U.S. Rep Ron Paul Acts to Counter I.M.F. and abolish Fed.


Dear fellow members of GATA,

A few days ago, in a commentary The Challenge Facing GATA, I shared how
Princeton Economics International has forecast that gold will sink to the $200
range by mid-2000 -- after which 'a gold bull into 2003 and perhaps 2007 with
the price of gold moving to $1000' is anticipated. I had received the
information from GATA member Bruce Pugesek, who is a subscriber to the PEI
service, not part of the outfit, as I had thought.

I also shared how Martin Armstrong, who is from PEI, reinforced the down on gold
in an e-mail in which he let me know that the conspiracy is not against gold but
against paper money. "The reason why the Euro is only an electronic form of
money for the next 4 years," he wrote, "is because this is an attempt to move to
purely an electronic currency using debt and credit cards."

Martin Armstrong went on to state emphatically, "Gold has simply been
demonitized by the central banks and its liquidation will continue. They have no
plan to ever return to a gold standard and hence its demonitzation continues
through its liquidation. Gold has ceased to be a monetary base unit of value and
it has simply become an investment."

I asked for and received responses to this from GATA members.

Ian Shaw put PEI's forecasting into perspective. He sent me an extract from a
London seminar given by Martin Armstrong on 14 May1997, which shows that
"forecasting is not an exact science and no one has a monopoly on success in
this department, including PEI."

Ian wrote, "The extract relates to gold only, but I suggest you pick up the
whole transcript at PEI's website in the section entitled 'transcripts' in the
left hand section. The comments on oil are particularly interesting." He went on
to ask, "Since the transcript still appears on PEI's website, does it reflect
their current thinking and, if so, how do they reconcile it with their present
predictions on gold and other commodities?"

This is what Martin Armstrong had to say about Gold in May 1997:-

"In the 1970s wheat prices peaked in 1974 and crude oil peaked at that time,
however, gold did not peak until 1980 at the end of the entire inflationary
cycle. Most people in the gold market are currently extremely bearish. We see
central bank selling and producer selling, etc. From a timing basis gold does
look as though it is likely to continue to fall going into early next year
(1998) before we will see a change in trend. We see that many producers are
making the wrong mistakes at the right time again. In Australia gold is
currently below production costs and we are seeing a great deal of forward
selling by the producers at this time. Accordingly, this is putting a huge short
position in the market. Once we get closer to EMU we will also see the central
bank selling dissipate.

"The one thing that we see at this stage that is very encouraging for gold is
the fact that it appears as though it has made its low in terms of all
currencies. Gold made a low in terms of US $s in 1985 and just finally hit its
low in terms of yen and European currencies in 1995. We have always found that
the difference between a bull market and a mere reaction is very clear. A bull
market is something that takes place in terms of all currencies. An example of a
reaction is when gold rallied to $500 in 1987 in terms of US $s. If you look at
a chart of gold in terms of D marks you will not find this rally. So it appears
that the lows are finally in place and we just need to see the sentiment begin
to change. As I mentioned earlier, we will begin to see more and more concerns
over EMU, taxation levels, social program funding. All of these concerns
combined with help change the sentiment towards gold. One of the reasons gold
rallied from $280 in 1982 to $500 within three months was rumors of social
security going bust and also rumors that Chase Manhattan was going to go bust
that summer.

"Gold does not rally due to inflation. Our research has shown that gold declines
with steady incremental inflation. All the major rallies in gold have taken
place during periods of uncertainty. Gold is not a hedge against inflation and
never has been. Instead gold is a hedge against uncertainty. So we believe that
1998 is going to be the turning point for gold and it should then continue
higher into around the 2003 time period. Again, our forecast might sound a bit
crazy but our computer is showing that gold could reach at least $1000 and
perhaps even $1200. If you consider that the 1980 high adjusted for inflation is
around $2000 today, so in nominal terms reaching the $1000 level is only a 50%
retracement. If we do see a real crisis in confidence going into 2003, we could
then possibly see $4000 to $5000 gold because the value of currency at that time
will also be in question.

"I dont believe that this is a doom and gloom scenario for the future. If you
understand how capital moves and where it is going, you can make a lot of money.
You simply have to realize that it is going to be a major factor in the markets
over the next several years. If you continue to trade based on the old fixed
exchange rate theories, you are going to be caught on the wrong side of the
market every time.

"The marketplace has become very fluid. I believe that by 2003 we will be headed
towards some type of global fixed exchange rate system or some type of world
currency similar to the old gold standard. Companies and governments will no
longer be able to handle the foreign exchange fluctuations. I also believe that
after 2003 we may be able to experience the same type of economic stability that
we enjoyed during the pre-World War II period."

- - - - -
So what happened between May 1997 and whenever it was that PEI revised its
forecast. Judging from what Farfel has written with regard to Martin Armstrong's
letter it would seem that M.A. has joined the "goon squad" going short on gold.

Farfel writes:

When the man states that there is no conspiracy against gold, it is
analogous to Himmler declaring that there are no concentration camps in Germany.
After all, Armstrong IS part of the "gold short cartel" and certainly one of its
leading mouthpieces in his relentless efforts to
expose gold's current severe "overvaluation."

Yet, in his own unique way, he is "charitable" to long suffering
goldbugs. He is willing to acknowledge the existence of conspiracies,
although in this case, he declares there is a conspiracy against paper
money with the ultimate aim of "doing away with the underground economy" in
order to increase the collection of taxes.

