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Fort Knox Gold Less Important Than Value of Currency

The privately owned Federal Reserve Bank has rejected requests from both main U.S. political parties and both houses of congress for an audit of its activities.

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WealthCycles Commentary

The question enormously fascinating: Is there any gold in Fort Knox? Google the question, and you’ll get approximately 1,320,000 responses; apparently, a lot of people really want to know.

In this video clip, Mises Institute Chairman Lew Rockwell is interviewed by Judge Andrew Napolitano, the host of Fox Business News’ “Freedom Watch,” which was canceled in 2011 despite top ratings.

“Fort Knox” is the common name for the United States Bullion Depository, located in Fort Knox, Kentucky, where a large portion of U.S. official gold reserves are alleged to be stored.

Although the question sounds like the set-up to a joke, the topic is no longer taken lightly, as the public grows increasingly aware of the precarious state of the Federal Reserve’s dollar—which is not backed by gold stored in Fort Knox or anywhere else—and the need to curtail government free-spending.

After the financial turmoil of the last two years and the related decline in the value of the dollar, gold has become an even hotter commodity than usual. That’s a reminder to hardcore free market advocates that a gold standard once was used to back our currency making it harder for our government simply to print more money, willy nilly, to cover its bills.

The Federal Reserve has rejected requests from both parties and both houses of congress for an audit of its money printing and money lending activities that arose because of legitimate concerns about the devaluing of the dollar and partly out of plain old suspicion. There has been resistance to any attempt to conduct third-party audits of gold, but as we explain in Gold Audit Fails to Discover Who Owns What, the largest concern is not that it isn’t there, but rather the selling and leasing of gold that is already owned by other parties. This is called repledging, rehypothecation, or simply—fraud.

When Napolitano asked Rockwell if there was any gold in Fort Knox, he responded:

Well, I think we’d like to find out. Ron Paul talks about this, where there ought to be an audit. There has not been an audit since the 1950s. And we know that a vast amount of gold flowed out of the United States in the late 1960s and early 1970s under LBJ and Nixon because of all the inflation right at the end of the Bretton Woods system.

Rockwell goes on to say that since we don’t know how much gold is in Fort Knox then it simply makes good sense to do an audit and find out. However, the Fed resists such an audit, which begs the question, why do they resist? Rockwell continues:

It seems to me they need to prove to us, either let an independent assayer go in there, count the gold and test some of the bars to see if they are gold. Same with the vaults of the New York Fed. Who owns the gold in the vaults of the New York Fed?

But the bigger issue than how much gold remains in U.S. reserves, according to Rockwell, is that the dollar is not backed by anything more tangible than public confidence, offering the U.S. government limitless opportunity to continue deficit spending.

Asked to speculate on what the world would be like had we remained on a gold standard, Rockwell says that, throughout history, during the long periods with gold and silver money

[Y]our money becomes more valuable each year. Even if you don’t get a raise, your paycheck buys more. The savings that a young person puts away in their 20s, when they want to spend them in their 70s, buy more. This is the way a free market society operates, because they’re not expanding the money supply, but the goods and services are being expanded, so money becomes more valuable. This is the way it’s supposed to be; it requires vast effort by the government, by the Federal Reserve, to actually turn this around, and make our money depreciate, to make it even disappear….
Also, by the way, we’d have far more freedom, because a gold standard strictly restricts the government from being able to do a lot of the crazy, unconstitutional stuff they do today.

As Rockwell reminds us, gold is history’s free market money of choice for a reason. Our modern fiat currency system is designed to continually erode human wealth by means of inflation, shifting resources from working, saving individuals to government and the financial sector. A currency constrained by the natural limitation that it must be backed by a tangible, limited asset would mean greater wealth and wellbeing for all of us.