Tokyo stocks plunge 5 percent after Wall Street loss

2:37a ET Thursday, October 23, 2003

Dear Friend of GATA and Gold:

Thanks again to GATA supporter Mark Webber for this
transcript, slightly edited, of Sprott Asset Management
President John Embry's remarks on ROB-TV in Canada
on Tuesday.

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

* * *

quot;Lunch Moneyquot; with Michael Hainsworth
ROB-TV, Canada, Tuesday, October 21, 2003

a href=http://www.robtv.comhttp://www.robtv.com/a

Hainsworth: John Embry is from Sprott Asset Management.
He joins us now ahead of his date on quot;Market Call.quot; We're
talking gold and the underlying element, the U.S. dollar.
Good to have you with us.

Embry: Nice to be here, Michael.

Hainsworth: There's been some talk, everyone from your
conspiracy theorist/Fox-Mulder X-Files economists right
down to your level-headed players, that the White House
is intentionally keeping the U.S. greenback low ahead of the
election because the economy is in such a sad state. That
plays well into gold, but what's your take on the dollar side
of it?

Embry: I think it's more than what the White House wants
and would like to see. Very simply the U.S. dollar is
fundamentally weak. When you're running a current account
deficit that's homing in on $600 billion and you've got budget
deficits that are out of control at all levels in the United
States, clearly there is a problem. There's a zillion dollars
being created and a lot of them are going out in the world.
As long as they're being recycled, the decline in the dollar
will be, shall we say, controlled. The great fear is that it's
going to get out of control. When the dollar starts to fall too
rapidly, a lot of these foreign holders -- the Chinese, the
Japanese, what have you -- will think, quot;Wait a minute. We've
got too many of these dollars and they're going down too
quickly. If they start to sell them, instead of buying them as
they have been doing, you could have a catastrophe. So it's
a bit of a game of chicken.

Hainsworth: Does Mr. George W. Bush or -- depending on
your perspective of the man's economic policy, his advisers
-- do they understand well enough that issue as you pointed
out? Such thatthey are talking up the prospects of devaluing
the yuan and trying to make some movement in Japan as
well?

Embry: They understand the problem -- there's no question.
They think that the yuan should move up against the U.S.
dollar. But the fact is that the whole thing is so tenuous. It's
fine to say that, but you don't want the American dollar to fall
too quickly. The balancing game, and they understand the
problem perfectly, is to make the U.S. dollar decline gradual
so there isn't a tremendous fallout in other things like interest
rates and what have you.

Hainsworth: You mention the current account deficit as being
one of the reasons the U.S. dollar is under pressure. The
billions of dollars being sent to Iraq on a daily basis to fund
the operations there are playing a very big role in the deficit.
That isn't expected to change soon either. So do we expect
continued depreciation of the U.S. greenback?

Embry: I think so. Clearly this is just added on to the traditional
current account and trade deficits. The Iraqi situation is just
making a bad situation worse.

Hainsworth: So what do you do? When you're in power, you're
heading into an election year, many Americans don't have jobs,
and you've got this situation with debt spiralling not only at the
federal level but also at the state level. California is just one of
the many states in trouble. How do you deal with that in 2004
and what does this mean for gold prices?

Embry: I'm in the camp, and I may be in the minority camp at
this point, that thinks that Bush isn't going to get re-elected
because the problems will manifest themselves before November
2004. And clearly if the U.S. dollar comes under considerable
pressure I don't think a lot of these other countries want to see
their currencies going up sharply. So they're going to print money
and they're going to buy U.S. dollars to try to keep the thing from
getting out of control.That is what I call global debasement of
currency, the best possible situation for gold. I'm on record as
saying that the gold price will probably be $500 dollars by the end
of next year. I don't see any reason to change my point of view.

Hainsworth: Setting aside the reasons why you feel George W.
Bush won't be in power at this time next year, what would that
do to the U.S. dollar if he was defeated? What would that do to
the U.S. economy to bring a Democrat back into power?

Embry: That's a very good question. But I think they're doing a
horrible job now. I don't think anybody could do a lot worse. So
would it make it any worse? I don't think so.

Hainsworth: Do you think Wall Street sees it more as the devil
you know versus the devil you don't?

Embry: Conceivably. There is a sort of belief on Wall Street that
Republicans are good and Democrats are bad. To date I think
their policies have been reckless in the Bush administration.

Hainsworth: Do you think though that those reckless policies
are enough to have Wall Street put pressure to make some
changes heading into that election year?

Embry: Yes, I think Wall Street does have a huge impact on the
administration. I think they're becoming a little uncomfortable with
(Treasury Secretary) Snow. His comments are all over the place.
Paul O'Neill was essentially driven from the job. I don't know
whether Snow's long for it either. I think there will be quite a bit
of
upheaval in the next 12 months. And the idea that you can start
putting in place policies here and run for the next 13 months
and get re-elected is, I think, the height of optimism.

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----------------------------------------------------

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