Tuesday, August 31, 2010

Ron Paul Calls for Audit of U.S. Gold Reserves

By Christian Gomez
The New American
Friday, August 27, 2010


In an exclusive interview with Kitco News, Congressman Ron Paul (R-Texas) revealed that next year at the start of the newly inaugurated 112th United States Congress, he would introduce a new bill to audit the U.S. gold reserves, which are reportedly stored at the New York Federal Reserve and Fort Knox.

The reason behind this bill is that in the event “we ever get around to deciding we should use gold in relationship to our currency, we ought to know how much is there,” Paul told Kitco.

“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?” said Paul.

This is not the first time Rep. Ron Paul has suggested that there be a full audit of the county’s gold reserves. Paul recalled that “In the early 1980s when I was on the gold commission, I asked to recommend to Congress that they audit the gold reserves — we had 17 members of the commission and 15 voted not to [recommend] the audit.”

The two votes in favor of an audit came from the two gold advocates who pushed for the creation of the commission in the first place — Senator Jesse Helms (R-N.C.) and Rep. Ron Paul.

At the time, Sen. Helms and Rep. Paul were the leaders of Congress’s gold coalition, which included Republicans Sen. James McClure of Idaho, Sen. Barry Goldwater of Arizona, Rep. Philip Crane of Illinois, Rep. James Collins of Texas, Rep. Steven Symms of Idaho, and Democratic Rep. Larry McDonald of Georgia, the latter of whom was at the time also a National Council member of the John Birch Society.

In fact, Rep. McDonald introduced a similar bill to that of Ron Paul’s newly proposed 2011 gold reserve audit bill. In 1979, Rep. McDonald sponsored H.R. 555, entitled: “A bill to require the Comptroller General of the United States to audit annually the gold held by the United States on the first day of each fiscal year and to report his findings to Congress.” McDonald presented the same bill again the next year, this time as H.R.555, and was unable to garner any cosponsors.

A few years earlier, on August 8, 1974, Rep. Phillip Crane introduced H.R. 16345, entitled, “A bill to provide for an audit by the General Accounting Office of all gold owned by the United States.” He too was unable to gain support for his gold reserve audit bill.

Although McDonald and Crane’s respected gold reserve audit bills received no cosponsors at the time, Ron Paul hopes to ride the wave of his recent landmark Federal Reserve Audit bill that passed the House this past year, but was eventually gutted in the Senate by Sen. Bernie Sanders of Vermont.

If Paul’s Federal Reserve audit were able to pass the House and make strong headway in the Senate, despite Democratic majorities in both houses of Congress, then come January, with a potential newly-elected “Tea Party” Congress, Paul’s bill to audit U.S. gold reserves might make headway. It would be fundamentally important to any future plans to return to a pure gold standard.

The last and only time that an audit was performed on the gold held in Fort Knox was issued within hours of President Dwight Eisenhower’s inauguration on January 20, 1953. After 20 years of Democratic rule in the White House and President Franklin Roosevelt’s Executive Order 6102 of April 3, 1933, in which private ownership of gold was outlawed, the American people had become worried whether all of the gold that FDR and the federal government confiscated was still in storage.

Ron Paul cited this audit of over 50 years ago as the “only one decent audit done”; however, Chris Weber from LewRockwell.com summarized the various problems with that audit as follows:

1.��� Representatives of the audited group were allowed to make the rules governing the audit. No outside private experts were allowed.
2.��� Those government bureaucrats involved were inexperienced in their tasks, by their own admission.
3.��� The entire audit of the largest gold hoard ever concentrated in history lasted only seven days.
4.��� Only a fraction of the gold was actually tested for purity. Later, the officials put this fraction at just 5 percent.
5.��� Based on that fraction, the official committee reported that, in their opinion, all the holdings would have matched their records if they'd all been tested.
6.��� If the audit was accurate, the fact remains that almost 80 percent of the gold went overseas in the coming years. If the audit was not accurate, the amount of gold lost could have been even more.

