The U.S. congressman plans to introduce a bill in 2011 that would force the claimed gold holdings at Fort Knox and the central bank in New York to be audited for the first time in almost 60 years.
Rep. Ron Paul (R-Texas) plans to introduce a bill to force an audit of the claimed gold reserves at Fort Knox and the New York Federal Reserve, he told Kitco News last week in an interview.
Dr. Paul “has been calling for an audit of the gold held by the U.S. Federal Reserve since 1982, when he served on the U.S. gold commission—set up to examine the role of gold in the monetary system”, Ellen Kelleher reported in a recent article on the “true value of gold” at the Financial Times where she also quotes Gold Anti-Trust Action Committee (GATA) founder Bill Murphy—who refers to gold as the “economy’s thermometer”.
“There hasn’t been an independent audit of U.S. gold reserves since 1955,” he said. “Don’t you think that’s a bit suspicious?”
Dr. Paul told Kitco: “If there was no question, you’d think they would be very anxious to prove to us that the gold is there.”
“In the early 1980s when I was on the gold commission, I asked them to recommend to the Congress that they audit the gold reserves—we had 17 members of the commission and 15 voted not to the audit,” said Dr. Paul. “I think there was only one decent audit done 50 years ago.”
The Texas congressman didn’t confirm a belief to the reasonable accusation that there is no gold in Fort Knox or the Federal Reserve’s holdings, but until an audit proves otherwise, he maintains that “possibility”, the article added:
“If we ever get around to deciding we should use gold in relationship to our currency we ought to know how much is there,” said Paul. “Our Federal Reserve admits to nothing and they should prove all the gold is there. There is a reason to be suspicious and even if you are not suspicious why wouldn’t you have an audit?” he said.
The gold audit follows his crusade last year looking to audit the Federal Reserve, which he says is the chief culprit behind the economic crisis.
“I don’t think the Federal Reserve should exist—it would be best for congress to exert their responsibilities and that is find out what they are doing”’ said Paul. “It is an ominous amount of power they have to create money out of thin air and being the reserve currency of the world and be able to finance runaway spending whether it is for welfare or warfare; it seems so strange that we have been so complacent not to even look at the books. If we knew exactly what they were doing, who they were taking care of, there would be a growing momentum to reassess the whole system,” he told Kitco News.
Regarding Dr. Paul’s thesis on fiat money, hard money and a potential gold standard:
Paul said everyone accuses him of wanting the gold standard but he said he doesn’t accept that. “I accept the idea of a gold coin standard and I think we can do much better than what we had,” he said. “There was a lot that they did pre-Fed that was not exactly right but we never had a disastrous loss of purchasing power long-term, we didn’t have a great depression, we didn’t have the 1970s with stagflation and we wouldn’t have what we have right now.”
Since the Fed’s creation in 1913 the dollar has lost more than 96% of its value, and by inflating the money supply the Fed continues to distort interest rates and intentionally erodes the value of the dollar, said Paul.
Paul’s solution is to not replace the Fed with anything. “It would make the dollar strong… who wants money to be devalued? I want a strong dollar and if it were equivalent to gold it would remain strong.”
Paul also said he wants to legalize the freedom for people to choose. “My proposal for now is to legalize the [constitutional] use gold and silver as legal tender in a parallel standard and have it compete with paper money. If people get tired of using the paper standard they can deal in gold or silver,” he said.
On the topic of gold price manipulation, Paul said, “I think it is probably true.”
“I am not the one to lay out proof of this, others have done a lot of investigation. One of the reasons I don’t dwell on that is they are not going to listen to us” he said. “But I think it is very important somebody talks about it and emphasizes it just as a warning to be careful; you don’t have to only anticipate what the markets are doing, but you have to anticipate what the government is doing.”
The best example of manipulating the ratio of gold to paper would have been from the late 1950s to 1971, said Paul. “We printed money like currency, we printed too many dollars against the gold, so they said, ‘we will take your gold.’ …if they are capable of that they are capable of doing this as well, because they don’t want their cover blown, ” said Paul. If the markets are saying not to trust paper money, they have to do everything they can to “destroy gold,” said Paul.
Recounting a visit with Paul Volcker, former Chairman of the Fed Reserve, Rep. Paul said the Chairman walked straight into the room, went immediately to his staffer and asked what the price of gold was. “They know gold is important. I think they are quite willing to manipulate it. That is the only way they can maintain this false illusion about gold.”
