Why are gold and bonds doing so well together?

Section:

2:54p ET Saturday, May 24, 2003

Dear Friend of GATA and Gold:

Given the likely lack of market commentary and news over
the long holiday weekend in the United States, maybe the
exchange below will be a reasonable substitute.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Dear GATA:

Thank you for your continued work as a conduit for
the kind of information provided by the Insight
magazine article about the "strong-dollar policy."

It's reasonable to suppose that the formulators of the
"strong-dollar policy" hoped it could be sustained in
perpetuity. But they probably would have asked
themselves, "What would be the consequences if it
doesn't continue indefinitely?"

It's likely that the policy gurus felt that the downside
damage could be contained by the following
mechanism.

If the overseas appetite for dollars eventually faltered
because of a massive, unsustainable increase in
irredeemable debt, the debts would have been
accrued in highly valued dollars but would be paid
back -- if at all -- in cheaper dollars. The
purchasing-power spread between the inflow of
high-value dollars and the eventual outflow of
cheaper dollars constitutes a kind of systematic theft
from holders of the debt, including those around the
world foolish enough to believe that the United States
is sincere in its international friendships.

I can't believe that policy makers didn't consider this
possible result if and when demand for dollars came
to falter. They further must have hoped that the
importance of the United States as the consumer of last
resort would make it "too big to fail," thereby ensuring
that addiction to ever-increasing debt was not "our"
problem but was instead a problem for creditors.

-- D.O., England

* *

Dear D.O.:

Thanks for your note. Yes, the gold price suppression
scheme and the "strong-dollar policy" are essentially
the expropriation of the world by the United States,
or a tax by the American empire (I hate that word
and concept but I'm afraid nothing else will do) on the
rest of the world. The rest of the world is free to
attempt to escape, but it's like the old saw about
banking: When you owe the bank a thousand dollars,
you're under the bank's thumb, and when you owe
the bank a million dollars, it's under YOUR thumb. U.S.
creditors can escape now only by putting most of their
foreign exchange reserves at risk.

What did the originators of the "strong-dollar policy"
think about its way of ending? My suspicion has
been that the policy never looked beyond President
Clinton's re-election in 1996 but got out of control
because it produced so much free money for the
Wall Street interests that had come to bankroll
both major political parties in the United States.

If there is a change in the policy now, as seems
likely, it may result from warnings from foreign
governments that have the power to crash the
dollar by converting their dollar reserves abruptly
-- warnings that the dollar exchange rate must
be adjusted downward gradually with the
co-operation of the U.S. government or it will be
done violently without that co-operation, with
great dislocations in the U.S. and world economies.

This is essentially what the GATA delegation led by
GATA Chairman Bill Murphy told House Speaker
Dennis Hastert and other members and staffers of
Congress in private meetings a few years ago when
we presented them with copies of our "Gold Derivatives
Banking Crisis" report.

Information that came to us subsequently and indirectly
made clear that the higher officials to whom we had
spoken had known something about the problem already
and met with us largely to determine how much WE knew
and how much had leaked into the public domain. That is,
the problem was considered a matter of U.S. national
security. In a way it was such a problem, except that in a
democracy public economic policy must be public. Of
course it was a problem of INTERnational economic
security too, and thus doubly deserving of disclosure.

GATA continues to publicize the gold price suppression
scheme and the dishonesty of the "strong-dollar policy"
in the hope of ending U.S. economic imperialism and its
expropriation of the world, particularly the developing
world, and ending its reciprocal threat to U.S. economic
security. Of course GATA hasn't quite achieved that yet
and so maybe the best GATA can offer to those who are
listening is "sauve qui peut."

A good way of accomplishing that is to put a substantial
share of one's wealth into gold and silver -- physical
gold and silver in possession or allocated gold and
silver in the vault of a trusted depository, not "paper
gold." People listed below may be relied upon for that
purpose.

-- CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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----------------------------------------------------

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