Although that audit may have satisfied the American public of 1953, which “was still used to accepting official government statements at face value,” Weber writes, in the decade since then Americans "have lost much of their respect and belief in the words of their government,” as a result of scandals and lies ranging from President Lyndon Johnson’s Gulf of Tonkin incident, the sinking of the USS Liberty, Richard Nixon’s Watergate fiasco, Bill Clinton’s lying under oath about his sexual affair with Monica Lewinsky to President George W. Bush and Secretary of State Colin Powell's false “irrefutable” evidence that Saddam Hussein was building “weapons of mass destruction” and possessed direct links to the September 11 attacks.

With a great many Americans having lost faith in their government, any audit of U.S. gold reserves will not come without scrutiny, but 50 years since there was an actual full audit, one wonders if the gold is still there. After all, as Alex Newman pointed out in The New American, the United States government has been using the gold to keep the price of gold low against the dollar so that Americans don't become aware of the amount of inflation that has been occurring owing to the government's and Federal Reserve's money policies.

When asked if he thought “there is any truth to claims that there is no gold in Fort Knox or the New York Federal Reserve,” Paul replied, “I think it is a possibility.”

That possibility alone is one reason why Paul says there should be an audit, and as he said before, “even if you are not suspicious, why wouldn’t you have an audit?”

In the interview Paul expressed discontent over the new tax burdens for selling gold in transactions of $600 or over that was passed in Section 9006 of the Patient Protection and Affordable Care Act, commonly known as ObamaCare. In regard to this Paul said, “For every transaction of over $600, gold dealers have to fill out a form; it is a lot of paperwork.”

As for whether he would run for President in 2012, Ron Paul remained elusive, offering his usual response that it was still too early to tell. If Paul does run and win, he would be the first President since Ronald Reagan seriously to consider returning to a gold standard, and hopefully the first President since William McKinley actually to have such a proposal enacted, such as the Gold Standard Act of 1900.

In Ron Paul’s office is a portrait of President Grover Cleveland, who like Rep. Larry McDonald was a hard-money constitutionalist Democrat. Regardless of Paul's political willingness to run or not for the presidency, one thing is sure: come January 2011, he will push for an audit of the United States’ gold reserves in his effort to restore sound economic policies consistent with the U.S. Constitution.

For further reading:
"The Gold Audit", The New York Sun, August 31, 2010

Monday, August 30, 2010

The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

By Michael T. Snyder
The Economic Collapse Blog
Monday, August 30, 2010


Are we witnessing the slow but certain death of cash in this generation? Is a truly cashless society on the horizon? Legislation currently pending in the Mexican legislature would ban a vast array of large cash transactions, but the truth is that Mexico is far from alone in trying to restrict cash. All over the world, governments are either placing stringent reporting requirements on large cash transactions or they are banning them altogether. We are being told that such measures are needed to battle illegal drug traffic, to catch tax evaders and to fight the war on terror. But are we rapidly getting to the point where we will have no financial privacy left whatsoever? Should we just accept that we have entered a time when the government will watch, track and trace all financial transactions? Is it inevitable that at some point in the near future ALL transactions will go through the banking system in one form or another (check, credit card, debit card, etc.)?

The truth is that we now live at a time when people who use large amounts of cash are looked upon with suspicion. In fact, authorities in many countries are taught that anyone involved in a large expenditure of cash is trying to hide something and is probably a criminal.

And yes, a lot of criminals do use cash, but millions upon millions of normal, law-abiding citizens simply prefer to use cash as well. Should we take the freedom to use cash away from the rest of us just because a small minority abuses it?

Unfortunately, the freedom to use cash is being slowly stripped away from us in an increasingly large number of countries.

In fact, as countries like Mexico "tighten the noose" around big-ticket cash purchases, our freedom to use cash is going to erode rather rapidly.

The following is a summary of some of the very tight restrictions being placed on large cash transactions around the globe right now....


In Mexico, a bill before the legislature would completely ban the purchase of real estate in cash. In addition, the new law would ban anyone from spending more than MXN 100,000 (about $7,700) in cash on vehicles, boats, airplanes and luxury goods.

$7,700 is not a very high limit, and this legislation has some real teeth to it. Anyone violating this law would face up to 15 years in prison.

Read the rest of the article.

Thursday, August 26, 2010

Malaysia Looks to Ancient Alternative Currency - Gold

By Kevin Brown
The Financial Times
Friday, August 13, 2010


Paper money is so old hat. While De La Rue - which makes banknotes for 150 currencies - struggles with production problems and management turmoil, in one part of Malaysia, they are looking at an ancient alternative - gold.

