Reflections by Reg Howe

12:45a EDT Monday, June 19, 2000

Dear Friend of GATA and Gold:

Think for a minute before you get all agitated by the
proposal, made last week at the conference of the
International Precious Metals Institute in
Williamsburg, Va., by an economist for the U.S. Federal
Reserve Board, Dale Henderson, that all central banks
should sell all their gold.

Some argue that Henderson would not have made such a
radical suggestion without the approval of his highest
superiors at the Fed. And being so depressed, most
people in the gold world seem to construe this as more
bad news for gold.

But if you look at it from GATA's perspective,
Henderson's proposal can be construed as recognition
that the gold of the central banks is largely gone
ALREADY and that they may be looking mainly for a
method of legitimizing or dimissing its surreptitious
disapperance.

That is, if the central banks have leased more gold
than they can recover, their gold's having been sold
into the channels of international trade; and if some
big financial institutions considered quot;too big to failquot;
borrowed that gold, are on the hook to replace it, and
have sold so many futures contracts and calls on gold
that they are vulnerable to bankruptcy if gold's price
rises markedly -- well, if you were a central bank,
what ELSE would you do but start making noises like
Dale Henderson's?

That is, might you not try to disguise a bailout of
your friends the gold shorts by proclaiming that
quot;gold doesn't matterquot; while, in secret, you were
letting them repay the gold in cash at a huge
discount to what the market price would be if the
market knew what was going on?

That is, Henderson's remarks may signal that the
central banks are waking up to the catastrophic short
position in gold, documented by GATA, and figuring
that they have two choices: Cause worldwide economic
chaos by trying to recover their gold reserves, or
write off those reserves.

The latter scenario is really not so improbable. After
all, just in the last two years, what, if not something
like this, were the rescue of Long-Term Capital
Management by the New York Fed and the Bank of England's
gold sales about? What were these things if not the
implementation of the doctrine of quot;too big to failquot; in
the derivatives and gold markets?

If GATA is right -- and all the documentation of the
gold short and gold derivative positions collected by
Frank Veneroso and Reg Howe points in this direction
-- the authorities don't have the gold they are
supposed to have. The discovery of this could be huge
trouble -- unless the public can be convinced that the
gold was nothing in the first place.

Please post this as seems useful.

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