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Alan Greenspan, et.al., Not Feeling Particularly Threatened By GATA Lawsuit
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(12/21/00) Last week we reported the GATA/Reg Howe lawsuit aimed at a host of economic players of the Western World. Mr. Howe is suing because the price of gold is too low, and has named conspirators. Although this lawsuit has been the talk of the gold-bug chat-rooms, that's probably the last we’ll ever hear of it.
First of all, gold does not need help in a court of law. Gold is not about to become obsolete just because the Treasury, Federal Reserve, and many other big hitters in the economic world would like it to be.

Gold has a natural constituency among the people of the world. Gram by gram are fortunes built. Gold is the money of last resort when the local currency is weak, inflated, or subject to manipulation. Today’s low gold price, measured in U.S. dollars, reflects a faith in the federal dollar, a faith conditioned by a twenty-year track record of strength in that currency.

And for those who don’t share that unbridled faith in the dollar, today’s gold prices are the best buying opportunity in decades. Why go to court to try to raise gold prices, thereby making gold less affordable?

Reg Howe’s lawsuit names the Bank for International Settlements, Alan Greenspan, William J McDonough, J.P. Morgan Co., Chase Manhattan Corp., Citigroup Inc., the Goldman Sachs Group, Deutsche Bank AG, and Lawrence Summers (Secretary of the Treasury) as conspirators working to keep gold prices low. You can go to the end of this article to find a link to the text of this document.

We won’t go into criticism of this lawsuit as a piece of writing – let’s just say it reads like a magazine article, is full of unnecessary information, wanders far afield from its legal points, and in general is not the kind of document a Federal court clerk is going to accept graciously.

Legally, no federal court is going to start ordering Alan Greenspan to sell or not sell gold any more than it is going to order him to raise or lower interest rates, or order the Secretary of Defense to invade or not invade a foreign country. The courts are not, the recent election mayhem notwithstanding, generally in the business of running other branches of government unless there is very good reason.

Reg Howe’s status as a B.I.S. shareholder is a separate issue. If the plaintiff as owner of a share of B.I.S. stock is being injured, then he should sell his stock. If the plaintiff owns some international banking stock which is the subject of an underpriced buyout, he may have some remedy as to value, but that has nothing to do with his request for the court to take over running the American economy.

The remedies sought by the plaintiff are so extreme as to discredit whatever factual merit the complaint may have. Plaintiff starts by asking the following:

"(1) A permanent injunction enjoining Alan Greenspan, William J. McDonough, their subordinates and their successors in office, and the Secretary of the Treasury, acting through the Exchange Stabilization Fund or otherwise, from intervening in the gold market, directly or indirectly, for the purpose of affecting or with intent to affect gold prices;"

Basically, the complainant is asking for a court order prohibiting the U.S. Government from selling or buying gold.

Although he qualifies the request with the language about "the purpose of affecting or with intent to affect gold prices" in reality are we going to have court hearings where these officials have to come and testify about their subject intent in this or that transaction? I think the US government can buy or sell all of the gold that it wants without worrying about lawsuits.

Buying and selling gold, and running the economy, are pretty much what governments do. No one would suggest that governments should not do these things. Protecting the value of its currency is indisputably a legitimate government activity. If defeating monetary inflation is achieved through the limitation of gold prices, then that is a decision properly to be made by the Secretary of the Treasury, not to be gainsaid by a court at the behest of an aggrieved gold investor.

The plaintiff’s complaint is basically political. If there is a remedy, it is also political. That remedy is to get Congress to pass a bill doing what he wants. The plaintiff knows this full well - at some point in his complaint he mentions going to see Senator Dennis Hastert. That would be a good first step for the plaintiff. But he needs to get Dennis Hastert to do something legislative to benefit him. From what we can gather, it seems he got 15 minutes of Dennis Hastert’s time (in baseball lingo, that's a 'cup of coffee' in the major leagues). We can assume he got a polite reception, but no action forthcoming.

Parties who speak for various economic interests try to get Congress to pass bills to their benefit every day. Remember the Free Silver movement, which culminated in the candidacy of William Jennings Bryan? (Not likely you do, since it happened in 1896.) The issue at that time was trying to persuade Congress to freely mint as much silver as came in the doors of the Mint in order to create inflation (the free coinage of silver), so that debtors (farmers) could pay off their bank debts with cheap money. The banks naturally opposed this, preferring to be paid in gold. And so the battle raged, through the middle of the 1890’s.

It was a grand and long-lasting political controversy, a great clash of ideas and interests fought in open political debate, full-blown rhetoric, and widely debated in the press.

But nobody sued anyone over gold prices. Just like today, the issues of the people’s money should not be decided in some courtroom.

At Onlygold.com, we see low gold prices as an opportunity, not grounds for a lawsuit. As for those who paid high prices for gold in the past, well, them's the breaks, welcome to the NFL, that's life in the big city.

Editorially speaking, we at OnlyGold.com feel that gold is going to do just fine by itself in the future. Certainly gold prices have been manipulated downward over the past few years. And that's happened because demand for gold, though growing, has been outpaced by new mining and sales from national reserves. In a more robust market for gold (which we feel is coming sooner rather than later), natural market forces will take over and gold prices will go higher.

That’s the way the world really works.

 

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