Salon.com essay features GATA

Section:

By Bill Murphy, Chairman
Gold Anti-Trust Action Committee
July 30, 2000

The other day GATA's Gold Derivative Banking Crisis
report, which has been presented to high officials
of Congress and the staff of every House and Senate
banking committee member, made it on to ABC
television in Australia.

I just received this email from Michael R. in
Australia:

"No coincidence that the report got a brief show on
the ABC this week.

"Most of the relevant media know of the report and
some have even looked at it and of course a lot of
the guys at The Diggers and Dealers conference know
of the report. It remains extremely difficult to get
past the 'bunch of nuts' response. Still can't get
anybody in the media to look at it seriously. I mean
those wonderful nice folks at Goldman Sachs,
Deutsche Bank, et al. would never pull a shonky deal
to make a big quid. Never happen.

"There is, however, some light. This morning on ABC
radio the precious metals analyst from Salomon,
Smith, Barney (Australia) was asked: 'So you can't
see gold breaking $300 in the near future?' His
reply: 'That depends on who you believe regarding
the size of the shorts. If it is as large as 10,000
tonnes, then we could see a substantial rise' in
price. Now that would not have been said even three
months ago."

What is fascinating to me is that no one is willing
to debate GATA's claims or say specifically why we
are wrong. It is always the "they are the nuts"
comment, never an explanation. Nor has anyone called
me to dispute the GDBC report.

GATA and many of you are taking on the most powerful
forces in the world: part of the U.S. government,
allies such as British Prime Minister Tony Blair,
and the incredibly wealthy bullion banks. The
opposition, which has the mainstream U.S. press
following them, makes our task of exposing the truth
about the gold market a formidable one.

But it is winnable! More than that, because of the
Internet, we ARE being heard and we ARE making great
progress. We WILL win out -- that is, if all of us
continue to present the facts to responsible
journalists.

Exposure, exposure, exposure! That will do it for
us, and it is made simple for you to help out.

All you have to do is forward to other news
organizations the follwoing letter, which is being
sent to Ed Bradley of CBS' "60 Minutes" at his
request (and to personal contacts of GATA supporters
at The Wall Street Journal and Business Week). Just
gather the right news media email addresses and fire
them out. It would not hurt to send this to as many
gold companies as possible too.

This is the essence of the letter I am sending to Ed
Bradley of 60 Minutes. It has been edited to delete
certain sensitive information and details.

* * *

Dear Ed:

My sister, Kris Ferguson, told me of her
conversation with you at Dick B's dinner party in
Aspen and of your possible interest in the gold
market scandal.

The enclosed material will give you some idea of
what the Gold Anti-Trust Action Committee has done
to expose this fraud, which is hurting so many
unsuspecting poor gold-producing countries, small
gold companies, gold investors, gold miners,
geologists, and the public.

Because of the voluminous amount of material
pertinent to this story, I am presenting the
essentials to you in bullet form:

* September 1998 -- Long-Term Capital Management was
bailed out. We had heard for the previous 18 months
that LTCM was short 300 tonnes of gold as part of a
gold carry trade. Many of us expected the gold price
to soar as LTCM covered its gold shorts. That never
happened. Word spread that LTCM was let out of this
trade in an off-market, rigged transaction as part
of its bailout. Since then Eric Rosenfeld, a LTCM
partner, sent GATA an affidavit denying everything.
But Myron S. Scholes an LTCM partner who won the
1997 Nobel Prize for economics for devising a new
method to determine the value of derivatives,
informed a friend of his and a staunch GATA
supporter that all participants were given immunity
from criminal or civil prosecution if they never
spoke of this and denied it ever happened.

* That is when the manipulation of the gold market
became noticeable. A motive: Certain bullion banks
and valued clients have been borrowing gold at 1
percent lease rates for years, then selling the gold
and investing the proceeds in financial markets. This
has been going on for some time and is a great loan
if the price of gold stays the same or goes lower, as
the loan must be paid back in time at the market
price of gold. We believe the gold loans are now
above 10,000 tonnes. Mine supply in 1999 was only
2,579 tonnes. Most of the gold is not lent but
actually sold and is being worn as jewelry around the
world, so it cannot be easily retrieved in a crisis.

* The Counterparty Risk Management Group was formed
in January 1999 with Goldman Sachs and J.P. Morgan as
co-chairs.

* Certain bullion banks such as Goldman Sachs, J.P.
Morgan, and Deutsche Bank (among others) were always
there at certain critical times, after the LTCM
crisis, to knock down the price of gold -- seemingly
at the same time. I kept writing about this phenomena
and Chris Powell, managing editor of the Journal
Inquirer in Connecticut, now GATA secretary/treasurer,
suggested that we stop complaining and do something
about it. Thus the Gold Anti-Trust Action Committee
came into being. CNBC invited me to be a guest for
the first and last time in February 1999.

