What Price

What Price Gold… $7,000… $14,000… $60,000?

Natural law copyright by Anthony Hargis

(Copyright notice:  to lawfully reproduce all or part of this article, the following attribution must be included: “Natural-law copyright by Anthony Hargis, redressone.wordpress.com)

You may think this will be a wild ride. If you think collateralization, currency equivalents, double-entry bookkeeping and mortgage-backed securities are dull subjects – if you think wishful thinking is a harmless activity – if you think taxes are essential for the development and maintenance – rather than the destruction – of civilization, then, yes, this will be a very wild ride. We are about to study concepts and actions, crimes and fictions that few, if any, others have examined yet relative to their influence on gold. It may also be a disturbing study; for, the dollar is the world’s reserve currency. It is used as gold once was used: to serve as backing, or collateral, for issued currencies around the globe; in the dollar’s case, for the world’s major currencies and a few dozen others.  Thus, today, wishful thinking has replaced gold as backing for most of the world’s currencies. We should ponder the question, ‘What happens when men build their societies on houses of cards?’

Units of money are the storehouse for man’s unused labor; they comprise streams and rivers that carry the products of man’s labor from hand to hand, from present to future; it is the basis of every contract.  There is probably not a single transaction among men that does not involve some kind of contract; a spoken or written word, even a nod, will suffice to make a contract.  To properly serve its purpose, the value of money must have the same, or greater, value at the end of a contract compared to its beginning, whether the time lapse is twenty minutes or twenty years.  If a money unit is less valuable at the end of a contract, he who provides a service or product is short-changed x amount.  On the other side of the transaction, the buyer gains x amount on the purchase; but loses a thousand x on his savings.  In full context, both producer and provider of capital are cheated of their current and past labor by a cheapened money unit; for, all men, if left unmolested by tax takers, are natural savers.  Those who receive benefits of a cheapened money unit are the legally-protected criminal class and, to the degree of crumbs and droppings, the useful-idiot class.

If money is properly founded, men will labor unmolested and, at the end of each day, will reflect upon their greatest achievement: children with sparkling eyes and a curiosity that drives them in ten different directions at once.  The most entertaining part comes from watching them sort out their priorities, and learn the ways of the world; it is the pride of workmanship in its highest form.  If, on the other hand, money is not properly founded, men grow angry that half their labor is taken by others – either by taxes or a cheapened money unit, which some men mask by the word, ‘inflation’; and that their children must therefore go without food or shelter, clothing or parental companionship; children will grow sullen, confused and lethargic, and will take their revenge in a hundred different ways against a hundred random people in each of their following years.  This is the result when tax rates are moderate.  Where they are unrestrained, children suffer the fate of exposure.  Mother and father, who could see no hope of supporting a newborn, would take it into a field and abandon it; there to yield to the forces of wind and sun, cold and rain; sometimes dogs or wolves would silence its screams and shorten its suffering.[1]  Thus were human lives ended – hundreds of thousands, maybe millions, per year – for thousands of years.  Where child and tax taker compete for the same coin it will always be bad for the child.  Taxes, you see, will always fall most heavily on the weakest members of society.  History tells us that such a society will drift inexorably toward extinction, and will never be allowed to rise again.  A verdict, or insult, applied against Egypt comes to mind: “policies set in motion by the Roman military and Christians reduced Egypt to a rotting mass of slaves – and left the country freely available to any conqueror, and wanted by none but the most base.” Encyclopedia Britannica, 11th ed., v. ix, 90.

Men organize societies, or civilizations, to make their property and rights more secure – and to preserve the achievements and ideals of that society.  But, in every case, they fail to bridge the gap between aim and realization; for, to preserve ideals, it is necessary that children of that society must survive.  Where men send their male children to death and mutilation on the nearest battlefield – where parents cannibalize their young thru the process of governmental debt, the transmission of ideals fails – even if those ideals glorify the warrior class.

Thus, if perpetuation of ideals is the aim, child rearing must be the first industry of society; and everything that subverts it must be the blackest of crimes.

