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February Gold Notes from All Over: Covering Keynes, California, and Clawar
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(Feb 6, 2001) While gold markets flounder, fidget, and fizzle, we find: Keynes' true definition of a 'barbarous relic;' a document from the upcoming war of gold miners vs.environmentalists; and a reason to sell London and buy New York.
Everyone knows that renowned economist John Maynard Keynes called gold "a barbarous relic." This sound bite is unfailingly quoted from the hazy, distant past whenever gold is disparaged in the popular media.

Recently, in the January 22nd "Fact and Comment" column in Forbes magazine, Steve Forbes goes even further than misquoting Mr. Keynes, and asserts that Keynes "mistakenly" called the yellow metal itself a "barbarous relic."

Now, plainly gold is not a relic at all, much less barbarous. In fact, it is a vital and timeless form of wealth, as Mr. Forbes would agree.

But Forbes takes the poor departed Mr. Keynes to task for something he never said. Not fair, since Keynes is not around today to defend himself.

So to strighten out this ‘barbarous relic’ business, let's take down from the shelf, and blow the dust off, our old reliable source in such matters, "A Retrospective on the Classical Gold Standard, 1821-1931." In it, we find John Maynard Keynes in 1931 writing specifically about the post-WWI restoration of the gold standard by the Bank of England.

Here's how Keynes actually used the infamous phrase:

"In truth, the gold standard is already a barbarous relic. All of us, from the Governor of the Bank of England downwards, are now primarily interested in preserving the stability of business, prices, and employment, and are not likely, when the choice is forced on us, deliberately to sacrifice these to outworn dogma, which had its value once, of 3 pounds, 17 shill ings, 10 1/2 pence per ounce. Advocates of the ancient standard do not observe how remote it now is from the spirit and the requirements of the age. A regulated nonmetallic standard has slipped in unnoticed. It exists."

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Having settled that, on to the present. There’s a long controversy over mining on U.S. public lands. Gold mining in particular comes under attack because so much of it involves pouring massive quantities of cyanide over crushed ore in order to extract the gold – a messy business, to say the least.

Messy it may be, but this form of gold mining, particularly as practiced in Nevada and much of the western states, has made the U.S. the world’s third largest producer of gold, up from 8th place a scant twenty years ago.

Much can be said about the economic, safety, legal and environmental issues of gold mining in the West. This controversy over use of public lands has been news for years. We reprint here this BLM press release that crossed our desk last week:

For Immediate Release: Friday, January 14, 2000 Contact: Jan Bedrosian (916) 978-4616 or John Dearing (916) 978-4622

BLM RECEIVES IMPORTANT LEGAL OPINION INVOLVING PROPOSED GLAMIS IMPERIAL MINE IN CALIFORNIA DESERT

The U.S. Bureau of Land Management's (BLM) California State Director has received an important legal opinion approved by Secretary of the Interior Bruce Babbitt involving a controversial proposal for a large gold mine in eastern Imperial County.

The legal opinion, prepared by Secretary Babbitt's Solicitor, John Leshy, was requested by BLM's Acting State Director Al Wright, regarding the mining proposal located about 45 miles northeast of El Centro. The project, called the Glamis Imperial Mine, proposes a cyanide heap-leach gold mine using three open pits on 1,650 acres of public lands administered by BLM. The BLM is in the process of preparing a final environmental impact statement (EIS) on the project, first proposed and submitted for public comment in November 1996.

The BLM had requested the legal opinion based on numerous public comments concerned about the potential impact of the proposed mine on cultural resources of religious significance to the nearby Quechan Indian Tribe. The public lands involved are located within the Indian Pass-Running Man Area of Traditional Cultural Concern as well as a BLM-designated Area of Critical Environmental Concern and a Class L (limited use) area designated by the California Desert Plan under the Federal Land Policy and Management Act of 1976.

The 19-page opinion notes that BLM also requested that the National Advisory Council on Historic Preservation, a Presidential-level advisory group, review the significance of the cultural values identified and the mine's potential impacts. The Advisory Council completed that requested review and advised BLM on October 19, 1999, that the cultural values were critical to sustaining the Tribe's traditional religion and culture, that the mine would unduly degrade the area, and that no available mitigation measures were adequate to compensate for the loss of these cultural values.