* On April 26, 1999, I met in Washington with U.S.
Rep. James Saxton, chairman of the Joint Economic
Committee of Congress, to alert him to what was going
on. At the time, the Clinton administration, led by
Treasury Secretary Robert Rubin, formerly of Goldman
Sachs, and future Treasury Secretary Lawrence
Summers, were seeking to get the International
Monetary Fund to sell gold for debt relief for poor
countries. The Congressional Black Caucus, leading
Republicans and Democrats, and 36 of 41 poor gold-
producing countries came out against this plan, as
the low gold price was hurting the poor countries too
much already.

* Gold began to advance in early May. On May 6,
Deutsche Bank told its clients that the price of gold
($289 at the time) would not go above $290. I passed
on that comment that day in writing to the
subscribers of my financial commentary web site,
www.LeMetropoleCafe.com. On May 7, in unprecedented
fashion, the Bank of England announced that it would
sell about half its gold reserves. The price of gold
plummeted. The National Accounting Office and the
Financial Services Authority in London are
investigating the affair.

* On September 26 (in what became known as the
Washington Agreement) 15 European Banks unexpectedly
announced that they would limit their gold sales to
400 tonnes per year and would cap their gold lending.
The price of gold rocketed $84, bullion banks
panicked, and overly hedged (short) gold producers
Ashanti and Cambior nearly fell into bankruptcy.
Despite this, the price of gold was beaten down by
the same forces below $290 again.

* GATA encouraged gold producers at the Denver Gold
Group Conference in October 1999 to cover their
forward sales (hedges); we conducted via a fax
campaign to the attendees. The renowned novelist
Arthur Hailey participated by sending letters to
Barrick Gold (an aggressive hedger) and Gold Fields
Ltd. (which does not hedge). (See enclosed.)

* I went to Vancouver, Canada, to meet with Robert
Champion de Crespigny, chairman of Normandy Mining,
the largest gold producer in Australia. The meeting
was arranged by Normandy executive Colin Jackson. For
some reason the Ccairman would not meet with me when
I got there. Since then we have resolved that issue.
But six other major gold producers have supported
GATA, several with contributions of $10,000 to
$50,000. We have raised about $230,000 in total, via
contributions from individuals from all over the
world and from other gold companies outside the
United States.

It would appear the gold companies in the United
States fear retribution from the U.S. government and
bullion dealers such as Goldman Sachs, whom I call
"Hannibal Lecter," and from some other bullion
dealers, the "Hannibal Cannibals." There is an
incredible conflict of interest between the gold
producers and their bullion dealer bankers. The
bullion bankers make huge amounts in fees by
influencing the producers to sell forward with exotic
hedge programs and by promoting the bearish story for
gold so that they can continue with their money-
making gold schemes.

* GATA placed a two-page open letter advertisement in
the weekly Washington newspaper Roll Call in December
1999, addressed to Federal Reserve Chairman Alan
Greenspan and Treasury Secretary Lawrence Summers,
asking them about government involvement in the gold
market. Many members of Congress joined in our
questions as a result of requests from constituents.
(See documentation.)

* In February 2000 gold producer Placer Dome
announced that it would not roll over its forward
sales but deliver into them (thereby reducing future
gold supply). The price of gold quickly shot up to
$320 and then was beaten right back down again. Since
then Normandy Mining announced similar plans -- which
affect another 1 million-plus ounces of "would-be"
gold that were sold forward and will go back to the
bullion dealers, rather than be sold into the
physical market. In the meantime, according the World
Gold Council, gold demand continues at record levels.
Commodity price indices have been advancing all year;
the oil price tripled, sugar more than doubled, etc.
But the price of gold is not allowed to rise above
$290 for any length of time, no matter what else
happens in the financial arena. The gold price is not
even allowed to trend up; thus there is an obvious
historic deviation from the norm.

* In the spring 2000 my car was stolen out of my
driveway in Dallas. It was found a month later, days
after the insurance company paid the claim on the
car. Money, a cashmere sweater, and jumper cables
were found in the car and there was no visible
damage. A month later I was sucker-punched coming out
of a neighborhood restaurant. My dentist thought my
jaw was broken and called in an oral surgeon. It took
seven weeks to heal.