In a move applauded by some local Muslims, the state government of Kelantan said it was introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire.

Nik Abdul Aziz, the state’s chief minister, spoke in visionary terms of an economy in which state civil servants would be paid in the new sharia currency, and the poor would be protected against inflation by the intrinsic value of the precious metals used to produce it.

About 1,000 shops and restaurants in the state have said they will accept the new currency, which follows an earlier issue of gold dinars in 2006. The coins comply with traditional Islamic teaching on the use of coins with intrinsic value as a medium of exchange, rather than paper money.

The coins, minted to a specified weight and purity, are available in a range of denominations from half a dinar to eight dinars, and from one dirham to 20. At the current price of gold, one dinar is worth M$581($183) and one dirham is valued at M$13 ($5).

The launch was lauded by the Muamalah Council, a campaigning organisation that seeks the peaceful introduction of an Islamist social and economic system. The council said it was “the main Islamic event of the last 100 years”.

The details of the scheme suggest, however, that the people of Kelantan are unlikely to abandon the ringgit, the national currency, in a hurry. The state government said the value of the new coins was M$2m at the current price of gold. It is not known how many of each denomination have been minted, but if they were all worth one dinar there would be just under 3,500. That works out at about one coin for each 400 people in the state.

The chief minister also admitted that there were “many technicalities” to be overcome before the scheme could be significantly extended. He did not explain why a switch to gold and silver coins would protect against fluctuations in the value of money, given that the US dollar price of gold has risen more than five fold in a decade.

In spite of its small scale, the scheme may pay political dividends for the state government, which is run by PAS, an Islamist party that is in opposition in the national parliament. PAS is locked in a ceaseless struggle for control of Kelantan with the United Malays National Organisation, the main party in the federal government coalition, which also claims to represent Malay Muslims, the largest population group in Malaysia.

Burnishing its Islamic credentials is unlikely to do PAS any harm. The only certain winner, though, is the gold market. Although small, the scheme will help to increase demand, pushing up prices even further.

For further reading:
"The Gold Dinar is Gaining Ground", Davi Barker, Illume, August 24, 2010
"Of dinars, dirhams and Malaysian politics", The Business Times, August 19, 2010
"Malaysia's New Gold Currency", Gold News, August 16, 2010

Wednesday, August 11, 2010

The New Push for a Global Currency

By Llewellyn H. Rockwell, Jr.
Thursday, August 5, 2010


You surely didn't think that the governing elites would let this economic crisis pass without pushing some cockamamie scheme for control. Well, here is the cloud no bigger than a man's hand, a revival of a 60-year-old idea of a global paper currency to fix what ails us.

The IMF study that calls for this is by Reza Moghadam of the Strategy, Policy, and Review Department, "in collaboration with the Finance, Legal, Monetary and Capital Markets, Research and Statistics Departments, and consultation with the Area Departments." In other words, this paper shouldn't be ignored.

It's a long-term plan, but the plan has the unmistakable stamp of Keynes: "A global currency, bancor, issued by a global central bank would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy.... The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present."

The term bancor comes from Keynes directly. He proposed this idea following World War II, but it was rejected mostly for nationalistic reasons. Instead we got a monetary system based on the dollar, which was in turn tied to gold. In other words, we got a phony gold standard that was destined to collapse as gold reserve imbalances became unsustainable, as they did by the late 1960s. What replaced it is our global paper money system of floating exchange rates.

But the elites never give in, never give up. The proposal for a global currency and global central bank is again making the rounds. What problem is being addressed? What is so desperately wrong with the world that the IMF is floating the idea of a world currency? In a word, the problem is hoarding. The IMF is really annoyed that "in recent years, international reserve accumulation has accelerated rapidly, reaching 13 percent of global GDP in 2009 – a threefold increase over ten years."

You see, monetary policy isn't supposed to work this way. In their ideal world, the central bank releases reserves and these reserves are lent out, leading to a boom in consumption and investment and thereby global happiness forever (never mind the hyperinflation that goes along with it). But there is a problem. The current system is nationally based and so the economic conditions of one country turn out to have an influence on the borrowing and lending markets. Without borrowers and lenders, the money gets stuck in the system.