My main purpose here is – not to dwell on how men are affected by money founded properly or improperly, but – to explain how money of today is founded; I might deal with the other topic another day, it is too big for my purpose here, which brings us to the question that serves as the title for this article.  A more precise question (less suitable for a title) would be, “What is the dollar value for gold that would redeem all dollar-denominated currency and dollar-denominated currency equivalents that have been issued into economic existence?”

We must first take a slight detour.  This involves an examination of the different types of collateral that stand behind issued dollars.  That gold remains the only valid collateral will become clear in the process.

We start our search by examining the liability statement for the Federal Reserve (FR).  The pertinent items are listed in the following table.

Item Desc ’11 Oct 5
1 “Currency in Circulation” 1,001
2 “Deposits with FR Banks” 98
3 “Reserve Balances w’ FR” 1,604
Total 2,703

Table 1.  Currency and currency equivalents issued by the Federal Reserve (billions).  Source, “Statistical Release” H4.1 for 2011 Oct 6 (issue date).

The first item represents FR notes issued into circulation, the scrip you and I carry in our pockets.

The second item represents deposit accounts maintained at the FR by the US Treasury, “Foreign official” institutions, “Service related” accounts maintained by member banks (such as Citibank, Wells Fargo), and “Other”, which is not further described by the FR.

The third item represents accounts maintained by member banks for reserve requirements and for normal collections and payments of funds.

The first item is actual currency; items two and three are “currency equivalents” because they are capable of immediate conversion into FR notes.

Please notice that each of these items is a liability of the Federal Reserve.

There are other currency equivalents that do not show on the FR’s balance sheet.  They are a) a sizeable portion of Mortgage Backed Securities (MBS) and b) sizeable fractions of currency issued by foreign central banks.  We will deal with these other equivalents later.

Before we proceed, we need to deal with a major confusion –held by most libertarians and activists, socialists and critics of the Federal Reserve – regarding the method by which paper money (such as the Federal Reserve Note) enters into circulation.

Invariably, the people just mentioned, tell us the dollar is issued ‘out of thin air’; or is a ‘fiat’ currency (it is simply printed and thrown out the door, to favored pirates, of course).  It is not that simple.  It is much worse.

It is a fundamental principle in accounting that, for every entry, there must be one or more equal and offsetting entries; this is the principle of double-entry bookkeeping.  Where this is not done – and where forums of redress are staffed by civilized men, people go to jail.

Thus, when the FR issues Federal Reserve notes (which creates a liability on the FR’s balance sheet), there must be an equal and offsetting entry somewhere else on that balance sheet.

As a general rule, new Federal Reserve notes are issued only to member banks of the Federal Reserve System.  When one of these banks needs a new supply of Federal Reserve notes, it must give US Treasury securities, with a face value equal to the amount of currency desired, to the Federal Reserve in exchange for currency.  With the exchange, such securities become assets, and such FR notes become liabilities, of the Federal Reserve.  At the same time, such securities are earmarked as “collateral” for issued currency; just as, one hundred and fifty years ago, gold served as collateral for issued currency.

This is reflected in a so-called “Statistical Release” H4.1 published every week by the Federal Reserve.  It includes up to ten tables that describe various aspects of the financial condition of the Federal Reserve (in 1997 it contained five tables, now it is ten).  The last table in each release, so far, is titled, “Collateral Held against Federal Reserve Notes”, and pertinent data for the one for 2011 Oct 5 is reproduced below.

Federal Reserve notes to be collateralized 1,001
Collateral held against FR notes 1,001
Special Drawing Rightcertificate account 5
Gold Certificate Account 11
US Treasury [securities,] agency debtand Mortgage backed securities pledged 984
Total Collateral Eligible: US Treasury[securities,] agency debt [1,730 bil] and Mortgage-backed securities [850 bil] 2,580

Table 2. “[Table] 10. Collateral Held against Federal Reserve notes: Federal Reserve Agents’ Accounts, [Billions] of dollars”.

This table shows, 2011 Oct 5, there were fractionally more than $1 trillion (face amount) of FR notes in circulation and that needed “to be collateralized”.

