*UPDATE* A second analysis article on this topic has been produced and delves deeper into the Fed and Treasury’s relationship with regards to gold and gold certificates: Read the NEW article here.
Thats right. The Fed owns NO gold. Zero, zip, ziltch.
For those of you who did not watch yesterday’s monetary policy hearing in the house of representatives, you most likely missed this bombshell exchange between Federal Reserve lawyer Scott Alvarez and committee chairman Dr. Ron Paul. My jaw literally dropped when I heard the Fed’s general counsel declare that the Federal Reserve owns no gold. After 1934, Alvarez explains that the Fed handed its gold over to the Treasury in exchange for gold certificates. When pressed further, Alvarez noted that the gold certificates do not represent any interest whatsoever in the gold itself. He explained the gold certificate listings on the Fed balance sheet, not as a claim to gold, but at most a claim to dollars from the Treasury. See the quotes here (and watch the videos at the bottom of the post):
Scott Alvarez: “The Federal Reserve does not own any gold at all… we have not owned gold since 1934, um, so we have not engaged in any gold swap. Before 1934 the Federal Reserve did, we did own gold. We turned that over by law to the Treasury and received in return for that gold certificates.”
Ron Paul: “…You have the securities for essentially all the gold?”
Scott Alvarez: “No. No we have no interest in the gold that is owned by the Treasury. We have simply an accounting document that is called gold certificates that represents the value at a statutory rate that we gave to the Treasury in 1934″
This issue is even more complicated than may appear and after doing some research we seem to have settled some of the quirks in this odd Treasury-Fed scheme. Bare with us when reading through this.
What appears to have happened under the Gold Reserve Act of 1934 is the Treasury seized the Fed’s gold, taking full ownership and claim to its proceeds. The Treasury as an aside transferred a sum of special 1934 series gold certificates to the Fed amounting to the statutory value of gold ($20.67 per ounce) times the quantity of gold transfered from the Fed to the Treasury. The official gold price was later revalued to $35 an ounce, an effective 40.94% devaluation of the currency, and stood at that value until the passing of the Par Value Modification Act of 1972. Under this act, gold was revalued again, this time to $38 an oz, and the Treasury account was credited upwards by $822 million in miscellaneous receipts to reflect the change in the gold price from $35 to $38. The gold was revalued one last time in 1973 to $42.22 and again the Treasury was credited with more additional value to their gold, $1.157 billion to be exact, to account for this. As of today, the Federal Reserve is left with $11.16 billion dollars worth of gold certificates and the Treasury holds 8,133.5 tonnes of gold still valued at $42.22/oz.
So what exactly are the gold certificates the Fed holds? For one, the Fed’s gold certificates are unlike previous gold certificate issues, and are not publicly trade-able. They are also not direct claims to gold, but rather reflect claims only to US issued currency or coin held by the Treasury. In addition the Treasury can demand these certificates back at any time in exchange for cash. The Fed’s gold certificates are an accounted for liability of the Treasury as listed in Note 19. Treasury’s “Other Liabilities”. In addition, if the Treasury is unable to satisfy a demand by the Fed for the funds, the Fed is able to gain access to the gold, since the gold stands as collateral for the gold certificates issued by the Treasury. This fact is taken from this statement in Note 2, from the Treasury’s balance sheet:
“Gold totaling $11.1 billion as of September 30, 2010, and 2009, was pledged as collateral for gold certificates issued and authorized to the FRBs by the Secretary of the Treasury.“
Given that the Fed has an indirect claim to the Treasury’s gold, it is questionable what line of reasoning the Fed’s general counsel was using when stating so broadly that the Fed has “no interest in the gold that is owned by the treasury” though this wording does come from the Gold Reserve Act.
In any case, we can analyze the implications of the basic facts and come to a couple of conclusions:
1) The widespread notion that the Fed owns gold is false. The corollary to this is the mistaken belief that the Fed understates its gold holdings on its balance sheet by only reporting certificates based on the $42.22 statutory gold value. The Fed does not in fact own the US gold stock multiplied by the market price of gold, unless the Treasury defaults and even then its not clear. The Fed does, however, own a claim to currency totaling $11.1 billion and this value has a remote chance of going up significantly if the Treasury revalues its gold, and attempts to monetize it.
