Reuters sees gold connection in Chase/Morgan merger

Section:

COPYRIGHT 2000, WWW.LEMETROPOLECAFE.COM
NOT TO BE DISTRIBUTED WITHOUT PERMISSION

-------------------------------------------------------

MIDAS COMMENTARY FOR SEPTEMBER 14, 2000

By Bill Murphy
www.LeMetropoleCafe.com
September 14, 2000

Spot gold $271.90, down 50 cents.
Spot silver $4.86, unchanged.

Barry Riley of the Financial Times wrote the following
in his Sept. 13 column headlined, "Oil crisis may give
bears the upper hand":

"Gold bugs, meanwhile, are steaming over the yellow
metal's failure to respond to the inflationary
pressures obvious in oil prices and in certain other
commodities. The gold bug pressure group GATA -- the
Gold Anti-Trust Action Committee -- has alleged that
the U.S. Treasury, in cahoots with other countries --
including the United Kingdom and Kuwait -- has
organized a price manipulation conspiracy to suppress
gold's traditional role as an alternative global
currency to the dollar. It is certainly curious that
the bullion price appears to be pegged to the dollar."

Barry Riley could not be more right on -- about our
fury over the price manipulation conspiracy -- perhaps
even a much bigger one than GATA first thought.

One day does not make a market, but today exemplifies
what has been going on for a long time. Even though the
Goldman Sachs Commodity Index, the Journal of Commerce
Commodity Index, and the Commodity Research Bureau
Index have all been steadily rising into multi-year new
high ground, the U.S. producer price index released
this morning revealed a drop of .2 percent last month.
How that could happen is another story for someone else
to deal with. What is of import to us is that the
levitating bond market finally saw the light and was
hit very hard during the bond trading session at the
CBT. Thirty-year yields rose sharply to 5.81 percent,
while the yield curve steepened. Long-term rates rose
much faster than short-term rates as market
participants saw evidence of inflation that is staring
us in the face, regardless of feeble media commentary
about the benign economic numbers.

The technical action of the bond market was extremely
negative and gave us a key reversal to the downside
with an outside day. That means a higher high than
yesterday's high, a lower low than yesterday's low and
a close below that low.

In the commodity producer real world, everything but
the kitchen sink has been thrown at the crude oil
market, but it refuses to sell off in any meaningful
fashion, even after production increase promises by
almost everyone in OPEC. Crude oil closed at $34.07 per
barrel, up 25 cents, while natural gas closed at 5.20,
at new all-time highs again.

The beleaguered euro even closed slightly higher after
a European Central Bank announcement that it will
spend $2.2 billion to buy the currency, which has
dropped 26 percent against the dollar since its debut
in January 1999.

However, the gold price was shoved lower after an early
rally. Over the past six weeks, all early rallies have
failed and except for a couple of days, gold has closed
flat or lower. Day, after day, after day.

As stated many times, no matter what happens, gold is
not allowed to rally. There is a reason for this and
that is that the price manipulation conspiracy crowd
has a big problem with their gold collusion and they
are in a bit of a panic over it. It is not even heating
oil season yet; no real cold weather in sight. But
already talk is circulating about whether oil
refineries will be able to refine enough heating oil to
meet the demand. It is a very serious problem.

As it is, high gasoline prices are causing havoc in
Europe.

Gold has been put off the radar investment screen
because of its poor price action. Out of sight, out of
investment mind. That is just the way the U.S.
government and the bullion dealers want it. They are
petrified that if gold was allowed to rally as the oil
price was moving higher, and now the bond yields moving
up, the investment community would be likely to turn to
gold as an inflation hedge. What a crazy thought!

That increased investment demand for physical gold
could cause severe stress on their paper gold short
positions.

The present administration wants to win the coming
election. The bullion dealers want to protect their
gold derivative shorts and the lucrative gold loans
they are using for investment purposes. Certain gold
producers are playing along because they know the gold
fix is in, are heavily hedged, and are also petrified
that they could look pretty feeble if the price of gold
were to rally sharply as it did a year ago.

All stops are being pulled out now to hold down the
price of gold. The problem is they are being found out
and they know it. The parties involved must be under
enormous pressure as the gold manipulation controversy
is growing in scope. To underscore this point, I
present this letter from Marti Thomas of the U.S.
Treasury Department to www.LeMetropoleCafe member
Michael Bolster:

* * *

September 6, 2000

Dear Mr. Bolster:

You wrote a letter to Sen. Connie Mack in which you
raised a number of questions concerning the Treasury
Department ("Treasury"), the Exchange Stabilization
Fund ("ESF"), and the gold and commodities markets.
Senator Mack has asked Treasury to respond directly to
you.