The collateral consisted of a) “gold certificate account”; b) Special Drawing Right (SDR) Certificate Account; c) Treasury and Agency Debt; and d) mortgage-backed securities (MBS).  As a group, these are known as “Eligible Assets”.

Perhaps it will be more clear if we put it in table form.

Eligible Assets Liabilities“to beCollateralized”
1. Gold certificate 11 1. Currency 1,001
2. Special DR 5 2. Deposits 98
3. Treas and Agency debt, est. 1,730 3. Reserves 1,604
4. MBS 851
totals 2,597 2,703

Table 3. Eligible assets and liabilities to be collateralized, as of 2011 Oct 5 (billions).

Thus, we have these numbers (Table 3, immediately above) to work with.  We can see that we already have a problem: assets earmarked as collateral for currency and currency equivalents are less than the items to be collateralized.  However, this problem will shortly turn out to be grossly insignificant.

These are symbols that appear on the Federal Reserve’s balance sheet.  Here is a major question, “What is their realistic value?” Or, “What is the ability of counterparties to perform according to the numbers that appear on the FR’s balance sheet?”  For example, counterparties for Treasury and Agency debt are the US Treasury (immediately) and taxpayers (ultimately).  Can the US Treasury collect taxes necessary to redeem US Treasury and Agency debt… which would then redeem FR notes?

(If we had time to waste, we could deal with the insanity of Federal Reserve notes redeeming Federal Reserve notes.  But we won’t.)

Let us examine them, one at a time.

Gold Certificate Account:  This represents a lien on gold that may or may not be in Fort Knox.  It is listed on the FR’s balance sheet at $42.22 per troy ounce.

Treasury Debt and Agency Debt are both obligations of the federal government.  They possess value according to the belief that, someday, the US Treasury will be able to collect taxes from future generations of American taxpayers to redeem this debt.

Governmental debt is the medium thru which wishful thinking is turned to reality, temporarily.  Men have engaged in wishful thinking for tens of thousands of years.  Originators of this practice, according to myths and legends, were magicians.  A magician persuaded other villagers that he could make it rain, the sun to shine, storms to abate; he could guarantee fish to jump into nets of men, victory in war, a successful hunt, easy child birth, vegetation to turn green and countless other miraculous events.  But, for villagers to enjoy these benefits, they had to surrender part of their property to the magician.  He would put on his costume, waggle his head, utter his gabble; a step to the right, clap, clap; a step to the left, clap, clap.  And, if nature cooperated, villagers were happy and magician enjoyed his booty.  But nature did not always cooperate.  After one or three major failures – and, since villagers had paid for them, they lost patience and chased the magician down the road, or cut off his head.  Because of the limited patience of villagers, the life expectancy for magicians was very short.

His was a three-part office: promulgator of charms and taboos, dispenser of miracles and collector of booty.  He eventually became priest with the same three-part office; except charms and taboos became commandments of an invisible magician.  This invention tremendously lengthened the life-expectancy of the visible magician.  Soon, the work load became so great that priest created the subordinate office of king whose duty was collector of booty, which was made more palatable by names such as sacrifices or peace offerings, tribute or sin offerings, supplies or taxes.  There was a guild of visible magicians in every land; and every one of them eventually fabricated elaborate legends and mythologies that glorified the collection of booty and the genocide of nonbelievers; read, for example, Deuteronomy, xx, 10-18, or Numbers, chapters xxv and xxxi.

This, in very brief terms, has been the story of man for ten, fifty or even a hundred thousand years.  George Frazier, in his Golden Bough, will tell you more.

Governmental debt and central banking made the practice enormously more efficient.  Where, formerly, living men had to surrender their property to finance groundless fictions, now, unborn generations are made responsible for debt that made possible long-dead fabrications.  Living men no longer had to be burdened with the expense of fabricating fictional lives and fictional beliefs.  This made men more tolerant of knaves… and more careless with their children.

It is the process by which one generation financially cannibalizes future generations.  Who would have thought that thieves and idiots that naturally gravitate to the service of government could have invented such a miraculous thing: a crime against victims that are not even born?

