Hint: It’s from your Uncle…
by Gary North
All guns are loaded. Never forget this.
I never knew my great uncle Gerald. That’s because he was killed in an accident. His son shot him.
Uncle Gerald 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.
The reverse rule applies to every warehouse. Every officially full warehouse is empty until it is shown to be full. This is #1 rule for storage safety.
FORT KNOX IS EMPTY
This rule 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.
- Amount 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 per ounce.
- The Depository opened in 1937; the first gold was moved to the depository in January that year.
This ends 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 where? This 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.
Since 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.
But what 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.
Congress 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.
WHY NOT SELL IT?
What does it matter whether the gold is there? It is kept on the books at $42.22 per ounce, an economically irrelevant figure.
The gold is not redeemable. No one can present a legal claim to have a specified amount of gold delivered at a legally fixed price.
It does not circulate. It is not sold or leased, we are assured by the Federal Reserve System. It just sits there, unused. It has no economic purpose.
Why not sell it?..