Mark Skousen''s newsletter plugs GATA

Section:

12:15a EDT Monday, June 7, 1999

Dear Friend of GATA and Gold:

Here is GATA Chairman Bill Murphy's speech to the
Northeast Investment in Mining Conference last Thursday
at the Marriot Marquis hotel in New York.

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

* * *

Much is being said about the Gold Anti-Trust Action
Committee, but unfortunately most if it has been sound-
byte analysis. So today I thought I would try and set
the record straight by explaining the background of
GATA, what we are trying to accomplish, and what it can
mean to all of you.

I have a background of some 25 years in the commodity
markets, but until the past few years had little
interest in gold. In my formative years I was fortunate
to be around and learn from some great economic minds.
One of the great commodity traders of all time is Dan
Ritchie, the chancellor of Denver University. I saw him
turn down both the Harvard chancellorship and D.K.
Ludvig's request to run his empire. Ludvig was probably
the wealthiest man in the world at the time.

There was Ray Dalio, who heads up the esteemed
Bridgewater Associates, who manage $15 billion
including some foreign government portfolios. And then
there is Frank Veneroso, whom most of you know from his
work in the gold market. But Frank is well-known to me
for his consultative expertise in advising the IFC, the
World Bank, and many governments in macro-economic
matters. The finance minister of Mexico called for "the
priest" (Frank) when they had serious financial
problems.

I learned a great deal about the commodity markets from
all of them, and having been a limit-position futures
trader myself at times, I think I have come to learn
something how about how markets trade.

So it was with great excitement and with the help of
Donald & Co.'s, John Brimelow that I decided to launch
my own financial website, www.lemetropolecafe.com,
around Labor Day last year. I was fortunate to attract
some outstanding financial commentators. Charles
Peabody, oft quoted by Barron's Editor Alan Abelson, is
one of the top banking analysts in the United States.
David Tice of the Prudent Bear Fund is constantly on
CNBC. Paris' Eric Barande is well-known among the
central bankers of France. And Dr. Neville Bennett
teaches Japanese history in Canterbury, New Zealand,
while writing for the National Business Review.

But more to the point of why we are all here today.
This past September the gold market looked to me like
it was poised for one of the big moves of all time.
Demand was strong and it appeared that the supply
plagues of the past couple of years were subsiding. Any
pre-EMU selling by European Central Banks would be over
by the end of they year. The Asian crisis and scrap
supply shock, which included a 300-tonne mobilization
from Korea alone, was behind us, and it appeared that
producer forward selling would be greatly slowed
because of the low gold price. That left only leased
gold as a major supply concern.

At the time I thought this might be a plus. Long-Term
Capital Management was blowing up. Over that summer we
had heard that they were short some 300 tonnes of
borrowed gold as part of a "carry trade." The gold
price started to rally toward $300 and we licked our
chops as we prepared for LTCM to buy back its
position.

Then the word spread that LTCM was let out of this
position in an "off-market transaction" -- a rigged
trade so that the price of gold would not shoot up.

The fall went on and every time it looked as if the
price of gold would take off, the same crowd of bullion
banks would knock it down. We then heard that this same
cartel was offering unheard-of relaxed credit terms to
producers if they would just sell forward. It was
reported to us that a well-known gold analyst was
requested by his higher-ups to tone down his
bullishness on gold. At the same time we twice received
feedback from very reliable sources that U.S.
officialdom asked Asian officialdom to refrain from any
aggressive gold purchases.

After all this the Counterparty Risk Management Group,
led by Goldman Sachs and J.P. Morgan, was formed to
manage risks in the financial sector along with the
likes of Credit Suisse. How long do you think it would
stand if Chrysler, GM, and Ford got together to do the
same thing in the automobile industry?

There was much more and I wrote a piece called
"Scandale Gold." Le Metropole member Chris Powell, the
managing editor of the Journal Inquirer in Connecticut,
said it looked to him like we might have violations of
the Sherman and Clayton anti-trust acts here, so we
should stop complaining and do something about it. That
is how GATA came into being.

We put out a press release and then I was on CNBC.
Coincidentally, Merrill Davidoff, a senior partner of
Berger & Montague of Philadelphia, one of the most
prestigious law firms in the U.S., had just signed up
at my website at the suggestion of John Devlin of Bema
Gold, so we contacted him.

Chris, GATA's hard-working Vice Chairman John Meyer,
and I flew down to Philadelphia a few days later. What
a dream! Merrill, who is here today, was very
knowledgeable about the gold market, and our other
attorney would be Jerome Marcus, just off of the front
page of The New York Times as it was discovered that he
was the behind-the-scenes brains of the Paula Jones
case. Further, Berger and Montague had been plaintiff's
counsel in such powerhouse cases as the Michael
Milken/Drexel Burnham case, the Exxon/Valdez case, the
Orange County case, and many others.

