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O'Neill and Greenspan Staring at Checkmate - Bill Murphy

Section: Essays

Yesterday, Secretary Paul O'Neill testified before the Financial Services Committee on the state of the international economy and the performance of the IMF and World Bank. Congressman Paul asked Secretary O'Neill what he thought of the Monetary Freedom and Accountability Act (HR 3732). Secretary O'Neill said he believed the administration needed the flexibility to deal with changes in the international economic system and would oppose anything that reduces the administration's "flexibility."

Congressmen Paul's Monetary Freedom and Accountability Act is not about taking flexibility away from the administration. It only requires the President and Treasury Secretary to be transparent in any gold dealings and that they receive permission from Congress should they choose to deal in the gold market. The President and Treasury Secretary share responsibility for the Exchange Stabilization Fund (ESF). The Gold Anti-Trust Action Committee has evidence that this fund is dealing in gold. Yet, in a memo to Alan Greenspan on June 8, 2001, Virgil Mattingly says:

"With respect to activities of the ESF, I note that the Treasury Department stated in a recent filing that the ESF has not held any gold since 1978."

If that is the case, why should O'Neill object to Ron Paul's Monetary Freedom and Accountability Act? Why should he care in any way, shape, or form? If the President and Treasury Secretary decided to mobilize the gold of American citizens, what is wrong with requesting permission from Congress to do so? Would not the founders of our country have wanted as much?

O'Neill is holding back and hiding the real truth about the Treasury and ESF gold operations. It is only a matter of time before he gets nailed, before some member of Congress asks him about GATA's evidence of Treasury gold dealings.

It may be sooner than you think! The following letter was distributed today to every member in The House of Representatives of the United States of America:

Support Sound Economics and Open Government

Dear Colleague:

Please help restore Congress' constitutional role in overseeing monetary policy by cosponsoring the Monetary Freedom and Accountability Act (HR 3732). This simple act takes a step toward restoring Congress' constitutional authority over the monetary policy of the United States by requiring congressional approval before the federal government buys or sells gold.

Federal dealings in gold can distort the gold market. Given gold's importance as a barometer of the health of our monetary system, this can have ripple effects across the entire economy.

The Gold Anti-Trust Action Committee (GATA) has raised serious allegations that the Treasury and the Federal Reserve, acting through the Exchange Stabilization Fund, have been interfering in the gold market with the goal of lowering the price of gold to disguise the true nature of the financial bubble of the 1990s. According to GATA, these actions made it impossible to know the true state of the economy, and thus may have worsened the impact of the recession on investors, consumers, and workers around the world.

While I share the concerns raised by GATA regarding the effects of federal interference in the gold market. HR 3732 in no way interferes with the federal government's ability to buy or sell gold. Instead, HR 3732 simply restores Congress' much-neglected role in monetary policy by ensuring Congress can debate and approve any federal dealings in gold. HR 3732 also ensures that the American public is fully informed of their government's dealings in the gold market.

Please stand up for sound economics, open government, and Congress' constitutional authority. Co-sponsor the Monetary Freedom and Accountability Act today.


U.S. Rep. Ron Paul


Who is more disingenuous, O'Neill or Greenspan?

The following is the official transcript of February 27th exchange between U.S. Rep. Ron Paul, R-Texas, and Federal Reserve Chairman Alan Greenspan before the House Financial Services Committee.

REP. RON PAUL (R-TEXAS): Welcome, Chairman Greenspan. I want to start by referring to a speech you gave on January at the American Numismatic Society, where you spoke profoundly about monetary policy, where you expressed that central bankers have had this relative success over the past decades, and it raises hopes that the fiat monetary system can be managed in a responsible way. So I think you're still at that point of hoping that this system will work. I maintain that the jury is still out on whether fiat money will work on the long term.

And then you foiled it up by saying, in case it didn't work -- and I don't know whether you had tongue in cheek or not about this, but you said that we might have to go back to seashells and oxen as our medium of exchange. And then you reassured everybody that the open discount window would have an adequate supply of oxen.

Chairman Oxley, if we get this point, which I suspect we will someday, I ask you that we have hearings to debate the issue of what medium of exchange that we have before the Fed starts using oxen as a medium of exchange.

HOUSE FINANCIAL SERVICES COMMITTE CHAIRMAN OXLEY: Are you referring to the chairman here?

PAUL: Yes. I hope that you will at least consider that. But I think it is an important point, and I relate that to the Enron issue, because in many ways I think the system that you have been asked to manage it's similar to being asked to manage an Enron system. Because Congress is notoriously in favor of deficit spending; we are currently expanding the national debt at $250 billion a year and we have nearly a $6 trillion debt.

Now, we create that debt by buying votes. We spend a lot of money.

Now, the Federal Reserve comes in and they buy that debt in order to maintain the interest rate that they think is the right interest rate, and they take that and use it as an asset. You put it in the bank, you call this debt that we created as an asset, and you use it as collateral for our Federal Reserve notes.

So that's a pretty good scheme. And I think in the moral terms, as well as the economic terms, it's very similar to what the Enron - how Enron operates.

I'm not convinced this system works very well, because a lot of people here praise you for the adequate amount of liquidity -- and that's what inflation is: create more money, lower interest rate. Every time you ask for liquidity, every time you ask for lower interest rates, you're asking for inflation of the money supply.