* We believe a facet of the U.S. government is
involved in the manipulation of the gold market. In
response to a question forwarded by Sen. Joseph I.
Lieberman, Fed Chairman Greenspan denied any Fed
involvement with the gold price. Treasury Department
officials (not Summers) have denied involvement by
their department, but they refuse to talk about the
secretive Exchange Stabilization Fund (ESF), which is
under the control of the president and the treasury
secretary. The ESF has told Congress in its biannual
report that it did not intervene in the currency
markets as of its last report, yet the ESF shows
massive trading gains and losses and a commission
paid of $39 million. (See enclosed documentation.) We
have requested an explanation. The government's
possible motive: The price of gold is used by
economists as a barometer of inflation, government
fiscal policies, etc. With a U.S. trade deficit of
$31 billion, the U.S. government wants the dollar to
stay that way as the essential foreign currency
reserve of other countries. The U.S. government wants
to keep gold, an alternative, off the radar screen.

* On May 10, 2000, a GATA delegation presented the
speaker of the House, Dennis Hastert, with the
enclosed "Gold Derivative Banking Crisis" report. The
meeting went so well that the speaker quickly
arranged a meeting with Alabama Rep. Spencer Bachus,
chairman of the House Subcommittee on Domestic and
International Monetary Policy. Bachus brought six of
his staff members with him. Then we met with Dr. John
Silvia, chief economist of the Senate Banking
Committee. The next day I dropped off the "Gold
Derivative Banking Crisis" report with the staff of
each House and Senate banking committee member. That
was followed by another two-page ad in Roll Call,
headlined, "Gold Derivative Banking Crisis." (See
enclosed.)

The week after that meeting, I sent some confidential
information to James McCormick, one of the six staff
members. We had been told that he was close to Ted
Truman, formerly of the Fed and now with the Treasury
-- and a CIA snoop. That information went directly to
certain bullion dealers, who terrified some of GATA's
supporting gold producers, as well as some other
producers. One supporting company sent a letter to
Chase Bank and J.P. Morgan denying supporting GATA,
though the company indeed had made a large
contribution.

Since then I have spoken about this matter with
Senator Kyle of Arizona of the Select Committee on
Intelligence, as well as with the staff director of
the Senate Subcommittee on Technology, Terrorism, and
Government Information.

* In June 2000 a GATA delegation attended the
Financial Times Gold Conference in Paris, where we
challenged the gold industry's data gatherer, Gold
Fields Mineral Services Ltd., to a debate for the
press on the key issues. GATA offered to pay for the
entire affair at a location chosen by GFMS, but the
service declined. No one at this prestigious
conference could tell us why the notional value of
the gold derivatives exploded this past year on the
books of J.P. Morgan, Chase Bank, and Deutsche Bank
(according to the Bank for International Settlements
and the U.S. Office of the Controller of the
Currency), while gold derivatives have been stable on
the books of other banks such as UBS Warburg.

* On July 24, 1998, before the House Banking
Committee, and on July 30, 1998, before the Senate
Agriculture Committee, Fed Chairman Greenspan said,
"Central banks stand ready to lease gold in
increasing quantities should the price rise." How did
he know that, and what central banks was he talking
about?

After the Washington Agreement capped European gold
lending, Kuwait (79 tonnes), Jordan (12 tonnes), and
now Uruguay (56.5 tonnes) announced that they have
sent ALL their gold to Britain to be lent out. That
never happened before in an announced manner. What is
strange about Uruguay is that its official gold
holdings have disappeared from the official IMF world
gold statistics as of April 2000. Has Uruguay's gold
been clandestinely sold, or is it lent, as was
reported by the World Gold Council? According to
recent opinion polls, only 5 percent of the people of
Uruguay want the country to sell all its gold.

The bullion dealers must be scraping the bottom of
the barrel in their seacrch for physical gold
supply.

The price of gold could rocket higher at any time.
Demand exceeds natural supply by over 1,700 tonnes
per year. This is a danger to more than the banking
system. GATA believes that the gold situation now has
national security implications. Asian countries such
as Japan and China have low official gold reserves.
At some financially vulnerable time, they could
confront the United States by threatening to sell
dollars and buy gold, just to bring their gold
reserves up to European Central Bank levels. By
ignoring what the "gold pool" is doing, the West is
putting itself in the position to be blackmailed.

The movie "The Insider" (7 Academy Award nominations)
showed "60 Minutes" dealing with CBS Network pressure
not to air an interview with Jeffrey Wigand about his
attempt to expose the coverup of smoking's medical
problems perpetrated by major tobacco companies.

That may be nothing compared to the pressure you will
receive if word gets out that you are thinking about
doing a story about what is really going on in the
gold market.

My biography and those of the members of the GATA
delegation that visited Washington in May is in the
"Gold Derivative Banking Crisis" report.

All the best and thanks for your consideration,

BILL MURPHY
Chairman, Gold Anti-Trust Action Committee Inc.