When governmental debt is incurred, it necessitates the imposition of taxes, sometime in the future to pay the debt.  Such taxes can be imposed or collected neither constitutionally nor practically.  This debt has been accumulating for at least one hundred years.  Constitutional taxes require the consent of those taxed.  When the tax is necessitated before a man is born, he cannot give his consent, and is therefore unconstitutional.  We should recall that the prohibition of “taxation without consent” was a major foundational stone of the American experiment.

Also, it is a constitutional principle that those who are burdened with a tax must also receive benefits of the tax; (See, People v. Parks, 58 Cal. 624, which was carried to, and confirmed by, the Supreme Court; but, see ‘Reality Check’ below).  For example, a tax levied in one county cannot be used to build a road in another county; or, a tax levied on American taxpayers cannot be used for the benefit of enemies of the United States (consider lend lease for Soviets in 1941, or the $10 billion to build retirement homes in Israel for former Soviet military officers, professionals and bureaucrats).  When these Bolshevik functionaries learned the money was in the form of a loan, they told Congress, “We think we deserve” this booty; and Congress made it an outright gift, Los Angeles Times, ‘91 Feb 19, A-20; Ap 28, A-17; and Jun 23, A-12.

Where burdens and benefits are separated by one, two or five generations, or by contrary political philosophies, the coupling is impossible; actually, unconstitutional.  There are several other constitutional violations regarding governmental debt; but these will suffice for now.

The collection of taxes to redeem current governmental debt is not possible practically because, since it is a kind of cannibalization, taxes needed to redeem such debt must be imposed and collected by the generation that benefited from the debt.  If this generation fails to redeem the debt before power passes from its hands, the debt becomes uncollectible; for, a victim generation will not cannibalize itself for the benefit of a dead generation – especially a previous generation that used following generations so badly.

So, within a context of two or more generations – and, since the connection between burden and benefit is absent, the real value of governmental debt is zero.  I will qualify this later.

Special Drawing Rights Certificate Account.  The face value of this collateral is so insignificant relative to overall amounts involved that I will disregard this item for the present purpose.

Mortgage-Backed Securities.  The purchase of these MBS was part of the emergency operation by the FR in its attempt to save too-big-to-fail banks; they first appeared on the Fed’s balance sheet, 2009 Jan 14.  They are described, in a footnote of the Statistical Release, as,

Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.  Current face value of the securities, which is the remaining principal balance of the underlying mortgages.

According to Congressional investigations (one and two), these are some of the most toxic MBS to be found; that’s why they were sold to the Federal Reserve.  If mortgages serving as collateral for these MBS were sound, banks and other investors would still own them.  I estimate that a true and current market value for these MBS would be somewhere between fifty and eighty percent of the stated value.  However, since the FR is maintaining an interest rate of near zero in an attempt to revive the housing market – and home prices are trending downward, I expect this downward trend to turn into an avalanche when the FR raises interest rates.  When they are marked to market, the loss will be converted, according to current practice, to Treasury debt.

But considerations of the prior paragraph are inconsequential because the purchase of these MBS by the FR was unconstitutional on the ground that Congress has no authority to compel one man or group of men to guarantee profits of another.  This can constitutionally only be done thru the judicial power – not the legislative; and requires due process of law.  (See Sharpless v. Mayor, 1853, 21 Penn 147 @ 168 and 174, later confirmed by the Supreme Court).

Some people will argue against this interpretation; they would say that the FR is a privately owned corporation and, as such, is not limited by the constitution.  I regard such objections as groundless – to use a polite word.  The FR is a creation of Congress thru the FR Act of 1913.  As such it is an agent of Congress.  Thru the law of agency, an act of the agent is the act of the principal; and is subject to the same restrictions imposed on the principal.  Since Congress has no authority to guarantee the profits of one man or group, neither can it delegate this nonexistent authority to the Federal Reserve.  We do not justify robbery by interposing a tax-taker between a robber and his victim.  (See, State v. Wapello, (1862) 13 Iowa 388 @ 410.)

