These Wall Street houses were rigging everything EXCEPT gold, right?

11:55p ET Thursday, December 19, 2002

Dear Friend of GATA and Gold:

Blanchard amp; Co.'s anti-trust lawsuit against
Barrick Gold and J.P. Morgan Chase is drawing
the usual sneers from the usual quarters.
Some of them were dispatched to you tonight,
particularly two items from the Toronto Globe
and Mail, Mathew Ingram's column and the news
story quoting MineWeb's Tim Wood and Martin
Murenbeeld of M. Murenbeeld amp; Associates Inc.
But, as the famous question goes, who can
refute a sneer?

Of course, as the Blanchard lawsuit's critics
observe, no quot;proofquot; has been produced. But
that's what a lawsuit is for: compelling the
production of enough evidence as to constitute
proof of the suit's complaints. Are the
Blanchard lawsuit's critics omniscient? Do they
KNOW there is no proof to be found anywhere?
Can they already prove the defendants'
innocence?

At least Ingram's column acknowledges
begrudgingly that the Blanchard lawsuit might
touch on some interesting information:

quot;Part of what gets the conspiracy theorists'
blood going,quot; Ingram writes, quot;is the fact
that the use of derivative contracts is
poorly understood, particularly in the gold
world, and that the terms 'derivatives' and
'off balance sheet' are often associated with
everything from the multibillion-dollar fall
of hedge fund Long-Term Capital Management in
1998 to the scandal-plagued balance sheet of
Enron.quot;

Yes, and as GATA consultant Robert K. Landis
has written lately at www.GoldenSextant.com,
while they are public companies, Barrick and
Morgan have never offered close to full
explanations of their derivative positions in
gold. Meanwhile, U.S. financial authorities
work desperately to prevent any regulation of
derivatives that might make them understood.

quot;Not surprisingly,quot; Ingram writes, quot;one of
the star exhibits in the gold conspiracy
theorists' case is J.P. Morgan's exposure to
gold contracts, which have a 'notional' or
theoretical value of about $45 billion --
three times as much as some of its
competitors. The implication, of course, is
that at some point it will have to eat a big
chunk of that exposure. J.P. Morgan, however,
maintains that its exposure is not a problem,
and that even if gold stays high it will not
have to take a major hit to its bottom line.quot;

But that's not necessarily the conspiracy
theorists' implication at all. The conspiracy
theorists may imply something quite to the
contrary: that Morgan may be telling the
truth and that its gold exposure is indeed no
problem (at least not for Morgan itself) BECAUSE
IT IS UNDERWRITTEN BY THE U.S. GOVERNMENT.

It is little short of amazing that Morgan's
bland assurances that its huge gold
derivative book is no problem do not prompt
journalists to seek detailed explanations of
how this could be so.

In its lawsuit Blanchard asserts essentially
that Barrick gained control of the gold
market because Morgan advanced it so much
gold at little cost, allowing Barrick to postpone
repayment well beyond any one economic cycle.
Thus, Blanchard asserts, Morgan put Barrick in
position to flood the gold market or choke it,
run the price up as well as down, almost any
time at will, positioning itself in advance
for big profits.

Barrick's arrangements with Morgan may have
been, as MineWeb's Wood says, common and
ordinarily legitimate as to their FORM. But
that is no exemption from anti-trust law as
to their CONSEQUENCES, for anti-trust law
forbids combinations that RESULT in restraint
of trade. That is, many otherwise ordinary
business arrangements may become
impermissible when they destroy a free market.

quot;In the end,quot; Ingram writes, quot;the outcome of
the lawsuit against Barrick and J.P. Morgan
and of the GATA suit is almost irrelevant,
because no matter what happens in either
case, the real gold bugs will see it as more
evidence that they are right, and that a
shadowy cabal of politicians and corporate
insiders is somehow pulling the strings in
the bullion market.quot;

Oh yes, gold bugs will see it their way no
matter what the evidence -- this according to
a writer who himself seems not to have
examined the evidence in the first place.

Actually, all the gold bugs want is a chance
to get at the evidence.

Whether the evidence against Barrick and
Morgan amounts to proof may be best
determined in court, but evidence abounds, from
Morgan's hugely disproportionate gold derivatives
position to Barrick's hugely disproportionate short
position in both gold and silver. Top this off
with the admittedly coordinated gold leasing
done by central banks -- after all, collusive
regulation of the gold price was what the
Washington Agreement was about -- and the
leasing of amounts of gold far greater than
what has been the industry consensus, leasing
documented this month by GATA consultants
Reg Howe and Mike Bolser, and even a lazy
newspaper columnist might show a little
curiosity.

MineWeb's Wood and others question Blanchard's
motives. At MineWeb Wood has even assembled 22
questions for Blanchard, including one seeking
to determine what share of the rare coin market
Blanchard controls, as if the proper journalistic
response to the gold price issue is merely tit
for tat and as if the coin dealer's influence
over the gold price could even register against
Barrick's and Morgan's.

But then even as he has mocked those who
complain about manipulation of the gold
price, Wood has asserted both that it really DOES
happen and that it doesn't bother him. Replying
to a reader's comment at MineWeb the other day,
Wood wrote: quot;Where is the scandal? Gold has
always been subject to government manipulation.
What's new?quot;

Well, for starters, it might be new that, on an
adjacent page at MineWeb, Wood approvingly quotes
as conclusive the U.S. government's DENIAL that it
has been manipulating the gold price. On one
page at MineWeb, market manipulation is common.
On the next page it certainly could never happen.
Would it really be no big deal if that denial was
untrue or a bit misleading?

If there are none so blind as those who will not see,
those who couldn't care less about the truth may run
a close second.

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

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

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

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