are loaded. Never forget this.
knew my great uncle Gerald. That's because he was killed in an
accident. His son shot him.
was a hunter in Oregon. He had taught his son to regard every
gun as loaded. He always was careful to unload his gun whenever
he came in from hunting. But one day he forgot. His son, knowing
that his father was meticulous about such things, for some reason
pulled the trigger.
In my household,
I was taught that every gun is loaded until it is examined to
see if it is unloaded. This is the #1 rule for gun safety.
rule applies to every warehouse. Every officially full warehouse
is empty until it is shown to be full. This is #1 rule for storage
KNOX IS EMPTY
applies to Fort Knox, where the nation's gold is said to be stored.
According to the
United States Mint, which is officially in charge of the nation's
gold, here are the facts.
of present gold holdings: 147.3 million ounces.
- The only
gold removed has been very small quantities used to test the
purity of gold during regularly scheduled audits. Except for
these samples, no gold has been transferred to or from the Depository
for many years.
- The gold
is held as an asset of the United States at book value of $42.22
- The Depository
opened in 1937; the first gold was moved to the depository in
January that year.
the entry: "The Depository is a classified facility. No visitors
are permitted, and no exceptions are made."
We are assured
that there are "regularly scheduled audits." By whom? Reported
is all that I have been able to find.
In 1974, after the US closed the gold window, congressional support
grew for inquiring into the US gold stock. The Mint and the GAO
were sanctioned to audit a portion of the Treasury's gold. Three
out of thirteen compartments at Fort Knox were audited for inventory
and samples were assayed and compared to records currently held
by the Mint. Following this partial audit the Treasury created
the Committee for Continuing Audits of the United States Government-owned
Gold in 1975 to annually inspect the accuracy and adequacy of
the Mint's records and internal procedures. These inspections
involved auditing about 10% of the US Mint's gold annually in
an attempt to cycle through the whole gold stock. By 1986, the
Treasury's Inspector General managed to halt the audits under
the notion that most of the Mint's gold had already been audited,
about 92%, and sealed and no significant issues were yet found.
The costs of the procedures were also a stated concern in the
halting of continuing audits.
then, starting in the 90's under 31 U.S.C. 3515, the audits
were mostly indirect efforts as the Mint's financial statements
and Custodial Schedule are annually audited by public accountants
at KPMG. There still existed some audit-work that was partially
direct up until 2008 by the Treasury OIG as their annual assessments
of the mint's Custodial Schedule statement included direct checks
of statistical samples, using a 95% confidence criterion, to
verify the number of gold bars in each melt, the melt number
for each gold bar, and the fineness stamped on each gold bar.
of the official annual audits of the Federal Reserve System, conducted
by accounting firms hired by the Federal Reserve System and conducted
under rules established by the FED?
By 2008, the Treasury OIG proclaimed that all 42 of the Mint's
gold compartments, or 100% of the Mint's gold, were audited and
sealed. As a result, all audits since 2008 only involved checking
that the joint seals remain intact. None of the audits by KPMG,
GAO or the Treasury OIG include an inventory or assay of any of
the 5% of the Treasury's total gold that is stored at the Federal
Reserve Bank of New York, or the Treasury's working stock of gold.
The extent to which the US Treasury attempts to verify their gold
holdings in the Federal Reserve Bank of New York involves annually
requesting a confirmation from the Federal Reserve regarding the
status of US gold reserves held by the FRBNY. Furthermore none
of the audits that occurred in the past fully assess the Treasury's
compliance with outstanding legislation with regard to their use
of their gold.
doesn't want to know the details of all this. It does not insist
that the Government Accountability Office conduct an ongoing annual
audit with random ingot testing. Why not? Congress doesn't say.
Ron Paul has called for a full audit of the gold in Fort Knox.
This has fallen on deaf ears.
NOT SELL IT?
it matter whether the gold is there? It is kept on the books at
$42.22 per ounce, an economically irrelevant figure.
is not redeemable. No one can present a legal claim to have a
specified amount of gold delivered at a legally fixed price.
not circulate. It is not sold or leased, we are assured by the
Federal Reserve System. It just sits there, unused. It has no
the Mint minted it into American tenth-ounce gold eagle coins?
voters should demand that they, as citizens, be given the right
to buy tenth-ounce American eagles at $42.22 per ounce. That would
restore power to the people. It would also be a nice bonus for
being an American citizen. You would have to have a proof of citizenship
to order your coins at this price.
sells these coins to wholesalers. I can visualize this late-night
cable TV ad.
Act now! The supply is limited! Only ten tenth-ounce coins for
each American citizen. Call our toll-free number: 1-800-"BUYRELIC."
Or go here:
drive down gold's market price for a while, but not by much and
not for long. It is generally estimated that all central banks
hold less than 20% of all the mined gold. (http://bit.ly/GoldHoldings)
The United States government's share of central bank gold is about
26% (http://bit.ly/GoldHoldingsCentralBanks) So, the US government
holds 5% of the world's available gold. But it would take several
years for the Mint to mint all of this gold into coins. So, the
effect on the price of gold would be minimal and temporary. I
favor the "for sale at $42.22 to Americans only" sales program.