What is the proper solution here?  The very least that I would suggest is that the purchase of MBS by the FR should be reversed.  This will bring the MBS total to zero and reduce member banks’ reserves by $851 billions.

With these constitutional and practical considerations, we are left with the following numbers.

Eligible Assets “to beCollateralized”
1. Gold certificate 11 1. Currency 1,001
2. Special DR Zero 2. Deposits 98
3. Treas and Agency debt Zero 3. Reserves 753
4. MBS Zero
Totals 11 1,852

Table 4. Eligible Assets and Collateralized liabilities adjusted for constitutional and practical considerations, 2011 Oct 5 (billions).

This leaves us with the gold certificate account as the sole eligible asset to collateralize currency and currency equivalents, totaling $1,852 billions, issued by the FR, as of 2011 Oct 5.

With a book value of $11.037 billion for the certificate and $42.22 per troy ounce for the gold, we calculate the certificate represents a lien on 261 million troy ounces of gold.  Working these numbers, we arrive at a dollar price of seventy-one hundred (7,100, rounded) that would collateralize currency and currency equivalents issued by the FR.

This assumes that gold alleged to be in Fort Knox is in metal form – as opposed to “receivable” form.  The US Treasury lists its gold on a report titled “US International Reserve Position”; and the item of our interest is described,

“gold (including gold deposits and, if appropriate, gold swapped)”

It used to be simply, “gold”.

This change was made in recognition of the Treasury’s participation in the so-called gold carry trade.

This carry trade first appeared in the early 1990s.  By this activity, central banks lent gold to bullion banks (e. g., Barclay’s, Republic, JPMorgan et cetera) at one quarter to one percent interest.  These banks then sold the bullion and invested the proceeds in US Treasury securities that paid three to five percent interest.

By the summer of 2001, various private newsletters (one, two, three) reported that 30% to 80% of central bank gold had gone into the carry trade, on a world-wide basis, in a supposed attempt to suppress the gold market.  I suspect the real story is that this carry trade was a stratagem by the criminal elite to “legally” get gold away from central banks (probably using bank loans for the purpose).  Thus, when currencies collapse, these criminal elite will possess gold and pay their paper debts with worthless paper.

All this gold was sold into the market at prices ranging between $260 and $400 per troy ounce.  Gold is now fluctuating around $1,700.  Thus, bullion banks are sitting on enormous losses relative to this carry trade.  And, I don’t see how they could have hedged their position in the futures markets; the amount involved would have overwhelmed such markets and would have driven large numbers of specialists (those who work the pits) into bankruptcy by now.

Of all the central bank financial reports I examined (German, French, Italian, Japanese, Euro and others), each showed a line on their balance sheet that read, “Gold and gold receivables”; and none separated the two categories.

So, I have to guess how much gold, if any, is left at Fort Knox.  If 50% is left, we have to double the earlier price to $14,200 per troy ounce.

We are not finished; there are other factors that must be included in our equation, a) “cash equivalents” driven by insurance on bank deposits; and b) foreign currencies issued by foreign private and central banks in exchange for dollar assets.

Insurance on Bank Deposits

Currently, the government, thru the Federal Deposit Insurance Corporation, guarantees the safety of bank deposits up to $250,000.  Hence, if a bank fails, the government will seize the bank and transfer all its depositors’ accounts, up to $250,000, to another, supposedly sound, bank.  Depositors with accounts larger than $250,000 will lose everything over that amount – no exception.  I call these latter accounts, ‘mega accounts’, for the purpose of this essay.

Mega Accounts

This is a problem for individuals and companies that have ‘cash’ positions over $250,000.  I single-quote cash because, what they call cash is actually a combination of miniscule amounts of cash and very large amounts normally held in checking accounts.

Some of these positions add to tens, even hundreds, of millions of dollars; in some cases, the total is over a billion.  If a company had such a total in a checking account, it would suffer a catastrophic loss if the bank in question failed.

