Whose Gold, if anyone’s, Is in Ft. Knox
Paul Craig Roberts

If there is gold in Ft. Knox, whose is it? 

Many bullion dealers believe that any gold in Ft. Knox is not ours.  Over the decades the gold was “leased” to bullion dealers who sold it into the gold market, thereby protecting the value of the dollar by holding down the gold price.

“Leasing” the gold means that the US can still claim to own the gold.  A sale has to be recorded or reported, but not a “lease.”  

Gold might also have disappeared through rehypothecation, which is the use by one party of another party’s asset to back their own financial or borrowing practices. The gold of other countries is also in Ft. Knox. Earlier this century, Germany requested its gold from Ft. Knox, and was told that the gold would be returned in seven years.  This indicates that the gold was used by Washington for some other purpose and was unavailable to be returned to Germany. 

For years Rep. Ron Paul and Sen. Rand Paul have tried to get a gold audit.   Neither of these legislators were even permitted to enter Ft. Knox to see if any gold was there.

Now that Elon Musk has announced a gold audit, holders of gold contracts have suddenly started to demand settlement in gold delivery rather than in cash and pocketing the profits.  The amount of gold delivery being demanded from Comex, the US gold futures market, and its London equivalent is enormous, putting the ability to deliver under enormous strain.  The only institutions capable of purchasing tons of gold at $2,900 per ounce are the Federal Reserve and US Treasury by creating the money with which to pay for the gold.  The rise in the price of gold reflects the increase in physical purchases.  It seems clear enough that the Fed or Treasury is desperate to put gold back into Ft. Knox in advance of the audit.

Previously, the Comex or futures market was used to hold down the price of gold by dumping huge amounts of short selling in the futures market all at once, often when there was no active trading, as Dave Kranzler and I have explained.  The gold futures market is unique in that it can be shorted  without the contracts being covered, unlike shorting equities.  In effect, shorting gold is like printing money.  The supply of paper gold in the futures market is increased simply by printing paper contracts.  The increase in the paper supply of gold suppresses the price, because the price of gold is determined in the futures market, not in the physical market.  The current demand for gold delivery when the contracts come due, instead of settling in cash, has made it impossible to hold down the price of gold.

There is speculation that President Trump intends to return the dollar to partial backing in gold in order to protect its status as reserve currency from a BRICS alternative.  Unless and until US debt can be brought under control, the US dollar’s reserve currency status is essential for the financing of US budget and trade deficits.  World central banks hold their reserves in US Treasuries.  Thus, an increase in US debt simply means an increase in the reserves of central banks, something that is welcomed.  If the dollar were not the reserve currency, financing the massive US debt would likely be impossible.

Trump’s attempt to restore normal relations with Russia, if successful, would require the end of the weaponization of the US dollar that is causing so much of the world to look for a different means of settling trade balances.  This would take the pressure off of the dollar from the threat of an alternative reserve currency and reduce the urgency of getting US debt under control,  but the pressure of mounting interest payments to foreign central banks on their Treasury holdings would still exist.  

The good news for Trump is that ending the conflict with Russia protects the dollar’s role as reserve currency.

Hon. Paul Craig Roberts is the John M. Olin Fellow at the Institute for Political Economy, Senior Research Fellow at the Hoover Institution, Stanford University, and Research Fellow at the Independent Institute. A former editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service, he is a nationally syndicated columnist for Creators Syndicate in Los Angeles and a columnist for Investor's Business Daily. In 1992 he received the Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists.

He was Distinguished Fellow at the Cato Institute from 1993 to 1996. From 1982 through 1993, he held the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies. During 1981-82 he served as Assistant Secretary of the Treasury for Economic Policy. President Reagan and Treasury Secretary Regan credited him with a major role in the Economic Recovery Tax Act of 1981, and he was awarded the Treasury Department's Meritorious Service Award for "his outstanding contributions to the formulation of United States economic policy." From 1975 to 1978, Dr. Roberts served on the congressional staff where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy.

In 1987 the French government recognized him as "the artisan of a renewal in economic science and policy after half a century of state interventionism" and inducted him into the Legion of Honor.

Dr. Roberts' latest books are The Tyranny of Good Intentions, co-authored with IPE Fellow Lawrence Stratton, and published by Prima Publishing in May 2000, and Chile: Two Visions - The Allende-Pinochet Era, co-authored with IPE Fellow Karen Araujo, and published in Spanish by Universidad Nacional Andres Bello in Santiago, Chile, in November 2000. The Capitalist Revolution in Latin America, co-authored with IPE Fellow Karen LaFollette Araujo, was published by Oxford University Press in 1997. A Spanish language edition was published by Oxford in 1999. The New Colorline: How Quotas and Privilege Destroy Democracy, co-authored with Lawrence Stratton, was published by Regnery in 1995. A paperback edition was published in 1997. Meltdown: Inside the Soviet Economy, co-authored with Karen LaFollette, was published by the Cato Institute in 1990. Harvard University Press published his book, The Supply-Side Revolution, in 1984. Widely reviewed and favorably received, the book was praised by Forbes as "a timely masterpiece that will have real impact on economic thinking in the years ahead." Dr. Roberts is the author of Alienation and the Soviet Economy, published in 1971 and republished in 1990. He is the author of Marx's Theory of Exchange, Alienation and Crisis, published in 1973 and republished in 1983. A Spanish language edition was published in 1974.

Dr. Roberts has held numerous academic appointments. He has contributed chapters to numerous books and has published many articles in journals of scholarship, including the Journal of Political Economy, Oxford Economic Papers, Journal of Law and Economics, Studies in Banking and Finance, Journal of Monetary Economics, Public Finance Quarterly, Public Choice, Classica et Mediaevalia, Ethics, Slavic Review, Soviet Studies, Rivista de Political Economica, and Zeitschrift fur Wirtschafspolitik. He has entries in the McGraw-Hill Encyclopedia of Economics and the New Palgrave Dictionary of Money and Finance. He has contributed to Commentary, The Public Interest, The National Interest, Harper's, the New York Times, The Washington Post, The Los Angeles Times, Fortune, London Times, The Financial Times, TLS, The Spectator, Il Sole 24 Ore, Le Figaro, Liberation, and the Nihon Keizai Shimbun. He has testified before committees of Congress on 30 occasions.

Dr. Roberts was educated at the Georgia Institute of Technology (B.S.), the University of Virginia (Ph.D.), the University of California at Berkeley and Oxford University where he was a member of Merton College.

He is listed in Who's Who in America, Who's Who in the World, The Dictionary of International Biography, Outstanding People of the Twentieth Century, and 1000 Leaders of World Influence. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: [email protected]

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