Auditing America’s Gold

Suppose you have a business. You hire people to run it. At some point as a responsible owner, you decide to review the books. To check the bills. To examine the bank account. And inspect the inventory.

But your managers refuse.They dig in their heels.The answer is no.You have no business doing any of that, they say.There is no need, they say.Don’t bother us, they say.

Would you be concerned?

The Unites States has never audited the Federal Reserve. It fights strenuously to keep its practices secret.

And now we find that we cannot even get a meaningful audit of America’s gold holdings.

That’s funny. Every public company in the United States must be audited. That’s a matter of U.S. law. But Washington refuses to submit to the same oversight.

Kentucky Congressman Thomas Massie

Should you be concerned?

A year ago Kentucky Congressman Thomas Massie introduced the Gold Reserve Transparency Act (H.R. 3795). It was referred to the House Financial Services Committee. It has apparently not advanced to markup, House floor consideration, or Senate passage.

It would require several important things:

A full independent audit of all U.S. gold reserves

• Conducted by the Comptroller General (the head of the GAO) with outside audit participation. It includes gold in “deep storage,” including United States Bullion Depository and other federal storage locations.

Physical verification

• Inventory, weighing, and assays (testing purity) rather than relying only on accounting records.

Recurring audits every five years

• Not a one-time event.

Disclosure of encumbrances

• Reporting on whether U.S. gold has been subject to leases, swaps, loans, and other similar arrangements.

A 50-year historical review

• Documentation of sales, purchases, transfers, receipts, and other transactions affecting reserves.

Security assessment

• Review whether current physical protection procedures are adequate.

Public reporting

• Results delivered to Congress and Treasury, with sensitive security details withheld as necessary.

Are any of those requirement unduly onerous? Wouldn’t you want a bank or financial manager that controls your accounts to be subject to the same sort of controls?

The Gold Reserve Transparency Act has little if any chance of passage. If the gold we own collectively, the gold the government holds on our behalf, is not subject to prudent oversight, we wonder why. We think it makes a strong case for individual Americans to protect themselves by owning their own gold.