The Fed Wages War on Gold

Question:   If you were advising the Federal Reserve, what would you say are the unsolved economic problems of the day?

Milton Friedman:  One unsolved economic problem of the day is how to get rid of the Federal Reserve.   - January 1996 interview on NPR

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Ron Paul has been aggressively seeking an official, independent audit of the gold that is supposedly being held at Ft. Knox on behalf of all U.S. citizens.  Such an audit has not taken place since Eisenhower was the President?   What gives there?  In the face of mounting criticism and citizen requests for this audit, why does the Treasury ignore this issue?  What does it have to hide?

At this point, anyone who looks at the Treasury financial statements is placing their "full faith" in the belief that the Government is honestly reporting its numbers.  Does anyone really believe that the economic numbers  the Government publishes on a weekly basis?  Everyone believe that the Government is telling truth about why we're spending trillions on wars in Iraq, Afghanistan and now Libya?  

The Fed has been spending millions to fight all of the recent Freedom Of Information Act requests, which have been filed so that we can see what the Fed is doing secretly with our money - especially now that most of what Fed does has a guarantee on it by the Treasury.  Most notably for me is the GATA request that we get to see what kinds of transactions the Fed has been in engaging in with OUR gold.  It is highly likely that the 8100 tonne book entry on the Treasury balance sheet is just another electronic entry on a piece of paper.  How about we get to take a look at the actual physical gold that is supposedly represented by that electronic entry?  How about we get to see if that gold has any legal encrumbrances attached to it like Federal Reserve gold swaps and leasing transactions?

An audit needs to be done and it needs to be done under the full, transparent scrutiny of all U.S. citizens who would like to watch it happen.  And of even more immediate concern, at least to me, is the drain on physical gold and silver occurring at the Comex.  It's kind of spooky the way unencumbered physical silver is being, and has been, "sucked" out of the system (Comex, SLV) over the past couple months. As much as I want to see Ron Paul force an open audit of Ft. Knox, I'd love to see an open audit of the Comex. I believe the Comex problem is the Achilles Heel of this whole mess.

It wouldn't take much to stage a run on the Comex. And when that occurs, if it turns out that the Comex is unable to make deliveries of actual physical metal and instead changes its rules and defers to cash settlement of contracts, that's when all hell will break loose.  I would then expect that GLD and SLV will head south quickly in price while the global spot price of gold and silver head for the moon.  The slight inversion in silver futures will go nearly verticle and the dollar index will go into a serious tail-spin.  But how about we just start with a simple audit of Ft. Knox? 

Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.'  (famous speech by Francisco D'Anconia in "Atlas Shrugged")

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The Federal Reserve Will Go Bankrupt, Don’t Listen to Bernanke: Jim Rogers

Jim Rogers truly believes Federal Reserve Chairman Ben Bernanke will end quantitative easing, as planned, at the end of the month.

"(Bernanke) says he's going to stop QE2 ... I take him at his word since he's said it so many times," explains Rogers. If that seems like a backhanded compliment, it is. It's also the nicest thing Rogers said about either Bernanke or the Fed as a whole in our latest interview.

If there's any truth to the long held market cliche "don't fight the Fed," then Rogers is in for a world-class beat down. He seems utterly unable to stop brawling with the Fed. At the very least, Rogers rages at the Fed machine at every opportunity.

When Rogers visited Breakout in March, I made him "imaginary Fed chief" by virtue of the powers of Yahoo! Finance. It was the shortest imaginary reign in history as Rogers made shutting the Federal Reserve the top item on his agenda. Today, the man is harder-lined on the subject than ever, based on our interviews. He says you should reject everything you know or are told about the Fed, starting with the idea that the job of Fed chairman is an apolitical role. All Fed chairmen are political stooges, says Rogers, and Bernanke is no different. And as we move closer to November 2012, he says "there's enormous pressure to get Obama re-elected ... Bernanke knows where his bread is buttered."

Rogers dismisses Dr. Ben as "just an Ivy League professor" who has never been right. According to Rogers, Bernanke has been out of ideas since arriving in Washington -- and that's a good thing, because what the Fed and Bernanke have done so far has sent us down a path that the economy might never recover from. The stimulus from two rounds of quantitative easing are only the most recent and public, and have been likened to giving a drunk more booze to avoid a hangover, according to Rogers and many trading economic-types. At this point, rather than just a hangover, the economic patient is headed for the morgue. Rather than a severe recession or even depression, we've been putting off feeling the pain, stashing a few trillion of bad debt here or there, and hoping it goes away. It won't, in Rogers' view.

However, all is not entirely lost. Rogers notes that the Federal Reserve, enacted in 1913 by Woodrow Wilson, was only the latest in a long line of attempts at U.S. central banking, all of which have ended in tears and disaster. The Federal Reserve will hopefully be gone before the country is, he says Until the Fed is abolished, Rogers has one piece of advice for traders and investors about Bernanke: "Don't pay attention to the man."

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