Dollar needs external price link, like you-know-what, Calendra writes

4:30p ET Wednesday, August 15, 2001

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy this morning issued a press
release about GATA consultant James Turk's recent
discovery about the disappearing SDRs. The release
got very good distribution through Business Wire and
good notice throughout the financial business, including
posting by Bridge News and CBS MarketWatch. The
release is below.

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

* * *

GATA Says Much of U.S. Gold Reserve is Encumbered

August 15, 2001 9:25 a.m.

DALLAS, Aug 15, 2001 (BUSINESS WIRE) -- quot;Hard as it is to fathom, it
appears that much of America's gold is essentially gone or in severe
jeopardy,quot; says Gold Anti-Trust Action Committee Chairman Bill Murphy.

Murphy points to an astonishing discovery by GATA consultant James
Turk in his new essay, The Mystery of the Disappearing SDR
Certificates, published at the GATA Internet site, www.GATA.org.
An SDR, which is acronym for Special Drawing Rights, a.k.a. quot;paper
gold,quot; is a monetary instrument issued by the International Monetary
Fund, representing special drawing rights for one 35th of an ounce of
gold.

Turk has discovered that the SDR certificates on the books of the
U.S. Treasury Department's Exchange Stabilization Fund have
dwindled from 9,200 millions to 2,200 millions.

Exchange Stabilization Fund
(Assets) (Liabilities)
(in millions)
SDR SDR
Holdings Certificates
Dec. 1998 10,603 9,200
March 1999 9,682 8,200
June 1999 9,719 8,200
Sept. 1999 10,284 7,200
Dec. 1999 10,336 6,200
March 2000 10,335 6,200
June 2000 10,444 4,200
Sept. 2000 10,316 3,200
Dec. 2000 10,539 2,200
Source: US Treasury Bulletin

Turk explains why this is important:

quot;The U.S. Gold Reserve does double duty. It sits in the vaults at
Fort Knox and the other depositories, but the U.S. Treasury has
issued Gold Certificates against it. The Federal Reserve owns these
Gold Certificates, giving the Fed a claim to the 261.6 million ounces
in the U.S. Gold Reserve. Simple enough, and the same transaction is
used for 'paper gold' -- the SDR's -- with just one small difference.
The U.S. Treasury has transferred its SDR's to the Exchange
Stabilization Fund (ESF), so the ESF and not the U.S. Treasury
issued the SDR Certificates now owned by the Federal Reserve.quot;

Turk continues:

quot;The ESF by law cannot issue more SDR certificates than it has
SDRs. The largest amount of SDR certificates outstanding was
10,168 million in December 1995, a significant date, because I
have contended all along that government actions that have
depressed the gold price began in 1996, which is the same year
that the SDR certificates began to decline. From this peak to the
present, the SDR certificates have been reduced by 7,968 million.
Given that there are 35 SDR's per ounce of gold, this reduction in
the SDR certificate account equates to 227.7 million ounces, or
87 percent of the U.S. Gold Reserve....quot;

quot;Everything is fitting into place,quot; Murphy says. quot;It appears that
the SDR certificates are being used by the ESF to hide its gold
transactions from the American public.quot;

GATA has long claimed that central bank gold loans are two
to three times the commonly accepted 5,000 tonnes cited by
the gold industry. quot;Eighty-seven percent of the U.S. gold
reserves is very close to 7,000 tonnes, which would increase
to 12,000 tonnes the official sector gold out on loan in some
way,quot; Murphy notes.

quot;No wonder former Treasury Secretaries Robert Rubin and
Lawrence Summers and current Secretary Paul O'Neill have
refused to directly answer members of Congress regarding
their gold market queries,quot; Murphy goes on. quot;The ESF reports
only to the president of the United States and the treasury
secretary, which means that these men are very aware of the
mechanics of manipulating the gold price.quot;

quot;This is most disturbing,quot; Murphy says, quot;because there is a
pattern of deception, first by treasury secretaries not answering
pointed questions and then by others who apparently are
involved in or knowledgeable about the U.S. government's
intervention in the gold market and who are conveniently
forgetting the facts.quot;

Murphy cites a June 8, 2001, memo to Fed Chairman Alan
Greenspan from Federal Reserve lawyer A. Virgil Mattingly,
who denies any knowledge of gold swaps, even though the
transcript of a 1995 meeting of the Federal Open Market
Committee records him as using those words to explain the
authority and apparent activity of the ESF.

Then in an August 7, 2001, letter, John P Mitchell, deputy
director of the U.S. Mint, offers no explanation why 1,700
tonnes of U.S. Gold Reserves stored at West Point, N.Y.,
were reclassified in September 2000 from quot;Gold Bullion
Reservequot; to quot;Custodial Gold.quot; In May this year all 7,700
tonnes of the U.S. gold reserves in Treasury Department
depositories were reclassified as quot;Deep Storage Gold.quot;

Mitchell says the U.S. Gold Reserve was quot;not reclassified
-- it was renamed to better conform to our audited financial
statements.quot;

quot;But Mitchell offers no explanation why that change is being
made now. Could it be that these changes to conform to
accounting principles were necessary because of the
dramatic reduction in SDR Certificates and encumbering
of the U.S. Gold Reserve?quot; Murphy asked.

quot;This is most frightening,quot; Murphy says. The U.S. Government
defaulted on its gold obligations in 1933 and 1971. Could it be
happening all over again?