Taylor Gold Review

February 20, 2001

RIGGING MARKETS NOT ALIEN TO CLINTON ADMINISTRATION

The Clinton Administration was open about its strong U.S. dollar policy. What it was not open about was its apparent manipulation of markets used to create a U.S. dollar that was so excessively strong that it grossly distorted world markets and helped fuel the insane stock market excesses, which most likely will end in tears. Led by Bob Rubin, an investment banker who understood how a strong dollar would help his friends on Wall Street dominate and control world markets, the Clinton Administration seemed to care little that our overvalued US dollar was resulting in a major loss of American mining and manufacturing jobs that were being exported in no small part because of the strong dollar. In effect, a rigged dollar resulted in an unfair disadvantage for American manufacturing.

We have maintained that a major means of manipulating the dollar to unrealistic levels was through the rigging of the gold price by way of encouraging the gold carry trade whereby the investment banking friends of Bob Rubin profited greatly by way of the gold carry trade. This of course is alleged in the law suit currently pending in Federal Court filed by Reginald Howe naming Alan Greenspan, Lawrence Somers, the New York Fed chief and several of the largest bullion banks in the world as well as the BIS as defendants in a gold price fixing and securities fraud suit. We believe that through the gold carry trade carrot and stick approach, the previous Administration in conjunction with the British government, forced the price of gold down and hence the U.S. dollar up.

By staging a relentless war on gold, the Clinton Administration succeeded in winning a psychological war against gold and thereby helped boost the U.S. dollar to levels well above any level that could be justified by global economic fundamentals. I don't mean to imply this was the only dynamic that boosted the dollar, but it was an important one and most likely was most responsible for the dollar's huge overvaluation. NEW TREASURY SECRETARY SUGGESTS MINIMUM INTERVENTION & PERHAPS A WEAKER DOLLAR

The new Secretary of the Treasury, comes to Washington with a whole set of different experiences than Bob Rubin had. He was previously the CEO of Alcoa so he knows first hand how a strong dollar policy simply hands over manufacturing to other countries. And to the extent currencies are distorted by manipulation, as has been the case during the Clinton years, then a strong dollar policy is not only unfair but will and has been causing huge amounts of economic imbalances that now need to be corrected.

While Mr. Rubin understood that a strong dollar allowed the U.S. to attract capital into the U.S. and thus help his buddies on Wall Street reap huge rewards, he could not understand in the same way as our new Treasury Secretary O'Neil, how the dollar policy destroyed American mining and our basic industry. So from that perspective alone, it would not be surprising if Mr. O'Neil was less concerned about a strong dollar than Rubin or Somers. Would the unions have understood how the Clinton Administration screwed them out of jobs, they may not have endorsed Mr. Gore so wholeheartedly as they did.

But in addition to the practical impact Clinton's currency manipulation policies had on sending basic industry out of the U.S., the Republicans come to Washington with a much stronger reverence for the sanctity of markets and also at their very core, they believe government should not be involved in changing and directing markets. This is 180 degrees apart from the interventionist philosophy of the Clinton administration.

Last week, Mr. O'Neil began to remind us of this basic difference between the two major political parties as he began to talk about his views on the dollar. The change toward a truly free market U.S. dollar is likely to have a very profound impact on the U.S. markets and our economy.

WILL BUSH CONTINUE MANIPULATING GOLD?

Very soon, the Bush Administration will have to make a decision on whether it will continue the corrupt policies of rigging the gold price downward and thereby pretend that the dollar is stronger than it actually is. It seems likely that the prior manipulation of the gold price was at least in part carried out with the full knowledge of President Clinton as well as the last two Treasury Secretaries. However, now that Reginald Howe's gold price fixing and securities fraud law suit has been filed in a Federal court, one would think the new Attorney General will also need to become knowledgeable about this activity.