And I think what we fail to do is ever ask about the cost. Do we ever concern ourselves about the people who have had two-thirds of their income removed because they happened to be savers and living off interest, we gouge them with inflation, the loss of purchasing power, as well as taxing that, and yet a lot of people in this country have suffered from that particularly system?

Now, the analogy I would like to draw is something you said in your testimony on page 13, and you have mentioned several times now that Enron may be a good lesson. And I think it is. And I'm not for more of this regulation by SEC. I think you're correct that derivatives provide a market tool that is worthwhile.

But you said, "The Enron decline is an effective illustration of the vulnerability of a firm whose market value largely rests on capitalized reputation, with very little, if no, physical assets." That's exactly what our monetary system is all about, and that's what I believe the dollar is vulnerable. We in Congress do not have a responsibly to run Enron. Some other government has a responsibility to deal with fraud. We have a responsibility to the dollar. And I think that's what we fail so often to address around here. And you said that "Enron provides encouragement that the force of market discipline can be counted on over time to foster a much greater transparency." That's exactly what the market does with money. If you look at the rapid and the sudden devaluations of the fiat currencies around the world, if you look at what happened to us in '79 and '80, that was the market coming in and forcing vulnerability and transparency on us.

Now, gold gives you a hint as to what's happening. Gold has sent a mild message in this past year, in spite of the fact that central banks and others continually sell and loan out gold and pushing the price of gold down. But there is a message there. So I would ask you, can you see any corollary whatsoever on what you're asked to do in running our monetary system to that which Enron was involved in?

FEDERAL RESERVE CHAIRMAN ALAN GREENSPAN: I hope there are fundamental differences. I mean, there are -- first, dealing with essentially a fiat currency, what it is that we are doing is that the currency is granted value by fiat of the sovereign, as it is said in the textbooks. The issue there is that, in years past, there's been considerable evidence that fiat currencies have been mismanaged in general and that inflation has been too often the result. What I was mentioning in the speech that you were referring to is the fact that there is some evidence that we're learning that lesson, learning how to manage a fiat currency. I've always had some considerable skepticism about whether that in the long run can succeed, but I must say to you, the evidence of recent decades is that it has been succeeding. Whether that continues is a forecast which I can't really project on.

The Enron situation is essentially one in which there was an endeavor to imply that earnings were much greater than they really, that increasing debt was hidden.

I think of no reason to have done what they did with their off-balance-sheet transactions other than to obscure the extent of the debt they had. And what essentially was squandered in that process was the reputational capital which they had succeeded in achieving over a period of time. And I don't perceive that anything that we are doing as a central bank involves anything related to that. I hope that where we need to be transparent and indicate what we are doing, we do so, and we so except in those areas where it, as I mentioned to you previously, inhibits the ability to actually function as a central bank. But as I say in summary, I hope your analogy is inappropriate.


Greenspan does not deny that central banks are loaning out gold and selling gold to depress the price and admits the "central bank" will not be transparent whenever it chooses to do so. Why?

Both O'Neill and Greenspan are articulating the case for our government not telling U.S. citizens what they are doing with America's gold. In a nutshell, they are saying we cannot tell the American citizens the truth; we cannot be transparent.

That is nonsense and it must end.

We can help stop the shenanigans by moving Congressmen Paul's Monetary Reform and Accountability Act through Congress. The first step is to gain him backing for his Act.

Here is a list of the key folks whose support we need to get Congressmen Paul's Act in play, along with their phone numbers:

Michael Oxley, Chairman of the Financial Services Committee 202-225-2676

John LaFalce Ranking member of the Committee -- 202-225-3231

Peter King Chairman of the Subcommittee on Domestic monetary Policy -- 202-225-7896

Carolyn Maloney -- ranking Democrat on the subcommittee -- 202-225-7944

Dennis Hastert -- Speaker of the House -- 202-225-0600

Dick Armey -- Majority Leader 202-225-4000

Richard Gephardt -- Minority Leader -- 202-225-0100

The GATA Army needs to make these people aware of the enormous importance of this Act. The best way to do that is to call the staff of these people and bring them up to speed. Emails will not cut it on this one.

Please take a few minutes of your time and make a phone call to at least one in the group. Please refer them once again to Congressmen Paul's letter to House members. Suggest that a staff member review the evidence the Gold Anti-Trust Action Committee regarding the clandestine U.S. gold operations and the manipulation of the gold price ( If you are so inclined, also send a copy of Ron Paul's letter to your own Congressman/Congresswoman. One does not need be a U.S. citizen to do take action. This is a world issue.

The President of the United States, George W. Bush, recently chastised the North Koreans for their lack of transparency. Should not Congress be able to ask him to stop acting like the North Koreans when it comes to gold?

The GATA Army has a real opportunity to make something happen here. Yes, you can help change the world. Make that call, or contact someone who can be of assistance. The House of Representatives now knows of GATA. Let us make them more aware of what we have found and how important the gold transparency issue is.

Obviously, Congress is very aware of Enron and its lack of transparency. The result was a fiasco. Congress is staring at another one with the gold fraud. It is time they wake up! It is time Congress ask Alan Greenspan and Paul O'Neill some very fair and blunt gold questions. When they do, GATA will have checkmated them.

1 March 2002