Clinton administration goes to war against GATA


Copyright 2000
Not to be reproduced without permission


By Bill Murphy

Spot gold $275.30, down 20 cents
Spot silver $5.11, up 9 cents

The CRB index continues its relentless move higher,
closing at 221.15, up another 1.17 today, well above
its 200-week moving average number of around 219. Oil
has come all the way back from its normal correction,
topping $30 per barrel at one point today. Gasoline is
trading near $1 on the Merc.

The Fed hiked its Fed fund rate a half point this
afternoon because it sees inflation in the pipeline.

Physical gold demand is very solid, according to all
our sources.

All of this and gold continues to weaken.

Australia is a commodity country. Commodities are going
up. The Australian dollar has been trashed and sits
below 58 on the Chicago Merc. It is hard not to
speculate that is under pressure from traders in the
United States (there have been news service reports on
this) whose agenda is to keep that currency under
pressure so that Australian gold producers will be
encouraged to sell forward and bring gold supply to the
physical market, thereby depressing the price.

Gold is priced in dollars. A 10 percent move down
against the dollar (64 to 58, for example) is the same
as the price of gold rising $28 when it comes to
selling forward.

Who might some of these people be?

Another blast from the past: (January 2000) "We believe
that the incredibly high liquidity of the gold market
suggests that a net short position is the natural
market equilibrium for the time being. The reason is
that gold can consistently be borrowed much cheaper
than money. For example, it is currently possible to
borrow gold for one year at a lease rate of 1.8 percent
while a one-year bond is yielding 6.6 percent.
Borrowing gold, selling it, and investing the proceeds
at the risk-free rate is an attractive trade.
Essentially, the price of gold could rise 4.8 percent,
or about $13 per ounce, and a bearish speculator would
still break even on a short position established today.
Clearly, certeris paribus, the risk/return profile of
the gold market favors the short side. We expect this
to continue for the foreseeable future." -- Lehman

It is hard to know whether Lehman is part of the gold
cabal, but it would appear that they know the drill.

The Gold Anti-Trust Action Committee today distributed
a press release about our new open letter advertisement
in Roll Call and our trip to Washington last week,
noting that we met with, among others, U.S. Rep.
Spencer Bachus of Alabama, chairman of the House
Banking Committee's Subcommittee on Domestic and
International Monetary Policy, which has oversight of
the gold and silver markets. That subcommittee is the
right place for our gold market concerns.

Frank Veneroso and Reg Howe are working up a storm with
follow-up material for the committee.

It is clear that the United States government is
instrumental in holding down the gold price. So it is
easy to understand why Lehman Brothers can come out
with such audacious commentary as presented above. The
reasoning behind our more developed understanding about
U.S. government's gold involvement will be divulged at
the appropriate time.

The stakes are huge.

What we have presented Congress could affect: the
composition of the next Congress and the legislation
for the years to come; the presidential election; the
Clinton, administration, which could be burdened with
another scandal; and British Prime Minister Tony Blair
and his Labor government, since the National Accounting
Office in Britain is already investigating the Bank of
England's gold sale. Among other things, the NAO wants
to know on whose advice the bank decided to sell more
than half the country's gold reserves....

Fed Chairman Alan Greenspan and Treasury Department
officials have denied direct involvement by their
agencies in the gold market. But we don't know about
the Exchange Stabilizaiton Fund, and we don't know if
they might be using secret offshore accounts to hold
down the gold price. It is even possible that they are
going through the Bank of England with their trading.

Many congressman have been told that the gold market is
not being manipulated by the U.S. government. If, in
fact, some faction of the U.S. government really is
holding down the price of gold, Greenspan, Treasury
Secretary Lawrence Summers, and President Clinton are
going to have some serious explaining to do.

It would make their support for the International
Monetary Fund's gold sales last year look very
politically motivated, to put it kindly. Thirty-six of
41 poor gold-producing countries opposed the IMF gold
sales because a low gold price was badly hurting their
economies. What will the Black Caucus, which went
against the Clinton administration on the IMF gold
sales, say if they find out that a Democratic
administration was responsible for creating such misery
all over the world?

Something stinks to high heaven about the $38 billion
of notional off-balance-sheet gold derivative contracts
on the books of J.P. Morgan at the end of 1999. It took
aggressive bullion banker Chase Bank 14 years to build
its book to $22 billion, according to Frank Veneroso.
But Morgan went from $18 to $38 billion in six months.
More on this soon.

But allow me to let you in on some of the inside scoop
here. Over the past year the name Ted Truman has popped
up in our circles as a snoop for the Central
Intelligence Agency. That is also the word around
certain politicos in Washington. He used to work for
the Federal Reserve but had a falling out with
Greenspan. Vice President Al Gore picked him to go work
at the Treasury Department, where he is employed at the
moment. After one of our meetings in Washington last
week we met with one of GATA's support contacts and
identified the people we had met. Immediately he told
us to be careful with one of them, because he has "a
direct line to Ted Truman."

That sets the scene.

Yesterday I almost fell off my chair when GATA
Treasurer/Secretary Chris Powell faxed me of a copy of
a letter he had just received from none other than Ted
Truman at the Treasury Department. The letter was dated
May 10, the day of our meetings in Washington. We did
not get out of our meetings that day until 3 o'clock.
Powell had written letters to the Treasury Department
months ago, as had others in GATA's behalf. I just
looked in our files and found the following

-- A letter sent to Sen. Mitch McConnell of Kentucky
from Jeffrey Rush Jr., inspector general of the
Treasury Department.

-- A letter to Dale Schnitzler and Rep. Sherrod Brown
of Ohio from Marti Thomas, acting assistant secretary
of the treasury.

-- A letter to Rep. Charles T. Canady from Linda L.
Robertson, assistant secretary of the treasury.

-- A letter to Sen. Christopher Dodd ("concerning
questions from Mr. Chris Powell") from Michelle A.
Smith, deputy assistant secretary of the treasury.

-- Two letters to Treasury Secretary Lawrence Summers
from Sen. Joe Lieberman of Connecticut.

-- A letter to Senator Lieberman from Alan Greenspan in
response to GATA's questions in our first open letter
advertisement in Roll Call.

All these but no letter from Secretary Summers to
anyone, not even to Senator Lieberman. Secretary
Summers had everyone else put his name down, but not

There was plenty of correspondence to Chris Powell over
these past months by other Treasury officials in
response to his request for answers to the questions
GATA posed in Roll Call.

It is very odd then that this supposed CIA snoop (with
the proper name of Edward M. Truman) at the Treasury
Department writes to Powell -- obviously immediately
after being informed about what we had said at one of
our presentations in Washington. Truman's letter itself
was in the same form as most others received, except
for one thing. It began: "Secretary Summers has asked
me to respond on his behalf."

I cannot help but think that Secretary Summers is the
ringleader of the U.S. gold trading operation, having
taken over from former Treasury Secretary Rubin. The
evidence is starting to mount. If that is the case and
Congress finds this out, it could open up a can of
worms, and who knows what else Congress will find?

The Gold Anti-Trust Action Committee and our supporters
could be the Democrats' worst nightmare, and maybe Tony
Blair's too.