US Rep Ron Paul will be holding a long awaited hearing today at 2 pm on his Gold Reserve Transparency Act of 2011 (HR 1495). I'm offering my own little cheat sheet for the hearing here. Witnesses to include
- The Honorable Eric M. Thorson (testimony in PDF), Inspector General, Department of the Treasury
- Mr. Gary T. Engel (testimony in PDF), Director, Financial Management and Assurance, Government Accountability Office.
The official link is here. Here's the text of the bill. And here is the live webcast link. Submit questions for the hearing here.
From the GAO's testimony:
H.R. 1495 also provides for GAO to prepare and transmit to the Congress, not later than 9 months after enactment of the act, a report of GAO’s findings from such review together with the results of the assay, inventory, audit, and analysis conducted by the Secretary of the Treasury. According to Treasury officials, because of the enormous quantity of gold that would need to be inventoried and assayed, there is uncertainty regarding the ability of Treasury to complete such actions within the 6-month period provided in H.R. 1495. If Treasury’s efforts are not completed within the 6- month period, there would be limitations on the scope of GAO’s work if GAO were required to report within 9 months after enactment of the act.
The Treasury IG makes clear he sees the requirements of the bill as unnecessary and redundant. There are a few other observations:
- In all, these compartments hold 699,515 gold bars with fineness, or purity, ranging from 0.4701 to 0.9999 with an average fineness of 0.9006. Fort Knox houses 60 percent of the fine troy ounces of the deep storage gold reserves, Denver 18 percent, and West Point 22 percent. [nb, that seems like a great range for fineness.]
- In 1974, in response to public and Congressional inquiries, the General Accounting Office (GAO), known as the Government Accountability Office since July 2004, in cooperation with the Department of the Treasury, conducted an audit of about 21 percent of the gold bars stored at the United States Bullion Depository, Fort Knox, KY, and concluded that the gold stored at that facility agreed with the records of the depository. [nb, 21% is not really a full audit.]
- In should be noted that the audit by GAO followed a Congressional visit to the Fort Knox facility. [Last one in 1974? Sounds as if it's time for field trip!]
- The testimony includes some interesting graphics at the end of the seals, etc. used.
Auditing the gold reserves has been an important issue in the gold bug community, for example with the GATA folks:
“There hasn’t been an independent audit of US gold reserves since 1955,” he says. “Don’t you think that’s a bit suspicious?” Murphy is not alone in calling for a public audit of the gold supplies held by central banks and the International Monetary Fund (IMF). Ron Paul, a Republican congressman who ran for president as a Libertarian candidate in 1988, has been calling for an audit of the gold held by the US Federal Reserve since 1982, when he served on the US gold commission – set up to examine the role of gold in the monetary system.
Not only has Dr. Paul has been agitating for an audit of the US gold reserves for a long time, but he's been consistently trying to raise the issue's profile. Reported Kitco last year:
This is not the first time the congressman has made his pitch. “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 Paul. “I think there was only one decent audit done 50 years ago,” he said. Though Paul did not say whether there is any truth to claims that there is no gold in Fort Knox or the New York Federal Reserve, he said, “I think it is a possibility.”“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.
Now, when I was Dr. Paul's banking and monetary policy staffer a dozen years or so ago, I went on a private tour of the New York Fed's gold vault and can vouch that back then there was an impressive store of what sure looked like gold bars to me. How much of that belonged to which account, I have no idea. The NY Fed stores gold for other central banks and the IMF but does not disclose how much is in which account. (On side note for those concerned with the logistics of returning to a gold standard and the "shipping" of gold around to clear accounts: gold bars are routinely now simply moved from one storage account in the NY Fed gold vault to another with little difficulty or cost.)
Of course there have long been rumors that "there's no 'there' there" (as Gertrude Stein once quipped about her hometown of Oakland) after President Ford in 1974 issued Executive Order 11826, revoking paragraph (d) of Section 2 from EO 10289, pertaining to gold. According to one report:
On July 19th an article appeared in the Los Angeles Times and other media outlets that the gold in Fort Knox had been stolen by the Rockefeller family. The claim made by Dr. Peter Beter was that part of the gold was flown to Mexico on the Rockefeller family jet. This prompted a Congressional tour of Fort Knox by the Treasury Department. During this tour no experts on gold were allowed, no assays on any of the gold was run, some of the witnesses complained that they were only allowed to look at the gold through small peepholes, and a few of the witnesses added that the color of the gold seemed to be wrong. This tour ended the scandal and no other investigation was done.
