Jude Wanniski
April 7, 2005


From: Ben.S.Bernanke@***.gov
Subject:: Greenspan
From Jude Wanniski, 4:21 pm, 4/7/2005

He did not like my paper on his petroleum speech. I'm sure not because he thinks I made a mistake, but because he thinks I've shown that he has made a mistake. The core of the paper is something I learned a year ago from George Yates, the former president of the Independent Petroleum Association of America (the wildcatters). He explained that prior to the 1970s, the market worked to always keep a 10% to 15% cushion of petroleum reserves, but after the oil shock, the cushion kept shrinking to where it is now not much more than 1%. Of course, all manufacturers have gone to just-in-time inventories. I realized yesterday that my paper on this last December was written before I met you in January, but I don't remember if I sent it to you then.   I did send the paper to the WH and recommended that it be shown to the President, who would have a feel for it having spent so much time in the oil industry.


PS   On the story that gold dropped in February because Gordon Brown suggested selling IMF gold and that it rallied in the last few days because Jim Saxton nixed the idea.... The Feb drop probably was in reaction to Brown, as gold went down in all currencies. The rally this week could not have been from Saxton, because different currencies had different gold moves.  That is, if gold moves because of the supply and demand for species, it would have to be the same in all currencies. If it moves because of the supply and demand for dollars, it will would show in the ups and downs in all currencies.