Selling Gold at Fort Knox Emerges as Next Big Question in Debate on Federal Debt Limit
by: David Pietrusza
NEW YORK — The next big question on the federal debt limit could be whether to start selling the government’s holdings of gold at Fort Knox — and at least one presidential contender, Ron Paul, has told The New York Sun he thinks it would be a good move.
His comment came in the wake of not only the government having reached the statutory debt limit of $14.29 trillion but also the release of a report by the Heritage Foundation of a report on asset sales. The report outlined how a “partial sales of federal properties, real estate, mineral rights, the electromagnetic spectrum, and energy-generation facilities” might garner the federal treasury $260 billion over the course of the next 15 years.
The report did not mention the possibility of selling the government’s holding of 147 million ounces of bullion, which at recent prices of $1,500 an ounce, would be worth about $370 billion. But the possibility has not been lost in the policy debate now raging in Washington. The Wall Street Journal reported Monday that a group of Republican congressmen supports the idea of selling gold.
Officials of the Obama administration have taken notice — and disagree. The assistant Treasury secretary for financial markets, Mary Miller, wrote in a posting on the Treasury Department’s Website May 6 that “fire sale” of the government’s financial assets, including gold, would not be a “viable option.” She urged instead a raising of the debt limit.
An unnamed senior administration official was quoted by the Washington Post as saying, “Selling off the gold is just one level of crazy away from selling Mount Rushmore.” The Wall Street Journal, in its dispatch Monday, reported that Treasury “could be forced to rethink” their opposition if the budget talks fail.
A study of gold reserve sales in the late 1990s noted that seven nations — Australia, Austria, Belgium, the Netherlands, Portugal, and Sweden — had then recently sold off substantial portions of their gold reserves. The sales, which amounted to 48% of those reserves, presaged a 26% devaluation in their nation’s respective currencies. Between 1999 and 2002, in 17 separate auctions, Britain sold off half of its gold reserve, netting $3.5 billion. What Britain sold is now worth $10.5 billion.
In September 2009 the International Monetary Fund authorized sales from its gold reserves. At the conclusion of its sales, the IMF had disposed of 403.3 tons of gold or 13% of reserves. Over half was purchased by the central banks of India, Sri Lanka, Mauritius, and Bangladesh. In early 2011, Communist China announced plans to increase its gold reserves from to 10,000 tons by decade’s end from the 1,200 tons it currently holds. Mexico has acquired 93.3 tons of gold this year, while Thailand added 9.3 tons to its national reserves this March. Russia added 22.5 tons in January and February.
In August 2010, a leading figure in the monetary debate in Congress, Ron Paul, a Republican of Texas, called for an audit of the federal government’s gold reserves. “If there was no question, you’d think they would be very anxious to prove to us that the gold is there. . . . ,” Dr. Paul then said, “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. I think there was only one decent audit done 50 years ago.”
“If we ever get around to deciding we should use gold in relationship to our currency we ought to know how much is there,” Dr. Paul added, “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?” In March 2008 the Times of London quoted a spokesman of the American treasury as saying that American gold holdings “are audited every year by the Department of Treasury's Office of Inspector General. He confirmed that although independent auditors oversee the process they are not given access to the Fort Knox vault.”
Dr. Paul told the Sun today that he reckoned the sale of gold reserves would be “a good and moral decision. An individual would have to do the same.” The sentiment is echoed by another big name in the debate on monetary reform, Edwin Vieira Jr., who told the Sun he has little hope of the government moving to sound money and would prefer that it coin its gold holdings in pieces marked with their weight and use them to pay off debts, particularly individuals — who might be owed, say, tax refunds.
Mr. Vieira is a proponent of what he calls the “absolute separation between currency and debt.” He considers specified weights of gold and silver as the only constitutional currency. “Redeemable currency,” he says, “is an oxymoron.” And given that America is in an era of fiat money with no plans on the government’s part to mount a reform, he says of the government: “They don’t need the gold. They’ve just been sitting on it since Roosevelt stole it.”
However, one of the most famous advocates of the gold standard, Lewis Lehrman, opposes the sale of the gold holdings of the American government — or any part of them. “Under no circumstances should the United States consider selling a single ounce of gold,” Mr. Lehrman, who runs the internet project TheGoldStandardNow.org, told the Sun. “On the contrary, depending upon the facts and circumstances and the level of prices, the United States might be a gradual buyer.”
Mr. Lehrman, who had served in the early 1980s with Dr. Paul as a member of the United States Gold Commission, had just been this afternoon interviewed by Diane Rehm of National Public Radio, on which he called for American leadership in restoring a gold standard. He did not suggest that it could be done immediately, but he argued that this is the time to start, saying: “We have all the grounding and the basis for the United States taking the lead in establishing the convertibility of the dollar today.”
http://www.nysun.com/national/selling-gold-at-fort-knox-emerges-as-next-big/87350/
2 comments:
From a sound money perspective, this makes perfect sense. What better way to support sound money than for the government to sell its gold back to the people? Not only that, but it is one of the most moral things that the government could do to pay its debts. Let me ask, what is more moral, to sell the gold back to the people in order to pay the government debt, or to inflate the currency in order to pay the debt? I think that it’s a pretty easy decision, and I respect Ron Paul for staying completely consistent in his principles.
I doubt that the U.S. or South Africa (my home) have any gold in their vaults, just as I doubt that any country has any gold in their vaults. I challenge the CORPORATIONS (yes they are registered as corporations on the New York Securities Exchange, see Dunn and Bradstreet's lisings) known as the Republic of South Africa and the United States of America to not only disclose the amount of gold but to show it to us. They can't, cause it 'aint there.
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