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Morgan Stanley analyst converts to gold

Section: Daily Dispatches

11a ET Thursday, July 18, 2002

Dear Friend of GATA and Gold:

Thanks so much to Jay Taylor of J. Taylor's Gold
amp; Technology Stocks newsletter for providing a
transcript of the section of Wednesday's hearing of
the House Financial Services Committee wherein
U.S. Rep. Ron Paul questioned Federal Reserve
Chairman Alan Greenspan about gold. Unfortunately,
the committee allows little time for questions, and
Paul was not allowed to follow up. But we are going
to keep working on this until we get a sustained
interrogation of Fed and U.S. Treasury Department
officials on the gold issue.

Thanks also to Taylor for providing some commentary
about the exchange.

The transcript and Taylor's commentary are appended

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

* * *

Wednesday, July 17, 2002

PAUL: Welcome, Chairman Greenspan. I've listened
carefully to your testimony but I get the sense I may be
listening to the Chairman of the Board of Central Economic
planning rather than the chairman of a board that has been
entrusted with protecting the value of the dollar.

I have for quite a few years now expressed concern about
the value of the dollar, which I think we neglect here in the
Congress, here in the committee, and I do not think that the
Federal Reserve has done a good job in protecting the
value of the dollar. And it seems that maybe others are
coming around to this viewpoint because I see that the
head of the IMF this week, Mr. Koehler, has expressed a
concern and made a suggestion that all the central
bankers of the world need to lay plans in the near future
to possiblY prop up the dollar. So others have this same

You have in your testimony expressed concern about the
greed factor, which obviously is there. And you implied that
this has come out from the excessive
capitalization/excessive valuations, which may be true. But
I believe where you have come up short is in failing to
explain why we have financial bubbles. I think when you
have fiat money and excessive credit you create financial
bubbles and you also undermine the value of the dollar and
now we are facing that consequence.

We see the disintegration of some of these markets. At the
same time we have potential real depreciation of the value
of our dollar. And we have pursued rampant inflation of the
money supply. Since you have been Chairman of the Federal
Reserve we have literally created $4.7 trillion of new money
in M-3. Even in this last year with this tremendous burst of
inflation of the money supply has gone up since last January
over $1 trillion. You can't have anything but lower value of
that unit of account if you keep creating new money.

Now I would like to bring us back to sound money. And I
would like to quote an eminent economist by the name of
Alan Greenspan who gives me some credibility on what I
am interested in. A time ago you said, quot;In the absence of
the gold standard there is no way to protect savings from
the confiscation through inflation. There is no safe store of
value without gold. This is the shabby secret of the welfare
statists' tirades against gold. Deficit spending is simply a
scheme for the hidden confiscation of wealth. Gold stands
in the way of this insidious process that stands as a
protector of property rights.

[Representative Paul then added the he strongly
believed this statement by Greenspan, taken from
a 1966 article that was included in an article he had
written, titled quot;Gold and Economic Freedom,quot; was
true. Paul continued:]

But gold has always had to be undermined if fiat money
is to work and there has to be an illusion of trust for paper
to work. And I think this has been happening for thousands
of years. At one time the kings clipped coins. Then they
debased the metals. Then we learned how to print money.
Even as recently as the 1960s, for us to perpetuate a myth
about our monetary system, we dumped two-thirds of our
gold, or 500 million ounces of gold at $35 per ounce, in
order to try to convince people to trust the money. And
even today there is a fair amount of trading by central
banks, the dumping of hundreds of tonnes of gold, loaning
of gold for the sole purpose that this indicator of gold does
not discredit the paper money and I think there is a definite
concerted effort to do that.

My questions are two-fold relating to gold. One, I have
been trying to desperately to find out the total amount of
gold either dumped or sold on to the markets by all the
central banks of the world or loaned by the central banks
of the world. And this is in hundreds of hundreds of tons.
But those figures are not available to me. Maybe you can
help me find this. I think it would be important to know,
since all central banks still deal with and hold gold
whether they are dumping, or loaning, or buying, for that

But along this line, I have a bill that would say that our
government, our Treasury could not deal in gold and
could not be involved in the gold market unless the
Congress knows about it. Now that to me seems like
such a reasonable approach and reasonable request.
But they say they don't use it (gold) so they don't need
the bill. But if they are not trading in gold, what would be
the harm in the Congress knowing about handling and
dealing about this asset, gold?

GREENSPAN: Well, first of all, neither we nor the Treasury
trade gold. And my impression is that were we to do so,
we would announce it. It is certain the case that others do.
There are data published monthly or quarterly which
shows the reported gold holdings of central banks
throughout the world, so you do know who holds what.
The actual trading data I don't think is available, though
the London gold exchange does show what its volume
numbers are. And periodically, individual central banks
do indicate when they are planning to sell gold. But they
all report what they own. So it may well be the case that
you can't find specific transactions. I think what you can
find is the net result of those transactions and they are
published. But so far as the United States is concerned,
we don't do it.

By Jay Taylor

Before Mr. Greenspan could answer the second of
Representative Paul's questions, the one having to do
with his proposed legislation forcing accountability on
the U.S. Treasury, the committee chairman cut off the
exchange by saying, quot;The gentlemen's time has

But Greenspan was wrong even in the one question
he did answer.

It is not true that you can tell how much gold has been
sold by the balance sheets of central banks.

For starters, the central banks lie about their assets.
They report gold that is lent out as if it was still on their
balance sheets. So there is no way of knowing how much
gold has hit the market. And so there is no way of knowing
how much gold must ultimately purchased off the market
by borrowers like Goldman Sachs, J.P. Morgan Chase,
et al., so that it can be returned to the central bank balance
sheets, where the central banks say it still exists.

The whole Federal Reserve and accounting schemes
of most central banks are fraudulent and misleading.
So while the politicians are so concerned about
accounting at Enron and WorldCom, they seem not to
notice how misleading their own accounting policies are.

This kind of Enron-like behavior from our ruling elite is
exactly what I meant in my June issue when I said,
quot;The fish rots from the head down.quot;

Also, we think Mr. Greenspan was parsing out words in
a most Clintonesque fashion when he talked about the
Fed or the Treasury not trading in gold. It was exactly the
Exchange Stabilization Fund that is in question in
Representative Paul's bill.

So technically, Greenspan may have been correct in
saying the Fed and the Treasury don't sell or trade in
gold. But what about the Exchange Stabilization Fund?

Yes, it is true that the fish rots from the head down, and the
most visible view of the head we have is Alan Greenspan.

But I guess it all depends on what the meaning of the
word quot;isquot; is. There are no absolute truths. Truth is what ver
you wish it to be. Or at least that's what Wall Street wants
us to think. And then we wonder why there is a loss of
confidence on Wall Street.