Of course, by stating that the global economic powers wish to do away with paper
money, it naturally follows that they particularly would like to do away with
the clunky precious metals (as money). So, the logic of his argument dictates
that we accept that gold is certain to drop in price...and drop very hard (all
the way to $200 in the short term!). However, lest goldbugs become unduly
disenchanted by his pessimistic prediction of gold's price, he offers them a
glimmer of hope in stating that gold should rise to $1000 by the year 2003!

Now, don't ask me by what bizarre logic he figures gold will resurrect
itself from its dive to $200, especially since he declares that the
global economic powers are intent upon demonetizing the metal. If such
demonetization were to occur, then conceivably 40,000 tons of gold would be sold
into the market as a commodity by Central banks, enough metal to supply normal
world demand for the next fifteen years.

Despite the fact that the Bank of International Settlements transacts in
gold francs, Armstrong insists that gold is no longer a monetary base
unit of value; rather, it is now simply an investment. Yet, given his
certitude that gold is heading for 200 shortly, he must certainly regard
it as one hell of lousy investment.

In effect, Armstrong speaks fluently in a language formerly known as
Orwellian "Doublespeak" but in contemporary American parlance, now known as
"Clintonese." It is essentially impossible for him to discuss gold in rational,
intelligent terms without introducing all variety of contradictory, oxymoronic
concepts. The only reason Armstrong insists gold will fall to 200 has more to
do with protecting his precious metal short positions than in any true belief in
the prattle he spouts.

I think Armstrong is fundamentally an intelligent fellow who, along with his PEI
clientele, got involved on an increasingly grand scale in the gold/silver carry
trades. Most likely, they probably embarked down the PM shorting road in the
belief that these carry trades would ensure a continuous stream of profits that
could be used sometime in the future to repurchase much cheaper metals in order
to close out their loans.

What they never counted on were the complications that the year, 1999, would
present to their scheme....specifically, exponential increases in PM demand
owing to Y2K concerns.... a potential stock/bond market crash causing a flight
from paper to assets possessing intrinsic value.... a Balkan War with the
potential to create a Russian/Chinese rejection of US Dollar holdings in favor
of increased PM holdings... a developing international paranoia that might
conceivably culminate in a desperate, "Every Central Bank for Itself!" scenario.

No doubt this is a critical, "left field" year for Armstrong and his PM
shorting friends. The calm, prosperous linearity of the Nineties seems to be
falling apart in this most unusual, turbulent, pre-Millenial
year. In such a volatile environment, it takes a lot of (forgive my use
of this word) CONSPIRACY to keep the gold price moving in a downward path. Yet,
for Armstrong and friends, it is imperative the metal fall in value. My own
guess is that gold at 200 is probably the price at which the metal shorts feel
complete capitulation will occur by all goldbugs, at which point they can swoop
in and obtain at least 8000 tons of metal (via failed producers and Central Bank
panic sales) in order to cover their enormous gold loans accumulated over this
decade via usage of esoteric gold-based derivatives. Of course, once those
loans are covered, then it will "make sense" to run the price of gold back to
$1000 or higher. Hence, Armstrong's declaration that gold will see $1000 in the
year 2003 or shortly thereafter.

- - - - -
To the lighter side, Glen Williams wrote:

Holy cow batman!! thieves are plundering gotham city! i hope pei is wrong about
the price of gold. i am getting a bit depressed about the negative slant on
gold. i have had a dream where gold shot up $40 from 283 to 323, but no
indication of that so far in reality. all of your efforts are much appreciated
to get a handle on this slimy mess and expose it! (for otherworldly thoughts on
gold moving up see www.dreamtime.net).

Well, let's hope your dream comes true soon, Glen.

- - - - -
In The Challenge Facing GATA commentary, I also wrote about the Prime Minister
of Canada, Jean Chretian, adding his voice to the chorus, "The I.M.F. should
sell some of its gold to help the poor countries."

Ken Reser, the Yukon Gold Miner, was so angry about this, he immediately
e-mailed to Preston Manning the leader of the official opposition here in
Canada. "I sent him a very long and detailed account of Gata and my feeling on
Jean Cretiens' support of IMF Gold sales, along with facts regarding ex P.M.
Brian Mulroneys' selling off of Canada's gold reserves before becoming a
director of Barrick Gold.

"I have advised Preston Manning that the Reform Party of Canada needs to have
the Finance critic get an education on the workings of Gold. If raised in the
house of commons, Canada's Gold Reserves being sold off could be the biggest can
of worms the Liberals and Tories ever faced. We'll see how Reform respond as
this is my third and most extensive exposure of these matters to Manning. He has
replied before but nothing further was said. Now I have others following my lead
with the emails to Reform and he might take the bait yet!!!!!!

- - - - -
Then Jim Lindsey and Doc Gary Matthews emailed me that Ronald Cambre, the
chairman, CEO and President of Newmont Mining has made strong representations
through the media that if the International Monetary Fund really wants to help
undeveloped countries, it should give them gold to help them stabilize their
currencies. Cambre has let it be known that he has had talks with the US
Congress, the Gold Institute and the World Gold Council about this proposal.

I hope to be able to bring you more information about this soon.

- - - - -
Good friends, it is Maudy Thursday and my focus is shifting to what is for me of
ultimate importance the unfinished business of Jesus, reflected this Easter
weekend in the crucifying situation in Kosovo.

I remain, for God and Gold
yours truly,

Boudewijn Wegerif (Bodwin)
Moderator GATA E-mail Group