This is a short history of the last two years. By now, if the Fed had its way, we would be awash in money. Instead the reserves are stuck in the banking system. It's like the whole of the population of the United States has suddenly been consumed by the moral advice: neither a borrower nor a lender be.

And why? Well, there are two reasons. Borrowers are just a bit nervous right now about the long term. They are watching balance sheets day by day, consumed with a weird sense of reality that had gone out the window during the boom times. Meanwhile, the bankers are just a bit risk averse, happier to keep the reserves in the vault than toss them to the winds of fate. They have the bank examiners breathing down their necks right now, and lending doesn't pay well, not with interest rates being suppressed down to the zero level.

Under these conditions, yes, hoarding seems like a pretty good idea. What's more, we should be very grateful indeed for this retrenchment. The idea of plunging back into another bubble seems rather shortsighted.

The IMF has a problem with this practice, though it doesn't dwell on it. The problem is that this practice of maintaining high reserves is putting a damper on consumption and investment, prolonging the recession. The simple-minded solution coming from the high-minded eggheads at the IMF is to find some system, any system, that would push the money from the vaults into the hands of the spending public.

The rationale for the global currency and global central bank is that the reserves could always find a market in a globalized system, and would not therefore be so tied to the exigencies of a nationally based banking and monetary system.

An academic paper can wax eloquent for hundreds of pages about the advantages of a global system. It will lead to more stability, efficiency, and less politicization of money and credit. And truly, there is a point here: a real gold standard is always tending towards a global currency system. Different national currencies are merely different names for the same thing.

But there is a key difference. Under a gold standard, the physical metal is the limit and the market is the master. Under a global paper system, the paper provides no limit whatsoever and the politicians are the masters. So there is no sense of talking about the glories of globalization in the current context. A world paper currency and world central bank would heighten the moral hazard and lead to a global inflationary regime such as we've never seen. There would be no escape from political control at that point.

Every proposal of a drastic solution such as this always comes with a warning of some equally drastic consequence of failing to adopt the proposal. In this case, the IMF actually raises questions about the survivability of the dollar itself. "There has been a long-running debate speculating on whether the dollar could collapse," says the paper. It raises the worry that if a run on the dollar materializes, central banks could attempt to race each other to dump it permanently.

But, the paper points out, many people wonder whether "good alternatives to the dollar exist." And for this reason, it might be a good idea to cobble together such an alternative sooner rather than later.

There is probably more truth in that statement than most people want to grant. But the right alternative is not yet another and more global experiment in paper money inflation. God forbid. If we want an alternative to the dollar, there is one that could appear before our eyes if only we would let it happen. Private currencies traders the world over could, on their own, give rise to a new currency rooted in gold and traded by means of digital media. On many occasions over the last 20 years, such a system nearly came to be. But guess what? The government cracked down and stopped it. The governing elites have decided that there will be no currency reform unless it comes from the marble palaces of the monetary elites.

Llewellyn H. Rockwell, Jr., former editorial assistant to Ludwig von Mises and congressional chief of staff to Ron Paul, is founder and chairman of the Mises Institute, executor for the estate of Murray N. Rothbard, and editor of LewRockwell.com.
Reprinted with permission.

For further reading:
"IMF Report Promotes World Currency", Alex Newman, August 10, 2010

Monday, August 2, 2010

The LBMA Joins the Gold Squeeze Cover-Up

By Adrian Douglas
Gold Anti-Trust Action Committee
Sunday, July 25, 2010


The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members. (See http://www.lbma.org.uk.)

I have recently written a series of exposes of the LBMA (see References 1-4 below) using the association's own data to show that the LBMA's bullion banks are operating on a "fractional reserve" basis. My analysis indicates that the bullion banks are holding only 1 real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent

At the March 25 public hearing of the U.S. Commodity Futures Trading Commission on precious metals futures markets I cited the LBMA's own statistics to label the "unallocated gold" accounts of the bullion banks as a Ponzi scheme. (See Reference 3 below.) There were bullion bank representatives at the hearing but no one expressed an objection. That hearing was videotaped and posted at the CFTC's Internet site but the bullion banks have not made any public statement rebutting what I said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group, acknowledged that what is widely called the "physical market" is in reality a largely "paper market" trading gold and silver as if they are financial assets and not physical metals. Christian stated that 100 ounces of paper gold are traded for every 1 ounce of physical gold.

