The Truth About the Fort Knox Gold

One of the little-known items on the Fed’s balance sheet is a vital asset it received from the U.S. Treasury a long time ago…

During the Great Depression, in 1933, President Roosevelt issued an executive order requiring anyone with gold to surrender it to a Federal Reserve bank or any member bank of the Federal Reserve system.

The Federal Reserve banks also required the commercial banks to hand over their gold to the Fed. Now, suddenly, the gold went out of the commercial banks into the Federal Reserve Bank.

But under the Gold Reserve Act of 1934, the Fed was ordered to surrender all its gold to the Treasury Department. All the nation’s gold in effect came under direct government ownership.

Now, this is key: The Federal Reserve is actually a private system, while the Treasury is an arm of the U.S. government. And the Fifth Amendment of the Constitution prevents the government from taking private property without just compensation.

To get around that legality, the “just compensation” was a gold certificate the Treasury issued to the Fed in exchange for its physical gold.

To this day, the Fed carries that gold certificate on its balance sheet.

The Treasury officially values its gold at $42 an ounce. That was the official gold price from 1973, two years after the U.S. abandoned the Bretton Woods system. Of course, the market price of gold today is almost $1,300 an ounce.

But if you take the face value of the gold on the Fed balance sheet, divide it by $42 an ounce and then come up with a number of ounces and convert that into tons, it comes out to over 8,000 tons.

That’s highly interesting, because that’s how much gold the Treasury currently owns.

The Treasury needs at least 8,000 tons of gold to back up that paper certificate it handed the Fed back in the 1930s to satisfy the Fifth Amendment.

If you take the 8,000 tons on the Fed balance sheet in the form of this gold certificate, market to market at $1,300, that mounts to well over $300 billion.

So the secret to the Fed’s balance sheet is its “hidden gold asset,” that gold certificate it received from the Treasury in the 1930s.

Nobody talks about this or admits it. But our whole system is based on gold.