From a philosophical viewpoint, continuing to rig the gold price is alien to Republicans. Thus there is reason to hope that in addition to a weaker dollar, we might also see a much strong gold price, not because a week dollar leads to a stronger gold price, but because a free market gold price, which may in fact be upward to $600 per ounce, would accurately tell the world that the dollar is not nearly as valuable as it was cracked up to be by the Clinton Administration.

A CONVERSATION WITH GATA'S BILL MURPHY

I called Bill Murphy today to find out if he would bring me up to date on Reginald Howe's law suit. This was the first time I had spoken to Bill since he returned from South Africa. Normally when I call Bill, he has very limited time to talk but this time he was so excited about his trip to South Africa that he could not talk enough. In answer to my question about the law suit, Bill told me that by March 15th, all the defendants were required by the court to respond to the charges.

Bill was clearly animated and excited by an exceedingly positive response from masses of South Africans, some of the biggest politicians in that country as well as newspaper, TV and radio coverage. He also received a very favorable response from most, though not all mining firms (a notable exception was a major gold short seller, namely Anglogold) and government officials as well as the Reserve bank.

The favorable response received by Bill should not be entirely surprising because the South African people are among those whom the Clinton Administration along with the British, sacrificed for a strong dollar policy and hence Wall Street profits. By rigging the gold price to lower and lower levels, the one currency, namely gold, that could have allowed the world to accurately judge the merits of dollar strength, the Clinton Administration not only disguised the true value of the dollar, but more significantly from the South African view point, put some 170,000 people out of work and in the process severely depressed the South African economy.

One of the most influential people Bill met with was the Zulu nation's King Goodwin Zwelithini. The Zulu's are the folks who supply most of the labor to the mining industry in South Africa, so they are mad as hell about what lower gold prices are doing to them. What is important to note is that since the end of apartheid, the Zulus are well represented in the government of South Africa and King Zwelithini has a considerable amount of pull in the government.

GATA'S ACTION PLAN

As Bill noted above, the new U.S. Treasury is aware of the gold manipulation issue. According to what Bill told me this afternoon, the Zulus and other high up folks in the South African government and industry are going to try to persuade our new Treasury Secretary, Paul O'Neil not to continue with this Clinton policy of rigging the gold markets. If they receive a positive response or at least if the new Treasury Secretary says that they will investigate this issue, Bill believes the gold market will respond very positively with a major move to the upside. Why? Because that would lend credibility to GATA's manipulation charges which have been ignored by the establishment to date.

If on the other hand, the new Treasury Secretary treats GATA as nutty organization not worthy of a response, as has been true thus far from the Clinton Administration, then Bill along with Reginald Howe and Frank Veneroso will return to South Africa for a mining conference SPONSORED BY THE SOUTH AFRICAN GOVERNMENT! The purpose of this conference will be to debate the GATA charges. All of the gold cartel people as well as their apologists at institutions like the World Gold Council and Gold Fields will be invited to participate in the conference.

Americans may not care much about the gold issue, at least as long as we have a strong dollar. But the South Africans care desperately about it because the gold manipulation and the resulting strong dollar is literally killing them. What Bill Murphy learned was that the South Africans understand GATA's message and they will support GATA's effort to bring about complete transparency in the gold markets.

HOW YOU CAN HELP

The purpose of this newsletter is not political action. Rather it is to inform and provide a set of views that are unique and out of the main stream. However, if you care at all about the allegations brought about by GATA, and if you wish that these allegations receive a fair hearing in court, a letter written to the new U.S. Treasury Secretary as soon as possible may be very helpful. If you write a message in your own words to the following two Bush Administration officials you can help ensure they give the allegations in Reginald Howe's law suite a fair hearing. Bear in mind that the court has required all players to respond by March 15th. Please send your opinion to:

Paul O'Neil, U.S. Secretary of the Treasury

United States Treasury

1500 Pennsylvania Avenue N.W.

Washington, D.C. 20220

Charles A. James

Antitrust Division

U.S. Justice Department

Washington D.C. 20220

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