The ESF does not engage in any transactions in the
market for any metal such as gold, either in spot
markets or in any of its various derivative forms. The
holding of the ESF consist exclusively of foreign
currency (euros and yen), Special Drawing Rights
(SDRs), and dollars. These assets are reflected in a
weekly press release on the Treasury web site
(www.treas.gov). The press release also reports
information about Federal Reserve holding of foreign
exchange, Treasury holdings of gold, and the U.S
reserve position in the IMF. These latter items are not
ESF assets.

With respect to the accountability of the ESF, the ESF
is audited annually and its financial statements are
provided monthly for the Congress. I have enclosed a
copy of the most recent audited financial statements of
the ESF.

I would like to underline that Treasury does not seek
to manipulate the price of gold or any agricultural
commodity by intervening in or otherwise interfering
with the market.

I hope that this information is helpful.

Sincerely,

Marti Thomas
Acting Assistant Secretary
(Legislative Affairs and Public Liaison)
U.S. Department of the Treasurer

* * *

Michael Bolster made his inquiry to Senator Connie Mack
months ago. The Treasury, but not Secretary Summers
again, responded to Michael the same day that Bettina
Schultz, former Deutsche Bank employee, interviewed
Jessica Cross, the World Gold Council, and Gold Field
Mineral Services about GATA. This all happened about
the time Reg Howe and I were cyber-mugged.

Dates and timing are important here and, I believe,
anecdotally show the extent of the manipulation of the
gold market. The GATA delegation visited Congress on
May 10, 2000. As you may recall, we were told that one
of the banking staff members we met with was close to
Ted Truman of the Treasury Department and was a CIA
"snoop," according to GATA's sources in Washington. It
just so happens that Ted Truman wrote a letter to
GATA's Chris Powell on, you guessed it, May 10, denying
any Treasury involvement in the gold market. As far as
we know, no other individual has received a letter from
Ted Truman.

This letter from Treasury's Thomas is carefully crafted
and covers a good deal of ground. It is no form letter.
It also closely follows the letter that Fed Chairman
Greenspan sent to Sen. Joseph I. Lieberman in answer to
GATA's questions put to him in our open letter in
Washington's Roll Call newspaper.

As soon as GATA turns up the heat, a letter goes out or
some action is taken to counter GATA.

I am sure I will go into this in greater detail at some
other time, but the bottom line is that our government
is covering up the fact that they are manipulating the
gold market. It is clear to GATA that lower-level
government officials most likely have no idea what is
really going on. They are probably not lying to us.

But GATA knows otherwise about the big picture and
certain other much higher U.S. government officials. We
know that the United States and Britain aggressively
intervened after the Washington Agreement was announced
and the price of gold soared. We know the U.S.
government was involved in the bailout of Long-Term
Capital Management's borrowed gold.

In time all this will surface. In the meantime,
somebody is starting to sweat bullets. Smoke is
billowing all over the place. The fire alarm is about
to go off.

Meanwhile back at the ranch, GATA and Reg Howe have
exposed to the gold world to the alarming state of the
gold market because of excessive derivative positions
on the books of certain bullion banks that have been
using those derivatives to hold down the gold price.
Yes indeed, the gold cabal is reeling. They know we are
gaining ground. Recent articles in Frankfurter
Algemeine Zeitung and in the Financial Times are proof
of GATA's increasing credibility in the highest
financial circles.

The gold cabal has responded to our credibility gains
by slandering GATA in the press, via GFMS and World
Gold Council press releases, and cyber muggings.

They are a scared group. It is interesting to ponder
the Chase merger with J.P. Morgan. Deutsche Bank's
effort to acquire Morgan did not work out. As a
colleague noted, the buyout of Morgan by Chase Bank was
done at warp speed. For 1 1/2 years now, GATA has
identified these specific bullion banks as "Hannibal
Cannibals." These were the three banks that showed
explosive gold derivative growth on their books this
past year, while the same gold derivatives at most
other bullion remained flat or declined.

Does "A" have anything to do with "B"? I don't know,
but I found so many tidbits to be interesting:

Right before the Chase/Morgan merger was announced, the
CFO of Morgan, a Mr. Hancock, resigned. His expertise
was in derivatives.

We have all wondered why those two very pro-GATA Gold
Derivative Banking Crisis report articles ever surfaced
in the FAZ. We know that Mr. Arnd Hildebrandt, a
freelance writer with knowledge of commodities, wrote
them, and that Bettina Schulz, a former Deutsche Bank
employee, wrote the WGC/GFMS/Jessica Cross piece
slandering GATA.

This is the latest from a German member of
www.LeMetropoleCafe.com:

"I just talked to Mr.Arnd Hildebrandt, the man who
wrote the first two articles. Evidently he got into
some problems (over the articles) and he told me he is
not interested in the subject anymore (after I showed
him that the Bank for International Settlements said
that Reg Howe and GATA were correct, not Cross/WGC) .
It is up to Mr. Jrgen Jeske, the editor of the FAZ, to
do what he wants with your rebuttal letter.

