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Section: Daily Dispatches

10 p.m. EDT Saturday, May 15, 1999

Dear Friends of GATA and Gold:

Here's what will be the final exchange for a while
between Martin Armstrong of Princeton Economics and
myself. While I might quibble with him about William
Jennings Bryan, Long-Term Capital Management, and a few
other things here, I accept much of what he says, think
you'll find his history and insight valuable again, and will
leave him the last word until his return from Europe. I'm
grateful for his effort in this dialogue and hope you have
enjoyed it.

Secretary, Gold Anti-Trust Action Committee Inc.

* * *

Saturday, May 15, 1999

Dear Chris:

Your view of Long-Term Capital Management is slightly
distored. The bailout was in fact for the financial
markets. The shareholders of LTCM were wiped out. The
banks were given the assets in return for an orderly
liquidation. The investors in LTCM did not receive a

The IMF has its own agenda. The Republicans have
demanded access to the International Monetary Fund's
decision process and the IMF refuses. It has emerged as
its own authority. When the gold standard collapsed,
the IMF simply reinvented itself. I speak to many
people on Capitol Hill and they are not in bed with the
IMF. The debate behind closed doors has been how to
make the IMF at least accountable to someone. Its
policies imposed upon Third World nations are a
throwback to a fixed exchange rates system. They are
the ones who insisted upon fixed exchanges rates and
that they must hold at all costs -- a great policy, as
demonstrated by Korea and others.

I work in this field quite extensively. There is no
conspiracy. The problem is that the IMF and the Bank of
International Settlements along with the World Bank all
have their own agendas and they have been at odds with
the G7 nations on many issues. No government is in
charge of these guys and only now are some beginning to
understand that profound fact.

When the gold standard collapsed, nobody was there to
turn out the lights. If this were a true conspiracy,
then perhaps it would be better organized. As it is,
these institutions are like the Keystone Cops. They
know not what they do!

Gold will one day return to a bull market. Perhaps in
2000 or at the latest in 2002. The lack of a paper
currency (Euro) is still driving international capital
toward the dollar. This trend could last for a few more
years. The European politicians are trying to create a
currency that is not based upon economics at all. Hence
the swan dive since Jan. 1. I'd rather hold a dollar
than a euro right now.

By the way, William Jennings Bryan stood for inflation
-- not sound money. The great financial panics of the
last decade of the 19th century were largely caused by
the silver Democrats who took 72 cents worth of silver
and called it a dollar. People then began to hoard gold
according to Gresham's Law. The U.S. Treasury needed to
be bailed out by J.P. Morgan, who lent it $100 million
in gold in order to make payments. Otherwise, the
United States would have been declared bankrupt
internationally, and there was no IMF back then.

Money is a difficult thing to define. It is, in its
purest form, whatever the majority believes it to be.
The Babylonians began with gold because it was abundant
in their region. The Greeks began with silver for the
same reason. The Romans had only bronze, as was the
case in Japan and China. The Japanese did not issue
gold coins until the 19th century in order to faciliate
trade with the West, just as Russian today are adopting
dollars on the street.

The Egyptians used both precious metals by weight and
wheat; they never minted coins. Only after the birth of
Imperial Rome, starting with Augustus, do we find gold
as a regular part of the monetary system in the west --
some 2,000 years ago. After the fall of Rome gold
disappeared and the monetary system became the silver
penny of Europe. Gold began to reappear as money after
600 years during the reign of Henry III.

Those who like to claim that gold has been money for
6,000 years leave out that it too has not always
survived as money in the past. Perhaps one day gold
will re-emerge as the black market form of money if
government succeeds in moving to a pure electronic form
of cash. But given the history of gold, it could be in
our children's lifetime.

All the best. I leave for Euroland for two weeks

Princeton Economics