According to the government, Fort Knox contains about 147 million troy ounces of gold. The government has a total of 248 million troy ounces of gold, mostly in bars that are 400 troy ounces each. Most of the gold in Fort Knox came from melting of the gold coins confiscated by FDR, and from other government operations while the US was still on the gold standard which we abandoned entirely in 1971.
At today’s prices the gold (248 million troy oz) would be worth an estimated $275,776,000,000 dollars which used to seem like a lot – until we started spending a trillion dollars at a time!
The Treasury Department still operates the United States Bullion Depository at Fort Knox, Kentucky, so what is the gold’s connection to U.S. currency and who owns it?
From 1879 to 1971, the U.S. dollar was backed by gold using what is commonly referred to as the Gold Standard. This meant that the bearer of U.S. currency could exchange it from currency to gold or silver. The government owned large stores of both and used them to maintain a balanced relationship between the value of the currency and gold or silver. This gold standard allowed the government to maintain stable purchasing power for the dollar in both the domestic and international markets.
From 1879 to 1933, the dollar was fully convertible to gold for both domestic and international traders. Gold convertibility was eliminated domestically in 1934 due in large part to the Great Depression. On April 3, 1933 FDR, declared a national emergency and prohibited the “hoarding” of gold coins and bullion by US corporations and citizens, requiring all stockpiles to be returned to the treasury in exchange for paper currency. However it was maintained for foreign monetary entities until 1971. From 1934 until 1971 Americans could no longer redeem currency for gold. Also during this period private citizens were not allowed to have holdings of gold bullion.
Using a gold standard, the government has a legal limit on how much paper money it can print. During the Johnson administration, the U.S. could print paper dollars equal only to four times the value of the nation’s gold reserves. This sets the stage for trouble if foreign investors decide to cash out their dollars for gold which is exactly what happened.
In the years leading up to 1971 the US government began printing more and more money to pay for the Vietnam War and other investments. The excess printing of paper dollars, and the negative balance of U.S. trade, resulted in foreign countries demanding that America make good on its’ “promise to pay”. They began demanding gold from the U.S. in exchange for paper dollars. This led to a run on gold in the late 60’s/early 70’s that resulted in over $22 billion dollars of gold leaving the US Treasury.
So in 1971 Nixon unilaterally canceled the Bretton Woods system and ending the direct convertibility of the US dollar to gold. In 1971, the United States government abandoned the gold standard. The US dollar was no longer a fixed currency. The dollar became fiat money, meaning it was no longer backed by gold or silver and was not necessarily redeemable even in coin.
This move opened the door for government spending and abuse on a scale never before possible by the federal government. From 1934 until 1971 the US paper money supply doubled. From 1971 until 2005 it multiplied 13 times. This does not even take into consideration what has happened in the last 18 months.
So now, some not so deep thinkers are suggesting that the U.S. sell off our remaining gold assets. See excerpt from Parade Magazine, Sunday Feb. 14, 2010:
Should the U.S. Sell Its Gold?
The U.S. has the world’s largest gold reserve—more than 8000 metric tons. That’s far more than Germany’s, which comes in second with 3400. At current prices, our reserve is worth an estimated $288 billion. Since the U.S. government could certainly use the funds, why not sell this valuable commodity? Does our country need to keep all of that gold?
“The gold reserve is a remnant of the monetary system we abandoned in 1971,” says Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School. “We could have sold it then, and maybe we should have. Since 1971, the return on gold has been 8.86% a year, while the return on stocks has been 9.76%. Even with the disastrous year we just had, stocks have done better over the long run.”
But there are good reasons not to sell now. “Our gold holdings swamp annual demand,” says Andrew Williams of the U.S. Treasury. “Even talk by the government of perhaps selling gold might cause the price to drop,” adds James Barth of the Milken Institute, an economic think-tank. He says that selling gold “could be viewed as a sign of weakness” by other countries and send the undesirable message that the U.S. is desperate for revenue.
While the President can authorize the Treasury to sell gold, that hasn’t happened since 1979. But even if he were to authorize a sale, he couldn’t spend the funds on health care, defense, or any other programs—the law requires that “all proceeds from the sale of government gold be used to pay down the national debt,” according to Williams. Despite how large the reserve seems, liquidating it would barely make a dent in the $12.3 trillion debt. Still, economists like Siegel argue that the stored gold brings the federal government little benefit, and the U.S. also spends a significant amount to safeguard it.
The first question is; do we still have it? There have been rumors circulating for years that the gold may have already been spent by the government. However according to an independent by KPMG, LLP, it is all there.
For audit info, go to: http://www.financialsense.com/fsu/editorials/2007/0423.html
The next question is not as easily answered – is the gold encumbered? In other words, does it still belong to the United States government or has the Federal Reserve laid claim to it? The Treasury and the Federal Reserve Board have employed a range of strategies to try to minimize the role and importance of gold in the international monetary system.
The U.S. Treasury has facilitated; selling, swapping, trading, and lending of gold by other countries, gold-holders, and mines in order to maintain an atmosphere of “oversupply” to bolster the dollar. All of this manipulation may have resulted in the encumbering the U.S. gold reserves which you would think would be the last thing they would want to do. Unfortunately, there is evidence that this may have happened so even though it is still there; the question remains –is it ours? This question needs to be answered.
In the end if it is still property of the U.S. Treasury we should not sell it we should keep it! The way things are going it maybe the best collateral the country has left. It gives us a little security in case of a national emergency.
Secure the Republic, Save the Gold, Stop the Spending, End the Fed!
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” –Thomas Jefferson
“The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals… it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.” –Thomas Jefferson