The clarion call went out for support from people all
over the world just like yourselves. Many of your
fellow gold shareholders and a few mining companies
quietly gave us the funds to retain this dream law
firm.

Then we needed a plan to seize the day.

Perhaps I have had too much idle time these past years
and watched too many movies, but after seeing the TV
serial about the great Zulu warrior of South Africa,
Shaka, I decided to fashion our battle plan after his.
To vanquish his foes, Shaka formed a diamond formation
that became an enveloping horn. We would do the same.

At the front of the diamond was our retention of Berger
& Montague. This firm is so highly regarded that our
adversaries and supporters alike would know that we are
for real. Those who might have information about
manipulation in the gold market might more easily come
forth and speak confidentially with our lawyers.
Merrill and Jerome would be available at times to fly
anywhere in the world to speak with those who have
information.

Merrill and Jerome told us: "This is a just case about
price-fixing. It goes on all the time."

Thus we would confront the colluders head-on with legal
power.

Right about then I was flooded with emails and amazed
at how many people said that threats would now be
coming our way. They questioned us whether this might
be too intimidating -- confronting Wall Street's
giants, the most powerful financial entities in the
world. The only way I could answer the intimidation
question was that everything seemed relative.

About 30 years ago I was playing wide receiver for the
Boston Patriots of the old American Football League in
a game against the Kansas City Chiefs. Over the middle
I went on a pass pattern when out of nowhere Hall-of-
Famer Willie Lanier punched me in the face. Down I
went. A bit dazed, I staggered back to my huddle. As I
reached the line of scrimmage, I looked up and saw 6-
10, 280-pound Buck Buchanan and 6-9, 300-pound Ernie
Ladd glaring at me. I thought that if these two both
hit me at the same time, I am a goner.

Now THAT'S intimidation! That was big way back then.

While proceeding with our investigation, we would call
for the left flank to flare out and start to encircle
those who have no regard for the free market. The left
flank would be a public-relations campaign that
targeted Congress. We would alert Congress to the size
of the gold "spec" borrowings and the gold loans. We
believe them to be 3,000 to 10,000 tonnes. Since mine
production in 1998 was only 2,529 tonnes, we believe
the gold loans have become too big to pay back in a
short time. They have now become a "systemic risk"
problem, and if they are not reduced soon, they could
cause another savings-and-loan type of financial
crisis.

I went to Washington and met with U.S. Rep. Jim Saxton,
chairman of the Joint Economic Committee, his staff
director, and their senior macro-economic adviser. I
also met with the senior counsel of the House Banking
and Financial Services Committee and the staff director
of the Capital Market Subcommittee, which I found out
is investigating Long-Term Capital Management for anti-
trust violations.

I urged them all to look into our contentions in the
most vigorous manner. I suggested that they quiz
Federal Reserve Chairman Alan Greenspan the next time
he testified before committee.

Whether it was a result of GATA's effort or not, the
following has occurred:

1. Saxton issued a strong statement against the IMF
gold sales the day after my visit. A well-known bullion
dealer analyst said that "GATA mugged Saxton" into
making that statement.

2. Greenspan WAS quizzed in his next banking committee
appearance about the very issues we raised. Some of his
comments are controversial, but he did say, "Gold
represents the ultimate form of payment in the world."

That is now on record and I feel reasonably confident
that we would not have that statement if it were not in
good part because of GATA's efforts. I would be also
remiss if I did not laud Larry Parks of the Foundation
for Monetary Advancement, who has been very effective
in this area.

The understanding by many market followers that the
gold market is being manipulated is spreading rapidly
now.

My namesake and technical analyst guru, John Murphy,
came out on CNBC and said he would not analyze the gold
market because it is manipulated.

And just last Friday I received this note from South
Africa.

"Dear Bill:

"Just thought I'd let you know that I'm noticing almost
daily in the South African press the odd mention of a
possible conspiracy in the gold market. Today, in a
widely read financial daily, the Business Report, we
have a nice 20-odd paragraph column on GATA, yourself
being quoted at length. It comes across quite well.

"The columnist says all we need to find now is the
smoking gun. Well, the way these things are being
discussed publicly lately, who knows? It might be soon.

"Regards,

"Francois."

Meanwhile and very curiously, the mainstream U.S. press
has refused to present our side of the gold story.
Ditto with the London press; the Financial Times of
London actually told a prominent gold analyst that we
were "dangerous" -- but to whom?

Yet, all in all, I would say the left flank has begun
to unnerve our foes. Outstanding progress is being been
made.

