gata refutes criticism of blanchard suit

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    11:55p ET Thursday, December 19, 2002


    Dear Friend of GATA and Gold:


    Blanchard & 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 & Associates Inc.
    But, as the famous question goes, who can
    refute a sneer?


    Of course, as the Blanchard lawsuit's critics
    observe, no "proof" 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:


    "Part of what gets the conspiracy theorists'
    blood going," Ingram writes, "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."


    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.


    "Not surprisingly," Ingram writes, "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."


    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.


    "In the end," Ingram writes, "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."


    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: "Where is the scandal? Gold has
    always been subject to government manipulation.
    What's new?"


    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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