International Man: For decades, mainstream financial commentators have dismissed gold as a “barbarous relic.” Federal Reserve officials and policymakers routinely downplay its importance, insisting that fiat currency and central banking make gold obsolete.
Yet, despite this public stance, the US government still holds one of the world’s largest gold reserves.
So, what’s really going on here? If gold is truly irrelevant, why does the government still treat it as a strategic asset?
Doug Casey: Governments hate gold because it’s a discipline on the amount of currency they can create. Gold is money. Governments can’t create it out of thin air. You might say that gold needs the government about as much as a fish needs a bicycle.
Gold is not a strategic asset. It shouldn’t be viewed as something to buy or sell, like land, copper, or a factory. You don’t buy or sell money; that’s almost a contradictory concept. Gold is money itself, although fiat currencies are treated as money in today’s world. Confusing gold with fiat currency is one of the terrible notions created by Keynesian economists. It’s allowed mainstream financial commentators to dismiss gold as a pet rock.
As you said, the Federal Reserve officials and policy makers routinely downplay the importance of gold. They believe that fiat currency and central banking have made gold obsolete. They’re 100% wrong.
Despite their theories and stated beliefs, governments around the world have been buying massive amounts of gold in recent years. They’re dumping dollars. For 25 years after World War II, the major asset of other central banks has been US dollars.
It made sense at the time because the dollars were convenient and guaranteed to be redeemed at $35 for an ounce of gold up to 1971. Now, however, the US government backs its dollars by nothing. Foreign governments can see that the US government is fiscally and monetarily totally out of control. They’ve seen the US arbitrarily confiscate assets, impose sanctions, and levy duties. They’re dumping dollars because it’s increasingly obvious they’re the unsecured liability of a bankrupt and unreliable government. They’re accumulating gold.
The only solution to today’s massive monetary problems is to go back to classical banking practices. What that means is gold and only gold is used as money. US Government debt should not be monetized. And fractional reserve banking has to be abolished.
There used to be a distinction between the two types of bank accounts—demand deposits (i.e., checking accounts) and time deposits (i.e., savings accounts). Banks have typically offered both, but they’re two totally separate and very different businesses.
With demand deposits, you pay the bank to store your gold securely. You have the right to withdraw it at a moment’s notice and write checks against it, making it simple to transfer it on the bank’s books to another person.
Time deposits are a totally different business. With these, you deposit money with the bank for X number of months. It must be for a fixed period of time to allow the bank to lend that money out for X number of months. The banks may pay you 3% and charge the borrower 7%, the 400 basis point difference covering overhead, risk of loss, and profit.
Today, however, there’s no longer any distinction between time and demand deposits. Banks lend demand deposits, which is a fraud. It’s as if you paid the Allied Van Company to store your furniture, and they then rented it to someone else.
Worse, when banks lend money today, it’s redeposited within the system. They lend it out again, it’s redeposited, they lend it out again, ad infinitum. It’s a giant daisy chain, an inverted pyramid of debt. It’s why banking is such a profitable business—until the inevitable happens. If any significant borrower goes bust, or if depositors want more than a minimum of cash, any given bank would be shown to be bankrupt.
That’s why Central Banks like the Fed are critical to maintaining the fraud. They stand ready to create fiat to maintain confidence in the system. And regulate commercial banks to keep them from abusing the system too badly.
Almost every bank in the world engages in fractional reserve practices. That practice puts them all in danger of bankruptcy. Sorry for the overly brief explanation. But the bottom line is that the entire system must be, and will be, reset.
International Man: Given the secrecy surrounding Fort Knox, do you think the US government still possesses the 261 million ounces of gold it claims to have?
Do you think the reluctance to conduct a full, independent audit is due to mismanagement, deception, or something more sinister?
Doug Casey: Chris Weber recently did an essay about that in his March 3 letter. His publication is one of my favorites; I suggest you subscribe.
