Sell the Gold in Fort Knox

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Ask a gold bug if he thinks that Franklin Roosevelt did the right thing in 1933 when he unilaterally confiscated the gold coins of all Americans. He will tell you “no.” Why not? “Because it was a violation of property rights. The Federal government had no legal authority to do this.”

But the Supreme Court authorized it, 5 to 4. The gold bug will tell you that the Supreme Court cannot be trusted.

Fast forward almost 70 years. Ron Paul announces at the Heritage Foundation that the government should sell its gold to reduce the national debt.

No one comes to his defense.

Understandably, the Treasury Department got one of its staffers to write a critique. The government should sell no assets, she insists. Congress must raise the debt ceiling. There are not enough assets to sell. She ridiculed the suggestion of a balanced budget through asset sales. With a deficit of $125 billion a month, she said, a fire sale would do no good.

Then, amazingly, she admitted that gold is central to the perception if the U.S. government as solvent.

A “fire sale” of the Nation’s gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system.

Treasury Secretaries from both parties have made it clear that they would not sell gold in order to buy time in a debt limit impasse. As then-Treasury Secretary James A. Baker said: “President [Reagan] and I are not prepared to take that step because it would undercut confidence here and abroad based on the widespread belief that the gold reserve is the foundation of our financial system, and because the Congress clearly has the power to prevent a default by assuming its responsibility with respect to the debt limit.” When President Reagan was asked whether he would consider selling gold, he told his Budget Director, James Miller, “absolutely not.” Similarly, Treasury Secretary Robert E. Rubin said, “We will not sell the nation’s gold supply.”

In short, gold is not a barbarous relic. Gold in the vault at Fort Knox and in the Federal Reserve Bank of New York (a private corporation) is basic to the world’s confidence.

But what about gold in the hands of Americans? She did not say. The Treasury has had contempt for that idea ever since 1933.

That a salaried government bureaucrat would oppose the sale is understandable. But equally incensed are gold bugs. Only one came to his defense: the #1 scholar of the American gold standard, Dr. Edwin Vieira, author of Pieces of Eight, a 1600-page history of the gold standard in America. “Redeemable currency is an oxymoron.” The government has no plans to restore a gold standard of any kind. “They don’t need the gold. They’ve just been sitting on it since Roosevelt stole it.”

Everyone else was critical of Paul’s suggestion to restore gold to the private sector.

What’s going on here? If it was immoral and illegal for the government to confiscate the gold at $20 an ounce in 1933, why is it a bad idea for the government to sell back the gold to the public at a market price today?

We see once again that people who say they believe that gold is the basis of freedom do not believe it. They believe in the United States government. They believe that the government has the right to hang onto its stolen gold. Why? Because the government will someday establish a gold standard. The gold belongs to the government.

But what is a gold standard? It is a system in which the government buys and sells gold at a fixed price. We have not had that system since 1933. The government did make the promise to foreign governments and central banks, but Nixon unilaterally broke the promise on August 15, 1971.

The gold bugs have now converted to Franklin Roosevelt’s idea of a gold standard: a system in which the government has the right to steal property at one price, hike the price later, and sit on the wealth. The gold bugs honestly trust the Federal government to restore a gold standard someday. There has not been one since since 1933 that any government on earth will do this, but somehow, the gold bugs believe, it will do it in the future.

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May 19, 2011

Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2011 Gary North