When the LBMA first made its trading statistics available in January 1997, observers and analysts were shocked. (See Reference 5 below.) No one could reconcile the statistics with other market data, nor comprehend how the bullion banks could be trading on a net basis more than 240,000 tonnes of gold annually while the global mine output was only 2,400 tonnes. Over the years the furor over these statistics had subsided until the end of 2009, when I commenced writing about my studies, showing that the statistics can be reconciled with other market data if the bullion banks are operating a fractional-reserve bullion banking operation with a recklessly low reserve ratio. I have also shown how the price of gold is suppressed because 45 ounces of demand are being diluted to result in purchase of only 1 ounce of real metal. If instead all 45 ounces were to be sourced and purchased, the gold price would be multiples of the current price.

Typically when people are exposed in a scandal their first reaction is a cover-up. The most notorious examples of this are the Nixon administration, when it doctored the Watergate tapes, and Arthur Anderson, which shredded millions of pages of documents relating to audits of Enron Corp.

The LBMA has now commenced a cover-up with respect to the gold trading activities of its member bullion banks, withdrawing statistics from the public domain.

This appears not to be the only cover-up going on in the gold market.

For years the International Monetary Fund has made great fanfare of its mere contemplation of selling some of its gold, and actual sales by the IMF have been widely publicized. Since February the IMF has been surreptitiously selling large tonnages of gold each month, but these sales now are to be found only by digging through the IMF's financial statements, and even there the recipients of the gold are not disclosed. (See Reference 6 below.) One has to wonder why the IMF now is trying to fly under the radar with its gold sales.

Similarly it was recently discovered that the Bank for International Settlements didn't feel it necessary to announce its involvement in the largest gold swap in history, 346 tonnes. (See Reference 7 below.) The BIS swaps instead were discovered only because a market analyst dug through the footnotes of the bank's financial statements.

These developments have all the hallmarks of cover-ups.

In June the LBMA trading statistics showed that in May 2010 the average net daily trading in gold by LBMA member banks jumped a massive 50 percent from the month before to 24 million ounces each day from 16 million ounces each day. That translates to $7.5 trillion annually. If an operation is running on a razor-thin fractional reserve basis, such step changes are often fatal.

It appears that a run on the bullion banks has commenced.

There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information.

There has been much debate about how investors, politicians, and regulators didn't see the 2008 financial crisis coming, and lack of transparency was cited as a key reason. Clearly those who have been manipulating the gold market are trying to skulk deeper into darkness. They have a lot to hide.

Investors could have been blindsided by the events of 2008, but anyone who misses the writing on the wall about what's going on in the bullion markets is just foolish. The bullion banks have sold far more metal than they can deliver, and more and more customers are asking them to deliver. This has led to back-door bailouts and cover-ups.

Anyone who has "unallocated" bullion should be very concerned. The LBMA itself describes owners of "unallocated bullion" accounts as "unsecured creditors." That means that the account holder has no collateral or title to any bullion.

Bullion bank unallocated account agreements require the bank only to settle in cash for non-performance. That means when the physical squeeze that is evolving takes gold and silver prices to multiples of the current price, holders of unallocated metal accounts will not get any bullion, nor will they be compensated at the prevailing market price.

I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast.


1. Adrian Douglas: Proof of Gold Price suppression -- Gold and the U.S. Dollar:


2. Adrian Douglas: Price Suppression Follows Inevitably from Fractional-Reserve Gold Banking:


3. Adrian Douglas: It's Admitted to the CFTC: London Gold Market Is a Ponzi Scheme:


4. Adrian Douglas: Jeff Christian's CPM Group Explains How to Make Paper Gold:


5. The Grand LBMA Expose: A Collective-Mind Analysis:


6. Adrian Douglas: IMF Can't Explain Gold Sales Now Without Revealing Squeeze:


7. Adrian Douglas: Mysterious BIS Gold Swaps Are Likely a Bullion Bank Bailout:


Adrian Douglas is publisher of the Market Force Analysis letter and a member of GATA's Board of Directors. Reprinted with permission.