2) The fact that the Fed owns no gold, nor claims to any gold, means the fundamental value of the dollar lacks any backing besides dollars themselves, not including Fed building and equipment. Dollars are in essence worth a lot less than many people thought, and the Fed is much more impotent in using the prowess of their assets, and conducting monetary policy in general, than many believed. In all, Alvarez’s clarification strengthens the case for gold’s high dollar value immensely.
*A second analysis article on this topic has been produced and delves deeper into the Fed and Treasury’s relationship with regards to gold and gold certificates. Read the NEW article here.*
see the specific exchange between Alvarez and Ron Paul about the Fed’s gold here:
watch the whole hearing here:
Thank-you for the article.
Anyone who has an interest in a sound economic system should search for:
“Green, sustainable economics – a phase of divine law” by Dr. D. S. Milne.
Good reading that ought to be put into practise.
I love Gold.
That intercourse between Alvarez and Paul reminded me of a famous quote: “I did not have sexual relations with that woman, Miss Lewinsky.” Gotta love lawyers! They make “truth” a science.
Am I missing something here – Isn’t the Treasury part of the US Government?
The Treasury is of course part of the US government, but the Fed is independent within the government, and totally private in many respects. The financials of the Treasury and Fed are not consolidated either and the Treasury has enough of its own excess liabilities that they can’t afford to just start giving away assets to the Fed, if that is what you’re implying. The question still remains as well as to whether or not the Treasury has retained ownership to their gold, or if they have engaged in swap/lease agreements or sales.
Ron Paul, is a Godsend for getting the truth out of these criminals for the people of the USA as well as the entire world. Finally the cloak of secrecy that the FED has been hiding behind since it inception. IT’S ABOUT TIME THE TRUTH GETS OUT ABOUT THIS ENORMOUS SCAM CALLED THE FED. Personally I feel every one of these crooks past and present should be put in prison for the rest of their lives, never to see the light of day as free men again for what they have done to the American people and other people throughout the world. It is a classic case of greed and power corrupting the system.
The FED belongs in prison end of story !! They should be ashamed of how they stold from everyone, disgusting people who in my opinion are wasting our good air, (by breathing it) and are in my opinion a total waste of skin.
Mr. Reginald Keating
Very interesting article. So, when the Treasury can no longer cover it’s obligations to the Fed, the gold becomes their property. I wonder how this relates to the Fed’s “negative liabilities” when they become due?
http://www.zerohedge.com/article/accounting-gimmick-makes-fed-insolvency-impossible
This is not news.
The gold on the Fed’s balance sheet has never been “owned” by the Fed. They have never claimed such. It has always been the Treasury’s gold (or alternatively, the “‘American people’s”, to the naive). If it exists.
So yes it is rather amusing when people speculate about the value of the “Fed’s” gold on its balance sheet, though in a fairly meaningful sense, there is no real delineation between the Fed and the Treasury, or even general government authority and the Fed. The Fed does not seem to follow the law, even stepping beyond the FRA (which is already unconstitutional) from time to time.
It is really a huge mess, unconstitutional, lawless and illegal, but the gold ownership part has never been a secret.
Imagine some private company telling the US government what they can see and what they can’t see. Oh wait, we already have that, it’s the Fed !
END THE FED ! NOW !!!!!!
I know people don’t like to really look at the facts, but the truth is, Ron Paul is part of the controlled opposition…
Before you condemn me, do as much research as I have done and you will see the same thing that I saw…
The evidence is too voluminous to type in here… But the truth is there to see…
Stop being lemmings!
Under what circumstances would the U.S. Treasury be unable to satisfy a Federal Reserve demand for currency in exchange for its certificates?
Is the problem that the U.S. Treasury presently is not equipped to issue non-Federal-Reserve-Note U.S. dollars?
The question is what does any nation determined to keep spending within limits of tax receipts have any need for a “Central Bank”? We functioned with a Treasury Department only during a period of great prosperity. Central Banks function to enable the establishment of massive, crushing new debt, ttypically during time of war, and they do not do so out of any sense of philanthropy. The current Fed, for example, refused initially to comply with Judicial Watch’s FOI demand on the grounds they were not part of government (!). They are in it for money, will have their pound of flesh, and do not be fooled into thinking they will be satisfied to be repaid in PAPER (!!!)