An editorial at The New York Sun today threw full support behind Dr. Paul’s potential bill, in principle. They don’t either make the statement that there is no gold, but take the only reasonably stance that an audit can do no harm and only help illuminate an otherwise ill-informed population, citing the potentially disastrous free-fall the U.S. dollar’s value and their past concerns:
If that weren’t enough of a warning, the Bloomberg wire reports that “gold’s most-accurate forecasters” are predicting that the value of the dollar may fall to but a 1,500th of an ounce of gold. It reports that what it calls the most widely held option on gold futures in New York is for the dollar to fall to but a 1,500th of an ounce of gold by December. The lowest value to which the dollar has plummeted so far is a 1,266.50th of an ounce of gold, which was the value of the dollar recorded on June 21. Bloomberg reports that holdings through what it calls “bullion-backed exchange-traded products” are within a 10th of a percent of the all-time high of 2,075 metric tons. It quotes one Deutsch Bank analyst, Dan Brebner—whom it calls “the most accurate forecaster so far this year”—as predicting the value of the dollar may drop to a 1,550th of an ounce of gold.
Suddenly the question to ask is not why in the world is Dr. Paul asking for this audit but why is he the only member of Congress making our gold holdings an issue. It was only a decade ago, at the start of the presidency of George W. Bush, that a dollar was worth nearly a 250th of an ounce of gold. As it started dropping, these columns warned repeatedly that it was a signal to be heeded, starting with “The Bush Dollar,” which was issued in December, 2005, and carrying on up through “The Pelosi,” “The Greenspan,” “The Bernanke,” “Ron Paul’s Prescience,” “$1,000 Gold,” “The Obama Dollar,” “Golden Opportunity,” and “Paul Ryan’s Question,” just to name but a few of the editorials of the Sun that have touched on this topic.
Christian Gomez wrote of the last U.S. government gold audit in the 1950s, last week at The New American, spurred on by worries that gold stolen by the Roosevelt Administration was unkept and that a present-day audit would aid in paving a path toward a gold standard in the U.S.:
If Paul’s Federal Reserve audit were able to pass the House and make strong headway in the Senate, despite Democratic majorities in both houses of Congress, then come January, with a potential newly-elected “Tea Party” Congress, Paul’s bill to audit U.S. gold reserves might make headway. It would be fundamentally important to any future plans to return to a pure gold standard.
The last and only time that an audit was performed on the gold held in Fort Knox was issued within hours of President Dwight Eisenhower’s inauguration on January 20, 1953. After 20 years of Democratic rule in the White House and President Franklin Roosevelt’s Executive Order 6102 of April 3, 1933, in which private ownership of gold was outlawed, the American people had become worried whether all of the gold that FDR and the federal government confiscated was still in storage.
Ms. Kelleher added that central banks and private institutions are moving toward gold as a hard asset in the wake of the global economic crisis of fiat money and free credit for oligarchs:
The U.S. still possesses the most gold, according to the World Gold Council, with 8,133.5 tonnes—about 70 per cent of its foreign currency reserves. Germany is in second place, with 3,407 tonnes. Then comes the I.M.F. (which is selling more than 160 tonnes on the market) with just under 3,000 tonnes; Italy, with 2,451.8 tonnes; and France, with 2,435.4 tonnes. Russia, which went on a buying spree last year, has 668 tonnes. The U.K., meanwhile, has just 310 tonnes, and the European Central Bank 501.
And what of China? It now produces more gold than any other country, but ranks only eighth on the list. However, since 2003 it has increased its gold reserves from 400 tonnes to at least 1,054 tonnes, by quietly buying from domestic mines, and made moves to liberalise its gold market further. These include increasing the number of banks permitted to trade bullion internationally and announcing measures that will encourage development of gold-linked investment products. The changes come as the country’s investors continue to pour record amounts of money into gold. Last year, Chinese investors bought 73 tonnes of bullion, up from 18 tonnes in 2007. The view on Wall Street and in the City is that China still buys gold from domestic mines as it must bulk up on the metal to diversify its portfolio as the size of its foreign reserves increases. “It would cause quite a stir if China came into the international market and tried to buy big amounts of gold,” surmised one strategist. “But we still think they’re accumulating gold, just not on the international market.”
It’s not just central bankers who are looking to acquire gold. Private bankers are on the hunt as well. Take Adam Fleming, for example. The nephew of James Bond’s creator Ian Fleming, and heir to the Robert Fleming Holdings fortune (the family’s merchant bank was sold to Chase Manhattan Bank in 2000 for $7.75bn), Adam also professes to be a gold bug, and an occasional supporter of GATA’s causes.
Dr. Paul also refuted the speculation that the U.S. economy is headed toward a “double-dip recession”, saying that “we have single-dip and it has been continuous”.
“The only reason it doesn’t look so bad is if you spend $2tn and you have a $500bn increase in some G.D.P. figures, you didn’t get much for your [trillions of] dollars but it might improve your statistics, so it was a fake recovery,” he added.
Earlier this year, Dr. Paul introduced a bill to audit the Federal Reserve that passed in the House of Representatives, but was “gutted” in the Senate to do little more than what the inspector general to the Troubled Assets Relief Program already does.