10:48a ET Saturday, June 23, 2001 Dear Friend of GATA and Gold: Barry Riley yesterday devoted his column in The Financial Times, "The Long View," to gold and GATA, and we couldn't be more grateful. We'll happily accept the gentle satire in exchange for Riley's again taking note of us and making our points to an international audience. Riley's column is a reminder that the battle for a free market in gold is being fought by GATA, not by the World Gold Council or anyone else. CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. * * * The Long View: That old-time religion By Barry Riley The Financial Times June 22, 2001 http://news.ft.com/ft/gx.cgi/ftc? pagename=View&c=Article&cid=FT3LIBY5AOC&live=true The setting sun was shining warmly, but it wasn't a very good omen as I strolled one evening this week into the so-called "bugs' bash", the once famous, but these days sadly under-attended, midsummer barbecue of the British United Gold Society. It is my own fault: if I am foolish enough to attend esoteric events I am bound to run the risk of bumping into my old adversary Fringe Freddie. Sure enough, there he was, glass of champagne in hand, advancing towards me. I looked around desperately, but was hemmed in by the promotional stall for a gold- mining stocks website on one side and the PR advisers of the World Gold Council on the other. He wore a yellow metal badge proclaiming: "Bring back the gold standard." There was no escape. "Are you still punting on gold, Freddie?" I opened provocatively. "It must be 18 months since we last met, and you don't normally back losers for that length of time. Gold, after all, came within a whisker of a 22- year low when it sank to $256 an ounce in April, and it has not recovered very much." Freddie grinned, revealing a new gold tooth. "Like nearly all the rest, you've been deceived by the dollar propagandists, old boy," he responded. "Over the past 18 months the bullion price has RISEN against the yen and the euro, not to mention the pound sterling. Oh, and it's easily beaten the main stock market indices, too. "Not bad, eh? And it's only the beginning. Several attempts at an upside breakout, the latest of which took the price up 11 per cent, have been smothered by intervention. But the anti-gold conspiracy organised by the US government is running out of time and metal. A big price upsurge, maybe a doubling, is just around the corner. Just look at the mining stocks: your own FT Gold Mines Index is up 25 per cent since April." I replied that I had heard the gold conspiracy stories time and time again. But the gold bugs were trying to create a mystery where there wasn't one. Mining output was rising steadily, thanks to improvements in technology, and the price was being driven down. Gold was a relic that was simply out of date. No rational argument has any chance against a fervent conspiracy theorist, however. Freddie's eyes began to gleam, in a manner normally triggered by a major crop failure and the mouthwatering prospect of a global famine. The immediate object of his attention, though, was the yellow metal. "The signs are all there, old chap," he hissed. "Official lending of gold by the central banks has been much more than the 5,000 tonnes they admit. The recent jump in the gold lease rate shows that some of the lending central banks have backed off, because they worry about running out of bullion. Meanwhile the Americans are desperately printing dollars to stop their economy diving into a recession. Gold is the only place left to go." I admitted that I'd had my curiosity aroused by the gold "carry trade," the manoeuvre in which big banks have borrowed gold at very low lease rates and invested the proceeds in bonds, making a big running profit. But the profit is destroyed, and could be turned into a massive loss, if the bullion price rises sharply. Hence the allegations of price manipulation. But I pointed out that a professor at the London Business School, Anthony Neuberger, was hired by the World Gold Council to investigate whether activity in derivatives was seriously depressing the gold price. Last month he reported that the effect was small. An effective extra supply of 4,000 tonnes may have been generated during the 1990s, but that compared with an existing global hoard of some 140,000 tonnes. "Be honest," retorted Freddie. "You've only read the spin doctors' press release and not the full 120-page report. The professor was required to accept the bogus official statistics as accurate. Even so, he has confirmed that the lending market is very fragile, and horribly vulnerable to a serious squeeze. Watch this space." Instead I looked optimistically towards the buffet table, where the menu was advertised as ingots of golden trout and 22-carrot salad. But the charcoal barbecues seemed to be causing problems, so there was no easy escape from the party pest. "All right, I admit there are some interesting parallels with what happened to the London Gold Pool in the late 1960s," I said. "It was a previous exercise in US Treasury-inspired gold-market rigging, to thwart gold bugs inspired at the time by General de Gaulle. After the policy became too expensive and was abandoned, the bullion price went from $35 to, in the end, $800. But that was in the context of Vietnam War spending, an oil price shock and an inflationary flare- up." Freddie's gold tooth glistened again in the evening sun. "Did you mention the oil price?" he chortled. "What a coincidence. And American consumers are spending far more on foreign goods than Nixon ever did on fighting Ho Chi Minh. Now the US government will have to admit defeat again. "It will all come right out into the open soon when the US Treasury is forced to respond to the court case being brought by the Gold Anti-Trust Action committee, the group of American gold defenders organised from Texas. The Bush regime will cut its losses and regard it as an opportunity to repudiate what the Treasury did in pursuing the strong dollar policy under Rubin and Summers." I couldn't, I said, imagine that GATA would get anywhere through the courts. But it was significant that the US Business Roundtable, representing manufacturing industry in the grip of a nasty profits collapse, was pressing this week for a more competitive dollar. Currency strength was a useful weapon to head off domestic inflation during the great boom; in contrast, as the global economy took a dive, we now seemed to be heading straight for beggar-my-neighbour territory. But I said I was sorry that I couldn't pursue the argument any further, because I needed to check out the details of the gold mining stocks website. When you are trapped by Freddie, any excuse will do. His voice pursued me, nevertheless, his phrases punctuated by that familiar braying laugh. "Currency turmoil ... bullion banks melted down ... hedge books in chaos." It may have been my imagination, but gold fever has an emotional connection with old-time religion, and I'm sure I heard him tail off with: "The end is nigh!" -END- Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/