Explains Annex D of the US Gold Commission report (PDF):
“On June 3, 1975, Treasury Secretary Simon issued Treasury Department Order No. 234-1 authorizing and directing the Fiscal Assistant Secretary, with the cooperation and assistance of the Director of the Mint, to conduct a continuing audit of United States Government-owned gold for which the Department of the Treasury is accountable.”
In addition to the rumors that the gold in Fort Knox was removed, there is the more contemporary rumor that the "gold" bars there have been swapped with gold plated tungsten bars instead which Dr. Paul's Campaign for Liberty has been spreading.
So, where do we stand now? The US Treasury gives some guidance on terms and holdings. According to their site:
Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury's Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called "Bullion Reserve" or "Custodial Gold Bullion Reserve."
At the end of last month, the US Treasury official holding of US gold was 261,498,899.316 fine troy ounces for a book value of just over $11 billion ($11,041,058,821.09) according to their status report.
Department of the Treasury
|Summary||Fine Troy Ounces||Book Value|
|Gold Coins, Blanks, Miscellaneous||2,857,047.831||120,630,844.95|
|Mint-Held Gold – Deep Storage|
|Fort Knox, KY||147,341,858.382||6,221,097,412.78|
|West Point, NY||54,067,331.379||2,282,841,677.17|
|Subtotal – Deep Storage Gold||245,262,897.040||10,355,539,085.76|
|Mint-Held Treasury Gold – Working Stock|
|All locations – Coins, blanks, miscellaneous||2,783,218.656||117,513,614.74|
|Subtotal – Working Stock Gold||2,783,218.656||117,513,614.74|
|Grand Total – Mint-Held Gold||248,046,115.696||10,473,052,700.50|
|Federal Reserve Bank-Held Gold|
|Federal Reserve Banks – NY Vault||13,376,961.126||564,804,727.98|
|Federal Reserve Banks – display||1,993.319||84,162.40|
|Subtotal – Gold Bullion||13,378,954.445||564,888,890.38|
|Federal Reserve Banks – NY Vault||73,808.979||3,116,377.47|
|Federal Reserve Banks – display||20.196||852.74|
|Subtotal – Gold Coins||73,829.175||3,117,230.21|
|Total – Federal Reserve Bank-Held Gold||13,452,783.620||568,006,120.59|
|Total – Treasury-Owned Gold||261,498,899.316||$11,041,058,821.09|
For another look at the government's audit of our gold reserves, the US Mint reported its Schedule of Custodial Deep Storage Gold and Silver Reserves as of September 30, 2010 and 2009 (PDF here).
Gold Reserves of the United States as of September 30, 2010
Gold reserves in the custody of the Mint:
Deep storage 248,046,116
Working stock 2,783,219
Total gold reserves in the custody of the Mint 248,046,116
Gold reserves in the custody of the Federal Reserve Bank of New York 13,452,784 261,498,900
Total gold reserves of the United States 261,498,900
Source: GAO analysis of Treasury financial reports.
The Mint also reports some "fun facts" about the United States Bullion Depository Fort Knox, Kentucky:
- 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.
- Highest gold holdings this century: 649.6 million ounces (December 31, 1941).
- Size of a standard gold bar: 7 inches x 3 and 5/8 inches x 1 and 3/4 inches.
- Weight of a standard gold bar: approximately 400 ounces or 27.5 pounds.
- Construction of the depository:
Building materials used included 16,000 cubic feet of granite, 4,200 cubic yards of concrete, 750 tons of reinforcing steel, and 670 tons of structural steel.
The cost of construction was $560,000 and the building was completed in December 1936.
- In the past, the Depository has stored the Declaration of Independence, the U.S. Constitution, the Articles of Confederation, Lincoln's Gettysburg address, three volumes of the Gutenberg Bible, and Lincoln's second inaugural address.
- In addition to gold bullion, the Mint has stored valuable items for other government agencies. The Magna Carta was once stored there. The crown, sword, scepter, orb, and cape of St. Stephen, King of Hungary also were stored at the Depository, before being returned to the government of Hungary in 1978.
- The Depository is a classified facility. No visitors are permitted, and no exceptions are made.
It'll be interesting to see if the testimony or questions and answers illuminates the issue more than we already know (for those of us who have been following the issue).
We'd have a lot more if Congress implemented my suggestion of getting our gold back from the International Monetary Fund too!