You’ll see why I say that. In any event, go to weberglobal.net to get that letter, gratis. You should take advantage of a two-month trial for $60 as well.
In fact, there’s never been a formal audit of Ft Knox. I doubt that the US government has anything like 261 million ounces of gold that it says it owns. In fact, most of the gold in Fort Knox is not even in good delivery .999 form; it’s what we call coin melt.
The US government confiscated gold coins from the public in 1933. They were in wide circulation and everyday use. The government then melted them down—they’re 90% gold and 10% copper. There’s never been an actual audit of how much gold, of what purity, there is in Fort Knox. FWIW, the vault itself was inaugurated in 1936.
We don’t know who owns whatever gold there is in Ft Knox, ostensibly 147 million ounces, because any amount of it may have been hypothecated for who knows what reasons. For that matter, the same is true of the gold stored with the New York Fed, another 110 million ounces.
No one knows exactly how much there is, who owns what, or how much may have been loaned out. It impresses me as a dog’s breakfast. For many years, Ron Paul has fought to get an audit, but they’ve disregarded him.
Hopefully, DOGE will be the impetus to dig into it so we can find out exactly how much is there and exactly who owns it.
International Man: US citizens have virtually no financial privacy, facing severe penalties if they fail to disclose every detail of their financial lives to the government.
Why is financial disclosure a one-way street where citizens are forced to comply while the government operates behind closed doors?
Doug Casey: It’s naïve to believe that, just because some people call it “our democracy,” that we’re anything more than the capite censi—the “head count,” as the Romans termed the mob. The people who control the government, the Deep State, are the boss. I recognize that it’s very politically incorrect to say so, but the government is an entity onto itself with its own interests.
Even though America is unique in world history for having been founded on the principles of personal freedom and a strictly limited State, it’s degraded over time. That’s natural, I suppose; the Second Law of Thermodynamics operates in absolutely every sphere. But today, it’s a fiction, a myth, that citizens no longer democratically control the State. We’ve devolved into an unstable multicultural domestic empire. In fact, you’re a subject, a veritable serf—albeit one with a high standard of living.
At this point, the government is very much like The Wizard of Oz, hiding behind the curtain. The Wizard, you’ll recall, was not the friend of Dorothy and her companions.
International Man: President Trump recently stated, “We’re going to go into Fort Knox to make sure the gold is there.” If it isn’t, he warned, “we’re going to be very upset.”
What do you make of Trump’s comments? Do they signal genuine concern about US gold reserves, or are they just political posturing with no real intention of follow-through?
Doug Casey: If it’s true that something has happened to the gold, it will trigger a genuine earthquake which will echo around the world.
I’m afraid that if DOGE digs into the gold holdings in Fort Knox and the NY Fed, there won’t be anything near 261 million unhypothecated ounces of gold.
If that’s the case, it would create such an upset that I’m not sure they’d dare disclose it. It would overthrow the world’s financial system because it would show that no figures are reliable and that it’s all a sham. This is potentially a very big deal.
International Man: What are the investment implications of renewed scrutiny on US gold reserves—both in general and with the potential for a full audit of Fort Knox?
Doug Casey: As I’ve said many times before, at approximately $3,000, gold is reasonably valued relative to the historical cost of everything else—clothes, food, houses, cars. But because the world’s financial situation is so shaky at this point and gold is, in fact, the only financial asset that’s not simultaneously somebody else’s liability, it seems to me that you should continue buying gold. It’s much better to own gold coins than it is to own dollars, which are just the accounting fiction of an unsound bank.
As Matt Smith has pointed out recently—he explains all this in (LINK)—if gold was reinstituted as money, whether just between governments or in general society, it would probably have to be revalued at 25, 30, or $40,000 an ounce.
At this point, continue buying gold even at $3,000 an ounce. The general public is still totally uninterested in it. That’s going to change when panic breaks upon the economic world in the near future.
Reprinted with permission from International Man.