But what if the government just sold all of the gold at a fire
sale in the available bars? Asians would rejoice. Americans would
not buy much of it at a market price.
this damage the U.S. government? The gold is not held as a reserve
for the money supply. The dollar's price domestically in goods
and services is not tied in any way to gold.
this damage the American people? Most Americans own no gold. It
would drop the price of gold for a time, harming present investors
in gold. Why would that bother anyone inside the Washington Beltway?
help gold users. It would help reduce the government's debt. The
money generated could be used to pay off the federal debt. Unlikely?
Then at least reduce the federal deficit.
why is there resistance to such a move? If gold is a barbarous
relic, as John Maynard Keynes insisted, then why not transfer
the confiscated gold back to the people who have good uses for
CENTRAL BANKERS IRRATIONAL?
banks still hold gold, despite the fact that it pays no rate of
interest rather like U.S. Treasury bills today. The textbooks
insist that such behavior is irrational. What is the reason for
this seemingly irrational behavior?
even more irrational. Central banks are widely believed to lease
(sell) their gold to profit-seeking large banks, called bullion
banks, so that these banks can profit on the interest rate spread.
The bullion banks keep billions of dollars of profits that central
banks could have received by selling the gold and investing the
makes sense only on this presupposition: central banks are the
operational agents of the largest commercial banks. Central banks
are there to make money for bullion banks.
banks lease their gold in this way? It is hard to say. Gold is
still held by central banks, at least officially. So, they may
have leased it to bullion banks, but the textbooks never mention
this possibility. Alan
Greenspan did, but only once, and only briefly. "Nor can private
counterparties restrict supplies of gold, another commodity whose
derivatives are often traded over-the-counter, where central banks
stand ready to lease gold in increasing quantities should the
Reserve has asserted that gold swaps are legal. See
banks keep IOUs from bullion banks on the books as if the gold
were there. The International Monetary Fund has authorized this
form of accounting. In a series of emails between the Gold Anti-Trust
Action Committee (GATA), the IMF representative admitted this
4. Why does the IMF insist that members record swapped gold as
an asset when a legal change in ownership has occurred? This is
not correct: the IMF in fact recommends that swapped gold be excluded
from reserve assets. (See Data Template on International Reserves
and Foreign Currency Liquidity, Operational Guidelines, para.
which the IMF official supplied is no longer online at the IMF
So, it is
possible that the gold in Fort Knox was swapped by the Federal
Reserve to foreign central banks, which in turn leased the gold
to private bullion banks at 1% per year or less, enabling those
banks to sell the gold, get any currency, and invest it at six
percent or more.
seems far-fetched, consider the other reason for storing all that
IS NOT SO BARBAROUS AFTER ALL
banks hold gold. Why?
textbook used in colleges, whether Keynesian, monetarist, or public
choice, we are given reasons why gold is not necessary or advisable
as a monetary metal. The Party Line of the economics departments
of all stripes is this: (1) central banking is not really a cartel,
even though it looks like one; (2) every economy needs a central
bank to protect the people from politicians, who would inflate;
(3) gold is a liability as a monetary metal because it keeps central
banks from inflating.
Party Line is simple to summarize: "Central banking is reliable;
politicians and the general public are not."
hold gold at all? Why not sell it and buy Treasury bills or bonds?
Why not buy the bonds of lots of other nations? The bonds pay
be because the economic return on these bonds is risky? Could
it be that central bankers never did trust PIIGS debt. Could it
be that they regard the long-term value of gold as more stable
than the long-term value of other currencies?
indicate that the experts in charge of monetary policy have adopted
ideas not discussed in textbooks.
1. Gold is more reliable than fiat money.
2. Gold functions as money for central banks.
3. Gold is not a barbarous relic.
4. Central banks with gold reserves are trusted.
5. Gold is a symbol of central bank reliability.
Any of these
answers would apply just as well to a commercial bank. They would
apply to private citizens.
ridicule such a suggestion. But the textbooks also avoid asking
this question: "If gold is just another commodity, then why do
central banks hold it as a legal reserve?" There is no gold redeemability.
No central banks pay gold on demand to anyone, including other
central banks. They did prior to August 1, 1914 (the start of
World War I), but not today.
it about central bankers? Have they lost their ability to think
through the principles of economics that they were taught in America's
best universities? Have they not adopted the logic of economics?
It is clear
that they have not bought into the textbook Party Line. Neither
should anyone else.
TO EMPTY FORT KNOX
If the gold
is in Fort Knox, we should ask: "Why?"
By the standards
of modern economics textbooks, this hoard of gold is irrational.
It is the holdover of pre-Keynesian, pre-monetarist economic theory.
It is a barbarous relic in the thinking of central bankers.
of gold in Fort Knox would testify to the fact that the senior
central bankers of the most powerful nation on earth have never
bought into the Party Line of the textbooks.
Nixon close the gold window in 1971? To preserve the remaining
supply of the government's gold, or at least preserve the illusion
of this gold.
he just let central banks buy all of it? At least the government
would have gotten $42.22 per ounce.
voters want the gold in Fort Knox to stay in Fort Knox, then we
should conclude one of three things: (1) they are economically
irrational or ill-informed; (2) the textbook writers are economically
irrational or ill-informed; (3) they haven't spotted a deal: buying
gold at $42.22 per ounce.
to sell tenth-ounce gold eagles to Americans at $42.22 per ounce.
At $42.22 per ounce, a barbarous relic is a very good deal.
Americans have better uses for the gold than the government does.
Knox isn't empty, here is a great way to save all those storage