The Solicitor's opinion does not specify or direct a decision on the mining project, but is important to BLM in making a final decision on whether to approve or deny the proposed plan of operations to develop a mine on mining claims the company has filed on the BLM public lands.(more) The opinion outlines and interprets detailed legal authorities which BLM is responsible for complying with, including:

• the Mining Law of 1872 which allows miners to secure exclusive rights to mine public lands through location of valid mining claims;

•the First Amendment's guarantees of the free exercise of religion;

•the President's Executive Order on Sacred Sites (EO 13007, May 24, 1996) which requires BLM, to the extent practicable, to accommodate Native Americans' access and use of the public lands for religious uses and to avoid adversely affecting such sacred sites;

•the Federal Land Policy and Management Act's requirement that BLM prevent undue and unnecessary degradation of all the public lands under its jurisdiction nationwide;

•the added requirement in that law that BLM must prevent undue impairment specifically for lands BLM administers in the California Desert Conservation Area, which covers nine million acres of lands in Southern California, including public lands in Imperial County;

•and finally, the protection requirements under the California Desert Plan of special resources, such as scenic, environmental and cultural values identified in that plan, as required by the Federal Land Policy and Management Act.

The opinion outlines the conflicts inherent in these statutes, regulations, and policies and concludes that BLM's ultimate decision on this project, taking all these all factors into account, is a "difficult task." It advises, however, that "in the end, what is determined to be ‘undue' is founded in the nature of the particular resources at stake and the individual project proposal. If the BLM agrees with the Advisory Council, it has, in our view, the authority to deny approval of the plan of operations."

Wright said the BLM is currently preparing the EIS as required by the National Environmental Policy Act. He said BLM expects to issue the final EIS sometime this spring and a final decision on the mining proposal later this year. He stated, considering this legal opinion, BLM will be evaluating whether or not to proceed with the validity examination it had initiated in 1998 to determine whether or not the project was based on valid mining claims. The validity of those claims was questioned by public comments in the draft EIS and that question will be answered as the law requires in the Final EIS, he said.

Copies of the Solicitor's legal opinion can be obtained from BLM in Sacramento (916) 978-4360, Riverside (909) 697-5200, or El Centro (760) 337-4400.

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Lastly, we would refer those who are deeply interested in gold conspiracy issues to an article entitled “New York Strangulation of World Gold Market – 1 Year,” an article to be found on the Gold-eagle.com website. Mr. Harry Clawar comes up with some surprising statistics on gold price changes in London versus New York. He opines a conspiracy is afoot. Lenny Kaplan brought these interesting points about these two largest gold markets to our attention:

*...About 3 out of 4 of all change in prices are positive from the N.Y. spot close to the London A.M. Fix.

*If someone (a) bought at the NY close, then sold at the London A.M. Fix and (b) placed a put (he really means going short or reversing the position) at the London A.M. Fix, then covered at the NY close, they would have earned, before commissions, $1.33/oz per ounce per day over the 12 month period.

*Trading the first half of the time cycle would have yielded much greater success, $1.51 per cycle vs. only $1.16 per cycle for the later 6 months.

*During the first half of the 12-month period overseas buying strength produced a net increase of $1.55/oz in the price of gold. During the second period, NY selling pressure resulted in a net loss of $14.50 oz.

So, in a nutshell, gold prices tend lower in New York. Why is that? Kaplan says that the large (mostly short) speculative funds exercise their great leverage in New York, and also that the U.S. bullion banks which have done the greatest amount of producer (mining) hedging are also U.S. based. Whereas London serves an area of greater gold demand – Europe, India, and the Far East. Therefore, New York gold prices tend to be lower than those in London.

Where selling is strongest, gold prices are lower. Where buyers predominate, gold prices are higher. Hmmm...

Some call that evidence of a conspiracy. To us, it looks like free markets at work.

 

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