Documentation of NY suppression of gold price


1:15a EST Friday, March 10, 2000

Dear Friend of GATA and Gold:

Here's the latest essay by Reginald H. Howe, Harvard-
trained lawyer, former mining company executive, and
proprietor of

Please post this as seems useful.

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

* * *

Definitions of Money in Congress:
Webster vs. Greenspan

By Reginald H. Howe
March 7, 2000

Daniel Webster addressed the subject of the nation's
money in a speech on the Specie Circular delivered in
the Senate on December 21, 1836:

"Currency, in a large and perhaps just sense, includes
not only gold and silver and bank bills, but bills of
exchange also. It may include all that adjusts and
exchanges and settles balances in the operations of
trade and business. But if we understand by currency
the legal money of the country, and that which
constitutes a legal tender for debts, and is the
standard measure of value, then undoubtedly nothing is
included but gold and silver.

"Most unquestionably there is no legal tender, and
there can be no legal tender in this country, under the
authority of this government or any other, but gold and
silver, either the coinage of our own mints or foreign
coins at rates regulated by Congress. This is a
constitutional principle, perfectly plain and of the
highest importance.

"The states are expressly prohibited from making
anything but gold and silver a legal tender in payment
of debts, and although no such express prohibition is
applied to Congress, yet, as Congress has no power
granted to it in this respect but to coin money and to
regulate the value of foreign coins, it clearly has no
power to substitute paper or anything else for coin as
a legal tender in payment of debts and in discharge of

"Congress has exercised this power fully in both its
branches; it has coined money, and still coins it; it
has regulated the value of foreign coins, and still
regulates their value. The legal tender, therefore, the
constitutional standard of value, is established and
cannot be overthrown. To overthrow it would shake the
whole system."

At the time of these remarks the nation was in the
midst of a speculative boom in western lands. Webster
himself was an active buyer, becoming so overextended
that for a time he considered resigning from the Senate
to put his personal finances back in order. President
Andrew Jackson sought to curb the speculation by
directing the Treasury to require payment in gold or
silver for public lands, a measure he took on his own
authority and without action by Congress. Webster was
aghast, considering the measure both ill-advised and
beyond the president's authority.

The boom collapsed in the Panic of 1837, blamed by
Webster and many others on the specie measure, but
attributed by most historians to the Bank of England's
sudden restriction of loans to the United States.

Responding to a question by U.S. Rep. Ron Paul, R-
Texas, Federal Reserve Chairman Alan Greenspan spoke to
the subject of the nation's money in his Humphrey-
Hawkins testimony on February 17, 2000:

"By definition, all prices are indeed the 'ratio of an
exchange of a good for money.' And what we seek is what
that is. Our problem is we used M-1 at one point as the
proxy of money, and it turned out to be a very
difficult indicator of any financial state. We then
went to M-2 and had the similar problem. We have never
done M-3 per se because it largely reflects the extent
of expansion of the banking industry. And when in
effect banks expand, in and of itself, it doesn't tell
you terribly much about what real money is.

"So our problem is not that we do not believe in sound
money. We do. We very much believe that, if you have a
debased currency, that you will have a debased economy.

"The difficulty is in defining what part of our
liquidity structure is truly money. We have had trouble
ferreting out proxies for that for a number of years.
And the standard we employed is whether it gives us a
good forward indicator of the direction of finance and
the economy.

"Regrettably, none of those which we have been able to
develop, including MZM -- has done that. That does not
mean that we think that money is irrelevant. It means
we think our measures of money have been inadequate.
And, as a consequence of that, we, as I have mentioned
previously, have downgraded the use of the monetary
aggregates for monetary policy purposes, until we are
able to find a more stable proxy for what we believe is
the underlying money in the economy."

Question by Dr. Paul: "So it's hard to manage something
you can't define?"

Answer by Mr. Greenspan: "It is not possible to manage
something you can't define."

What irony!

Daniel Webster, senator and speculator, arguing for a
flexible currency, gives an irrebuttable defense of
gold and silver as the constitutionally mandated
standard of value and sole legal tender.

Alan Greenspan, Fed chairman and lionized central
banker, professing allegiance to sound money, cannot
identify what constitutes money in today's economy.

The monetary provisions of the Constitution have never
changed. What has changed are the interpretations that
politicians and judges put on them. The result is that
the actual money of the country has gone from a thing
that could be easily defined to a notion that defies
all attempts at definition. In the process, the concept
of a true standard of value has been lost, and the
distinction between money and credit has been
obliterated. The consequences are almost too fearful to

The next president is almost certain to face a full-
blown currency crisis. Bushwacked or Gored, a
collapsing dollar will likely carry the next
administration and its party into political oblivion.
Nor would John McCain's economic prescription -- Alan
Greenspan, alive or dead -- offer much hope for a
different result. Indeed, of the candidates still
standing, only Alan Keyes has demonstrated either the
inclination or the intellectual firepower to tackle
major constitutional issues in a meaningful way.
Unfortunately for the Constitution, the odds are no
more favorable for him than for the dollar.