The following exchange between Congressman Ron Paul (R-TX) and the Fed’s attorney Scott Alvarez proves, without a shadow of a doubt, that The Federal Reserve has no gold backing the US dollar.
Most in the alternative news sphere suspected it – now it’s fact.
The Federal Reserve does not own any gold at all. We have not owned gold since 1934, so we have not engaged in any gold swap.
What appears on our balance sheet is gold certificates…Before 1934 the Federal Reserve did, we did own gold. We turned that over by law to the Treasury and received in return for that gold certificates.
The exact relationship between the Federal Reserve, the US Treasury and these non-tradeable gold certificates is not exactly clear, but an attempt to explain what’s actually going on has been put forth by goldnews.com:
In any case, we can analyze the implications of the basic facts and come to a couple of conclusions:
1) The widespread notion that the Fed owns gold is false. The corollary to this is the mistaken belief that the Fed understates its gold holdings on its balance sheet by only reporting certificates based on the $42.22 statutory gold value. The Fed does not in fact own the US gold stock multiplied by the market price of gold, unless the Treasury defaults and even then its not clear. The Fed does, however, own a claim to currency totaling $11.1 billion and this value has a remote chance of going up significantly if the Treasury revalues its gold and maintains the practice initiated in the Par Value Modification Act.
2) The fact that the Fed owns no gold, nor claims to any gold, means the fundamental value of the dollar lacks any backing besides dollars themselves, not including Fed building and equipment. Dollars are in essence worth a lot less than many people thought, and the Fed is much more impotent in using the prowess of their assets, and conducting monetary policy in general, than many believed. In all, Alvarez’s clarification strengthens the case for gold’s high dollar value immensely.
An interesting perspective, and one, if true, suggests that the value of your dollar in terms of gold is actually much less than believed – like close to zero. Our currency is not only not backed by gold, but in the event of a dollar meltdown the only assets backing the world’s reserve currency are worthless toxic mortgages purchased by The Fed in recent years from insolvent banking institutions.
The only thing holding this thing together at this point is market confidence. When that goes, everything else goes with it.