We have now unleashed the right flank and progress is
being made there too. The plan was to go to the gold
companies via the press and letters to their CEOs and
ask them to speak up for their industry, to take some
action, and to get behind us.

Now we realize the producers have a big dilemma. He's
called "Hannibal Lechter."

For the bullion bankers are eating the producer's
lunch. They are flooding the market place with gold
supply via 1 percent gold loans known as the "gold-
carry trade." They flood the media with bearish
propaganda which tends to feed on itself and scare the
producers half to death, pleading with them to sell
forward even at these very low gold prices.

The producers have been "silenced like lambs."

Why? Because Hannibal is their credit lifeline, their
banker. The gold producer privately loathes what is
going on, but fearing to alienate Hannibal, does little
or nothing about it. The result of that silence has
produced a slaughter.

Meanwhile "Hannibal Lechter" makes fat fees and a
fortune by investing his virtually interest-free gold
loans in other investment vehicles. How would you like
it if your papa came to you today and said, "Son, go
borrow what you want, practically no risk, practically
no interest, and invest it." How well do you think you
could do? If you had some bad debts that had to be
repaid, would that sort of proposal help you get back
on your feet?

"But Dad," you might say, "such a deal. How can that
be?"

"Oh, don't worry, Son. We'll make sure the gold price
does not go up for some time. You won't have to worry
about paying back the gold loan with a higher gold
price. Only some poor, gold-producing countries, gold
producers, gold miners, and gold shareholders will
suffer, and they don't matter."

Alan Greenspan's twice-made comment, on July 24 before
the House Banking Committee and July 30 before the
Senate Agricultural Committee -- "Central banks stand
ready to lease gold in increasing quantities should the
price rise" -- set the recent stage for this big-money
game and for the manipulation of the gold price.

The gold market manipulators have taken no chances of
losing control of this rigged market and money-making
bonanza. Their line of defense points -- first right
above $300 -- have ratcheted down to $296 and then
$290. But this scheme could blow up in their faces at
any time. The natural supply-demand deficit, which
Frank Veneroso thinks could be 1,500-2,000 tonnes this
year, is making it harder and harder to keep the price
down. For example, the natural supply/demand deficit is
four to five times the intended Bank of England sale.

According to Haruko Fakuda of the World Gold Council,
the British decision to sell gold was a "political
one." What does that really mean and why was it done?
Could it be that the manipulators were running out of
supply to hold the gold price down? Does the fact that
Goldman Sachs' international economist, Gavyn Davies,
just happens to be Tony Blair's economist, have
anything to do with this political decision?

That is too much to deal with here. Suffice to say we
have been very heartened by the recent comments coming
from leaders of the producing community.

Chris Thompson, chairman of Gold Fields, led off with a
comment about the dealers trying to talk the market
down by spreading unfounded rumors. That was followed
by John Wilson, president of Placer Dome, who spoke of
"malign forces" acting together to hold down the price
of gold.

We are asking all the gold companies to get behind our
big-tent campaign in some way. In addition to
conducting an investigation of the gold price
manipulation, we are lobbying Congress to vote against
the IMF gold sales. You might like to know that Tom
DeLay, the House power broker, is circulating a letter
right now about his grave concerns in this matter. He
joins congressional heavyweights, Jim Saxton, Tom
Daschel, and Dick Armey, who are opposed to the IMF
gold sales.

We also are pressing on with the banking committees,
feeding them information about the size of the gold
loans, and we are encouraging them to find out what is
going on here for themselves -- before a crisis
develops.

To do all this we need the support of the industry. The
World Gold Council is doing a fine job in promoting
gold demand around the world. But there are things we
can accomplish that are just too sensitive for the gold
council to touch.

We are asking the senior gold producers for some decent
financial support on a confidential basis, and we want
every gold company, no matter how small, to purchase
one of the fine-art limited-edition GATA prints. If
they cannot afford the $500, we are asking them to be
responsible for finding just one shareholder who can
afford it.

In this work of art, Absolut Vodka artist Alain Despert
has brilliantly captured the spirit of GATA. The people
in his painting are all of us. By taking our own
concerted action we can make a difference.

The diamond formation has just begun to turn into the
"enveloping horn." We believe that without this onerous
supply of borrowed gold it would take an equilibrium
gold price of $450 to $500 to clear the market. What
would that do to the share price of your favorite gold
company?

With your help GATA will surge forward. It is only a
matter of time before a John Dean comes walking in the
door or someone sends us a stained dress. The
enveloping horn will close in on the "Hannibal
Lechters." They will have to cover their shorts and
retreat out of the back end of our horn. The price of
gold will rise dramatically and then all of us here
will be the ones with the happy grin.

-END-

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