Wow. This reminds me of a billion dollar shell game. Lift the shell and the pea is nowhere to be found. Just as the Social Security money has been used in the General Fund, leaving certificates behind.
Why did they Fed get paid insurance money for gold they claimed they lost on 911 in the towers????
They are lairs!!! They stole all the gold between 1928 and 1939 to fund hitler go read the congressional records in this document 1933-March 9th-77CongRec41.pdf spell it all out. Who What when and where. The STRAWMAN was created.
Is anyone really stupid enough to think that Bush Senior or Bill Clinton would leave any gold in Fort Knox, if there was any left by the time they came along!
The value of the dollar is not backed by gold. It is backed by the work of the slaves owned by the Fed.
When you are born in the US you are given a Social Slavery Number. This number is linked to a bond traded on the world markets with an initial value of $1M.
(bond = bondage = slavery)
So the real asset wealth of the Fed is $1M x (the population of the US – the amount of slaves they sold) x compounding interest.
So the Feds actual wealth is somewhere in excess of $350T.
Get back to work slave.
quite Bear you are the odd Man out Its obvious you have an Agenda just what it is we can only Guess.
Do you have an association with these Rockefella Banksters, if so I understand, I as well would be ashamed to admit such crime against my fellow Citizen.
Good Luck its obvious you need it hope you will be rewarded.
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@quietbear and generally. I agree completely re. Ron/Rand et. al. It’s very easy to cast a pre-arranged “Nay” when you know the vote is going to be 450-3. Kucinich, Paul, perhaps the Vermont Independent in Senate? Rand? One hand counts them all, the rest?
Remember Big Bertha Murtha, that paragon of everything “good” about CONgress?
A rather rude awakening is coming to us all, globally, to be awake before the “alarm” goes off is a blessing, yes?
Vivek
So–What is actually in Fort Knox?
BUT WHERE did the Federal Reserve first get all the gold they say they turned over to the US Department of the Treasury?
From WHERE?
From WHOM?
HOW?
According to US Congressman MacFadden, the Federal Reserve that used US President FDR to Order Gold Confiscated FROM the American people, DID get turned over to the Federal Reserve, and then, the Federal Reserve turned it ALL OVER to England.
It’s like a Stealth Version of the 1776 Revolutionary War of Independence, and the English re-start of that Revolutionary War in 1812.
(SEE: http://www.ivamu.com/congressmacfaddenonthefederalreservecorporation.htm )
So now, perhaps the Day has finally arrived that we send our LARGEST Battle Ships over to surround Great Britain, and DEMAND the RETURN of our Gold, in FULL, and our ships do not leave until AFTER all the Gold is RETURNED — >in FULL.
Q. Why these elaborate schemes to KEEP the Federal Reserve ON the Gold Standard, all the while (falsely) claiming that it is “NOT good” for We the people to be ON the Gold Standard.
A. It is because they are lieing.
Major Disconnect going on here.
Tipping point.
i always love to read about stuffs like this one .,
This is a really great blog. Thx to the auther
Note… the important point is (not) “is there gold in Ft Knox”, but “who owns the total reserve of gold that (we) supposedly have in places like Ft Knox”. And I believe Ht Knox holds only about 5% of the total gold reserve (supposedly) we have.
In this case we are discussing the Federal Reserves’ gold ownership. The Treasury is the actually owner of the gold at Fort Knox and it represents more than 50% of its total gold holdings. You can read more about the Treasury’s gold in our report on the topic here.
Woodrow Wilson gave monetary control of the USA to the Rothschild’s in 1913. In 1933 FDR gave all our gold to the Federal Reserve. Following the Federal Reserve gave the gold to the Treasury Dept. in exchange for gold certificates. So we pay millions to guard Rothschild’s gold. Following, much razzle dazzle perpetrated by the Rothschild’s has muddied the water to the degree that we cannot figure the mess out but know the Rothschild’s are making trillions from the goyim in the USA.