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The King and I -- as in Murphy
1:16p ET Friday, February 16, 2001
Dear Friend of GATA and Gold:
A few weeks ago GATA Chairman Bill Murphy told you how the big
bullion banks, short irrecoverable amounts of gold, seemed to be
speculating against the South African rand, as they seemed to have
done against the Australian dollar, to drive down the local currency
and induce gold mining companies to sell more gold forward.
Murphy made a big issue of this during his recent trip to South
The following story from today's edition of Business Times in
Cape Town suggests that South Africa is beginning to recognize the
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Penalise speculators, says Standard Bank economist
By James Lamone
Business Times, Cape Town, South Africa
Friday, February 16, 2001
Johannesburg -- Finance minister Trevor Manuel's budget speech
should include penalties for banks that receive government business
but speculate against the local currency, Iraj Abedien, the group
economist for Standard Bank, said yesterday.
Abedien recommended that Manuel require financial groups to adhere
strictly to corporate governance ethics, especially those acting as
government agents in public sector tenders, bond issues, and
He said rumors that moved the currency market had emanated from
international financial institutions that were beneficiaries of
government business. These institutions, with large currency
holdings, had them bet against the local currency.
quot;It's right in a free market to say that unless you comply
with good corporate business [ethics] you won't do business with
quot;It's time South Africa and the minister of finance took a
hard position on businesses that have it both ways,quot; Abedien said.
At the beginning of the year, the rand came under speculative attack
during a period of law volume trading that took it to a record low
against the dollar.
Many traders identified the reason as concern over the possible delay
of Tellman's initial public offering, scheduled for the last
quarter of this year. They also identified speculation that Manuel
would stand down as minister for a job with the World Bank.
Abedien said speculation in January had sprung from three banks in
London and New York. quot;You have to put them on notice in some form
or other,quot; he said. The best way was for the government to insist
rules of fair play. If it was meeting its budget deficit and
following prudent policies, banks with which it did business should
also follow corporate governance ethics.
Abedien urged the government to tell international banks quot;If you
are caught doing certain things, you will pay heavy penalties.quot;
If an independent hedge fund manager speculated, nothing could be
done, he said.
But he pointed out that ethical problems arose if financial houses
with associations with South Africa, or involved in a bond issues,
were also involved in speculation.
He recommended that steps be taken to reduce currency volatility by
closing down the Reserve Bank's forward book by issuing bonds or
using other financial instruments: quot;The Achilles Heel of the
macroeconomic policy is the forward book of the Reserve Bank.quot;