Thom Calandra''s latest: Gold seen at critical juncture

12:17a ET Wednesday, November 27, 2002

Dear Friend of GATA and Gold:

GATA supporter David Champeau, who lives in Italy,
has been invited to appear on CNBC Europe's
quot;MarketWrapquot; program hosted by Nigel Roberts at
4 p.m. London time this Friday, November 29. It's
unclear at the moment how much time David will have
and what he'll be allowed to talk about, but you
already know what he is PLANNING to talk about. Our
European supporters are asked to let us know if
this interview comes to pass and how it goes.
David's friends are asked to keep an eye on him
and to let us know if he disappears before 4 p.m.
Friday London time, so we can circulate his
photograph to the financial press.

Also of interest is John Crudele's latest column
in the New York Post, castigating Fed Governor
Ben Bernanke's quot;assurancequot; that the Fed can
print its way out of any economic problem.
Crudele's column is appended here.

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

* * *

STOP THE PRESSES:
USING PLAY DOUGH WOULD BE WRONG

By John Crudele
New York Post
Tuesday, November 26, 2002
a href=http://www.nypost.com/business/62893.htmhttp://www.nypost.com/business/6...

Federal Reserve Governor Ben Bernanke may have
gotten himself into some hot water by saying the one
thing that no one in his position should say: We'll just
print more money if the economy doesn't respond to
traditional remedies.

Bernanke, who (may) have another two years left in
his term, made the outrageous comment in a speech
to a group of economists last week in Washington.

The governor was trying to explain what would happen
if the U.S. gets hit by deflation -- falling prices and
declining asset values. But the comment could just as
easily have panicked investors who know that such
an action could render the U.S. currency worthless.

Here's exactly what the economist -- who went to
Harvard and M.I.T., where they apparently don't teach
the lesson of between-the-wars Germany -- had to
say when the issue of the ineffectiveness of the Fed's
12 interest rate cuts came up.

quot;The U.S. government has a technology, called a
printing press -- or today, its electronic equivalent --
that allows it to produce as many U.S. dollars as it
wishes at essentially no cost,quot; Bernanke is quoted
as saying.

No cost!!??

The printing press image is a hot button with economists
because that's exactly what the Germans did in the
1920s when that country was faced with huge budget
deficits because of World War I.

After it printed enormous amounts of currency that
country's inflation became rampant, leading to an image
that everybody from the war generation remembers -- the
German people in the 1920s having to bring wheelbarrows
full of money to the store for groceries.

Those economic problems eventually led to the political
upheavals in Germany that brought Adolph Hitler to power.

Enough said? Bernanke should shut up.

Someone close to the Fed tells me that Bernanke's
comment didn't go unnoticed inside the central bank and
that the matter would be brought up at a future meeting.

When I asked yesterday about the printing press comment,
Bernanke issued the following statement:

quot;I wanted to reassure my listeners of two things. First, that
I do not believe we face such an extreme situation, and
second that the government has a full range of tools to deal
with a deflationary spiral in the very unlikely event we were
to face it,quot; he said.

quot;I am committed to a policy that fosters price stability,
meaning a very low and stable rate of inflation.quot;

Bernanke's remarks last week came at a time when, I'm
told, the Federal Reserve was very concerned about the
economy's lack of response to an amazing one dozen
rate cuts, which have brought the fed funds rate down
to an extraordinarily low 1.25 percent.

Even though interest rates are at a 40-year low, the
economy is growing only at a modest 3.1 percent
annual rate in the third quarter.

What's bothering the Fed the most, I'm told, is that
companies don't seem inclined to spend, either because
they lack faith in the economy, are worried about
terrorism, disheartened by corporate scandals, or --
most likely -- all those things.

And without corporate cooperation, the nation's payrolls
won't improve.

Last week both Bernanke and Fed chairman Alan
Greenspan made the rounds to allay fears that the U.S.
could see a period of deflation -- when prices fall and
assets lose their value.

While that's a remote possibility, there is a reasonable
chance that the Fed will soon run out of maneuvering
room on interest rates and be unable to stimulate the
economy in traditional ways.

The trouble is, even a hint of running the printing press
overtime could have untold consequences. First, the
dollar's value could fall abruptly -- which it hasn't -- and
foreigners could flee U.S. markets, which also hasn't
happened.

If foreign investors take a hike, interest rates will rise
abruptly and the U.S. economy could suffer a devastating
blow -- the complete opposite of what the Fed has been
trying to accomplish.