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Midas commentary for March 31, 2000

Section: Daily Dispatches

9:15p EST Friday, March 31, 2000

Dear Friend of GATA and Gold:

With the essay appended here, Reg Howe has drawn the
necessary conclusions about the Federal Reserve's and
the Treasury Department's evasion of the gold question.
You can help by sending this essay to your congressman
and asking him to ask the right question.

Please post this as seems useful.

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

* * *

Congress: Anything but the Right Questions
to the Right Guy

By Reginald H. Howe
March 31, 2000.

When it comes to manipulation of the gold market,
Congress appears just plain scared to ask the right
questions to the right guy.

In a letter made public yesterday to U.S. Rep. Jim
Leach, R-Iowa, chairman of the House Banking Committee,
responding to questions that arose during his Humphrey-
Hawkins testimony, Federal Reserve Chairman Alan
Greenspan again addressed speculation that the Fed is
intervening in the gold market: quot;I can say
unequivocally that the Federal Reserve Bank of New York
has not intervened in the gold market in an attempt to
manipulate the price of gold on its own behalf or for
the U.S. Treasury or anyone else.quot;

This statement makes unequivocal precisely the
interpretation that I put on Greenspan's response to
Sen. Joseph I. Lieberman, D-Conn., regarding the
questions posed by the Gold Anti-Trust Action Committee

If the U.S. government is involved in manipulating the
gold price, it is almost certainly doing so through the
Exchange Stabilization Fund, at the direction of the
secretary of the treasury, using an undisclosed agent
or agents, including in all probability Goldman Sachs.
Getting to the truth here is not rocket science, though
following the gold price after the truth comes out may
be. Put Treasury Secretary Lawrence Summers under oath
and ask him directly.

But Greenspan's statements denying Fed intervention in
the gold market, directly or as agent for the Treasury
or the ESF, are troubling in two respects.

First, clearly Congress is interested in the more
general question of whether there is any official U.S.
intervention in the gold market. Accordingly, assuming
that the Fed is not involved, if Greenspan knows that
the ESF is intervening in the gold market, he has not
been completely candid and forthcoming with Congress.

Second, if the ESF is intervening in the gold market
but Greenspan has no knowledge of that, the competence
of both U.S. global monetary policy and the Fed is put
in doubt.

As to the first point, it is of course possible that
Greenspan not only has greater knowledge on the subject
than his public statements suggest but also that he has
shared this knowledge privately with members of
Congress. In that case, the Fed chairman and Congress
together are conspiring to keep the truth from the
American people, and Congress is not going to ask
Summers the questions that would give the game away.

Instead, the Fed chairman's literally true answers are
being used to try to deflect attention away from the
subject generally and finesse the need for direct
answers about the ESF. This situation, should it in
fact be the case, would indicate a high level of
concern by everyone involved about the stability of the
international payments system in general and the dollar
in particular.

The second point raises a less likely but far graver
possibility: that the ESF is intervening in the gold
market but the Fed chairman knows nothing about it. In
this event very serious issues would be raised about
the coordination and implementation of U.S. monetary
policy as it relates to gold, both domestically, where
many consider the gold price a good leading indicator
of inflation, and internationally, where the gold price
is a measure of the U.S. dollar's acceptability as a
reserve asset. The notion that the president and the
secretary of the treasury might be engaged in a scheme
to con the Fed about the price of gold is worrisome

More worrisome, however, is the thought that the Fed
chairman is so easily conned. Surely, with its
resources and contacts, the Fed should be among the
first -- not the last -- to sense possible manipulative
activity in the gold market. What is more, given the
importance of the gold price as a monetary indicator,
the Fed should want to investigate and uncover any
activity of this sort as quickly as possible. Indeed,
if the Fed really believed in a free market for gold
and took the necessary steps to assure it, this whole
controversy would never have arisen.