"I asked Hildebrant whether we have a chance to get the
answer in the paper according to German press law, and
he told me that he sees no chance for this. The law is
very restrictive, in order not to get countless
counter-representations in the papers, and he thinks
the allegation that GATA could not get a lawyer does
not qualify for a response under the law. Bettina
Schulz would just give their source for this allegation
and all we can do is to forbid her to repeat it. I will
write a letter to Mr.Jeske, trying to stir his interest
in the subject."

I emailed our German Cafe member back and asked him
what he meant by Hildebrandt's getting into trouble.
This is the answer I received:

"You are fighting the most powerful people in the
world. They earn $10 million and more a year and they
don't want their fiat money power destroyed by a little
journalist."

Fascinating. The intrigue builds.

This is my take on what happened. GATA has known for
some time that there has been a severe split in the
Bundesbank. The young turks are anti-gold. The old
guard is very pro-gold. As a result of the formation of
the European Central Bank, the Bundesbank is not the
powerhouse it used to be. By the nature of Deutsche
Bank's effort to acquire Morgan, it is clear that this
German bank wants to get into the U.S. market.

The Bundesbank was handed a copy of the Gold Derivative
Banking Crisis report in May. If they did not know
before, they realized then that Deutsche Bank's gold
derivative was highly unusual, aggressive, and
undermining the Washington Agreement. Those derivatives
grew from $15 billion to $60 billion in one year.
Charles Von Arenschilt came over from another Hannibal
Cannibal, Morgan Stanley, to head up Deutsche Bank's
U.S. bullion dealing operations.

The U.S./British axis along with certain bullion banks
(Deutsche Bank being one) has been driving the price of
gold right back down again, as if the Washington
Agreement never occurred. The French are not happy
about it; neither are the Italians, nor the Germans. To
some degree it is an insult to them. Therefore, it is
my opinion that the Bundesbank got hold of Hildebrandt
and said, "We have a story for you to put out there in
the FAZ." That would explain why there were no
dissenting opinions in the first two articles.

While the author did not mention Deutsche Bank, he
mentioned the other guilty bullion dealers by name.
Deutsche Bank got the message loud and clear. They must
have known that such a sensitive story citing the U.S.
government's gold involvement to the detriment of poor
gold producing countries could be published only with
the blessing of some pretty powerful people in Germany.
Outraged, top brass at Deutsche Bank must have
contacted former DB employee Schultz and asked her to
savage GATA and try to discredit us by going to Jessica
Cross, the World Gold Council, and Gold Fields Mineral
Services for criticism.

The Bundesbank made its point to Deutsche Bank. They
have no further need of Hildebrant and FAZ. Whether
this had anything to do with their quickly pulling out
of the Morgan takeover, I have no idea, but the fast
recent events are intriguing.

If our assumption is correct, one thing is for sure.
The Bundesbank knows a big Deutsche Bank vulnerability
-- gold. They know it and Deutsche Bank knows it.

I will continue to try to get my rebuttal letter to
WGC/Cross/GFMS published, but it would now appear very
doubtful that our side will be successful in that.

As noted by the BIS, Reg Howe and GATA are correct in
our basic assertions about the alarming state of the
gold market due to the enormous gold derivative buildup
at certain bullion banks. Every gold producer in the
World Gold Council should be apprised of this by gold
shareholders and gold investors around the world. I
urge all of you to contact them and make them aware of
what GATA and Reg Howe have uncovered and that the BIS
has confirmed our basic premise. Every gold producer
should be queried as to whether they have read the GATA
Delegation's old Derivative Banking Crisis report
posted at the www.GATA.org web site.

The fair price of gold is hundreds of dollars higher
than what it is now. We believe that once the gold
producers know they have been had, they will take
appropriate action to take on the gold cabal and their
apologists and the shameful organizations that are
supposed to represent them.

Someday the horrifying scope of this fraudulent gold
scandal, maybe the greatest in American financial
history, will surface in all its terrible glory. The
gold producers should all be informed of what is going
on, who is perpetuating the collusion and why. We all
know how these things work in the end. Scalps and
irresponsible industry executives will be sought out.
Lawsuits, lawsuits, and more lawsuits. First tobacco,
followed by Firestone. Gold is next. Shareholders all
over the world, especially those who sold out or lost
money, will want to know what the gold producer
executives did about the obvious fraud when they were
reasonably informed. Did they support GATA's efforts?
Did gold producer members of the World Gold Council
take responsible action to correct the fallacies in the
Cross/WGC report, which conceal the bullishness of the
gold market? Did they take any action in behalf of
their shareholders to get the truth out?

The continued support of the World Gold Council by gold
mining companies might be more dangerous to the
companies than their openly supporting GATA would be.
Then, at least, they would have a defense about what
they tried to do when presented with the facts.

GATA is doing everything it can to win the day. We need
your help. "Carpe diem," as they say.