] such wonderful allies
was that they repeated over and over again the dictum that there
would be no war -- that is, if Britain called Kruger's bluff and
sent out the troops," writes Pakenham (p. 89). He adds (id.):
"Possibly Rhodes believed his own forecasts. But Beit, Wernher,
and Fitzpatrick knew the Boers. The despatch of British troops would
precipitate war."

The second new theme underlined by Pakenham is that the heaviest
burden of what contemporaries labeled a "white man's war"
fell on South Africa's black and coloured populations. Not that
the main protagonists did not suffer enormously. In men, money, and
materiel, it was Britain's costliest war since the defeat of
Napoleon, not to be outdone until World War I. Relatively speaking,
the costs to the Boers of their "Second War of Independence"
were even higher. But, says Pakenham (p. xvii): "In general it
was the Africans who had to pay the heaviest price in the war and its
aftermath." Adding insult to injury, in the Treaty of
Vereeniging, ending the conflict, the British agreed to a provision
postponing the franchise for blacks and coloureds until after the
introduction of self-government, when of course the local white
population would not grant it.

Perhaps the most startling point to emerge from Pakenham's book is
that absent one man, Alfred Milner, British viceroy of South Africa,
the war would never have occurred.

Motivated by his belief in Britain's imperial role and a personal
ambition to rank among its heroes, Milner hoodwinked his own
government into waging war over a controversy that it desired to
settle by negotiation and compromise. The public justification for
the war -- to secure the franchise and fair treatment for the
Uitlanders, white and mostly British immigrants who had followed the
gold rush into the Transvaal -- was largely a sham. Worse, with the
aid of a few like-minded friends as well as the gold-mining
interests, Milner deceived his superiors, including the colonial
secretary and the prime minister, regarding the actual course and
content of his negotiations with the Boer government. Referring to
the war as "Milner's War" is no exaggeration.

About the time he assumed office, President Kennedy remarked that
modern statesmen ought to read Barbara Tuchman's "The Guns of
August." Kennedy's successful handling of the Cuban missile
crisis suggests that he profited from his own advice. Pakenham's
"The Boer War" is similar must reading for anyone concerned
with modern South Africa or today's gold market. Against this
history, the gold price fixing allegations of my complaint in U.S.
District Court in Boston are scarcely far-fetched. Rather, they read
like a new variation on an old theme: the plunder of South
Africa's gold reserves for the primary use and benefit of British
and other outside interests.

The gold cabal orchestrated by top officials of the Clinton
administration and the Blair government, with maestro Alan Greenspan
and assistant Eddie George directing the BIS ensemble, bears uncanny
resemblance to the machinations that brought on the Boer War.
Motivated by ambition and greed, cloaked in deceit, both schemes set
political power and private profits as their goal. Both required
cunning, Machiavellian leadership. Elements of Milner are readily
apparent in Greenspan, self-described as "among those of us
engaged to replace [the gold standard]" -- that is, to create the
economic version of alchemy. Reeking of world class hypocrisy, the
International Monetary Fund gold sales were no more proposed for the
benefit of poor countries in sub-Saharan Africa than the Boer War was
prosecuted to secure the franchise and other democratic rights for
the Uitlanders.

When the British lion roared its defiance of Hitler through the mouth
of Winston Churchill, South Africa stood by it, notwithstanding
painful memories of the Boer War. But the British lion is not like
the African lion from whose paw Androcles pulled the thorn. Rather,
the British lion displays today the same morality that it seems to
have taught its most famous Rhodes scholar, recently departed from
the White House: "What have you done for me lately?"

Speaking at the Indaba African Mining Conference last week, one
African government minister warned that democratic governments cannot
expect to take permanent root in developing countries unless they
deliver measurably improved living conditions within reasonable time
frames. Nor can they succeed unless they provide the basic building
blocks of republican democracy: the rule of law, free markets, and
sound money. Gold mining remains a mainstay of the South African
economy, which dominates that of the whole sub-Saharan region. It is
hard to imagine anything that would do more to stimulate economic
growth in the area than an increase in gold prices from the low
levels set by manipulation to their more natural equilibrium now
estimated by some at around $500/oz.

To most Americans, strong U.S. support both for the new multiracial
government in South Africa and for other African nations trying to
move toward stable democratic regimes appears unquestionably in the
national interest. Few would accept that U.S. policy in the region
should be hijacked by the Federal Reserve for the benefit of a few
bullion banks, let alone that the Fed and the Exchange Stabilization
Fund should conspire with the Bank for International Settlements and
the British government to manipulate the free market price of gold.
On the birthday of America's Great Emancipator, the new
administration in Washington should make clear that its policies
toward South Africa and its neighbors will be governed by the law,
the Constitution, and the national interest.

But it would be a mistake to conclude that the future of South Africa
or its gold mining industry rests in the hands of officials in
Washington, London, or elsewhere outside South Africa. It is a nation
rich in human as well as natural resources, and possessed of
considerable spiritual resources as well. More like the United States
than Canada or Australia, South Africa never lived comfortably with
the British lion, and completely withdrew from the Commonwealth in
1961. Its great military battles are its own, not engagements in
foreign lands on behalf of the Crown.

Of all the smaller nations in the world, South Africa is perhaps best
positioned to withdraw from the IMF and reestablish for itself a
monetary system linked to gold. In that event, South Africa's
national patrimony would not be dumped into the world market at low
prices rigged by others. Nor would its currency be battered below any
reasonable measure of its purchasing power parity versus others.
Rather, its gold would have to be earned by exports of goods or
services or purchased for investment on capital account. By adopting
a monetary system like that on which most of the developed world
developed, including the United States, South Africa might reasonably
look forward to following a similar path, and, at long last, to
extinction of the British lion on the Rand.