Auditing the FED's Gold

by Gary North

Recently by Gary North: Did Romney and Bain Capital Profit at the Expense of Bain's Employees? 

I have posted a video of something I thought I would never see: all five of the Republican candidates for the U.S. Senate verbally demanding an audit of the Federal Reserve System. You can see it here.
Bernanke is facing what no Federal Reserve chairman has ever faced: public awareness of the Federal Reserve System. From late December 1913, when an almost deserted Senate voted for the Federal Reserve Act, until 2008, when the recession confirmed Ron Paul's warning in late 2007, there was almost no public awareness or even a vague understanding of the Federal Reserve System. The genie is now out of the bottle, where it had been corked since 1913. Ron Paul has uncorked it.
From the November 1910 secret meeting at Georgia's Jekyll Island until Ron Paul's 2007 candidacy for the Republican nomination for President, The Federal Reserve had received a free ride from Congress. There had never been much oversight. That's because FED regulation was an oversight. (The same word is used to convey opposite meanings.)
The Texas Leftist-populist Democrat Wright Patman had been a critic. He had been the chairman of the House Banking Committee until 1975, a year before Paul arrived in Congress. He was a Greenbacker: a believer in a zero-interest economy that achieves this Utopian goal through the use of fiat paper money. Patman was not able to generate much interest in the FED.
Patman did inflict one major wound on the FED. He and California Congressman Jerry Voorhis, another Greenbacker, in the early 1940s persuaded Congress to pass a bill, which Roosevelt signed, that forbids the Federal Reserve from keeping the interest payments from the government bonds it has counterfeited fiat money to purchase. Today, the FED must return to the Treasury all of this money beyond its operating expenses. For 2011, the FED will pay back $77 billion.
A full-scale audit of the FED, if it ever comes, must include an audit of the gold every year. The auditors must see if the gold is in the two vaults. The first vault, at Ft. Knox, is more famous. The more important vault is located at 33 Liberty Street, New York City: the privately owned Federal Reserve Bank of New York. This is the "Die Hard III" vault.
The auditors must do two things. First, they must determine whether there is the same amount of gold as is listed on the FED's books at the fake price of $42.22 per ounce. Second, the auditors must follow the paper trail of ownership. They must make sure that the gold in the vaults is still legally in the possession of the FED.
There is a possibility that the FED has transferred ownership of this gold, through swaps, to European central banks, which have in turn leased – sold – their gold to private buyers. It is not enough to determine that the physical gold is in the two vaults. It is also mandatory to determine whether the FED has indirectly sold the government's gold, which it has held in trust for the government since 1933.

[Note to auditors: pursue this phrase in the FED's statements: "deep storage gold." As to why, read this.]