One solution to this problem was/is a type of zero-balance deposit account.  The entire balance of a mega account was used to purchase US Treasury securities, supposedly the most secure investment on the planet.  Thereafter, company checks presented each day for payment would be paid against checks deposited on that day.  If the amount deposited was greater than the amount paid, the difference was used to purchase US Treasury securities at the end of each banking day; thus, leaving a zero, or very low balance, in the company’s checking account.

Conversely, if the account had a net payment for the day, sufficient securities would be sold to pay all incoming checks and to bring the account to zero at the end of the day.

This is why, when we examine balance sheets of large American companies, we find “cash and cash equivalents” listed as an asset item.

Thus, ‘cash’ positions of companies consisted of $10 million, or $100 million, in US Treasury securities and a checking account with a zero balance; and companies’ financial officers no longer had to worry about losing their ‘cash’ if their bank failed.  Their peace of mind was purchased with the belief that Treasury debt would be collectible against future generations of Americans to the end of time – altho, they did not express it in such terms.

Mortgage-Backed Securities

Soon, another problem arose: there weren’t enough Treasury securities to meet demand from companies with mega ‘cash’ positions.  This demand appears to be a major factor regarding the development and growth of Mortgage-Backed Securities (MBS).  One of the Congressional inquiries pertaining to the financial meltdown of 2007 (and counting) frequently referred to the almost insatiable demand for MBS by money centers around the world – but never explained what drove the demand (see Anatomy of a Financial Collapse).  I learned of the connection between MBS and mega ‘cash’ positions from Vermont Trotter, see his essay on the topic, Welcome to the Machine, a very good summary of the history of MBS.

(Vermont Trotter, judging by his recommended solution, is a collectivist.  I like to use such as sources of information when they lament and explain such enormous crimes; they never suspect that what they lament is a consequence of their core belief.)

Banks create these MBS by assembling four to five thousand residential mortgages into one package (one MBS) and dividing that package into ten to twenty tranches (similar, but not identical, to shares); thus, each tranch could have a face value ranging from $20 to $50 million.  These tranches soon became the favored investment for companies wanting to temporarily park their ‘cash’ outside of banks.

This solution led to two major problems: 1) owing to the huge demand by companies with mega ‘cash’ positions, lending standards relative to home mortgages deteriorated to the level of naked fraud; and, 2) owing to the large number of MBS – or to criminal intent, the origination and trading of these MBS was done in wholesale violation of long-established property law regarding documentation of loans.  With regard to the second problem, various commentators estimate that upwards of sixty million mortgages have clouded or destroyed chains of title – and banks cannot, or will not, produce documentation that establishes their authority to collect or foreclose on mortgages – probably for fear of producing evidence of felonious activity.

These two problems were natural consequences of the mandate of Congress, with the Community Reinvestment Act (as amended), to put un-creditworthy (subprime) borrowers in homes.  It was facilitated by the Federal Reserve with unrealistically low interest rates.

By 2006, some $15 trillion in residential mortgages served as collateral for MBS and half of that total was classified as high risk loans; namely, subprime, Alt A, loans that required little or no documentation, and home equity loans.  (See the Congressional Report, Anatomy of a Financial Collapse… pdf page 269)

To make matters even worse, some of these MBS were collateralized with student loans, Small Business Administration guaranteed loans, credit card loans, car lot loans and loans to mortgage servicers (companies that made mortgage payments missed by homeowners). (Federal Reserve press release, 2009 March 19)

It appears that these mortgage servicers were/are shell companies invented by banks to maintain the fiction that loans in default were valid assets.  Banks would lend money to these shell companies who would use the money to make mortgage payments missed by homeowners; as a result, such defaulting loans did not have to be charged against income.  Loans to these mortgage servicers were then sold to the Federal Reserve where they were used as collateral for issued currency.  Welcome to the Queen’s garden.

The important fact regarding MBS, relative to our question, is that they became a kind of default currency for mega accounts.  If their real value is less than face amount, tens of thousands of companies, hedge, pension and mutual funds, and other types of organizations world wide will suffer catastrophic losses; and we must find some collateral to make up for the lost value of these MBS.  What can that collateral be?  For now, I see no other alternative but gold.

MBS serving as “currency and currency equivalents”

I have to guess the amount of MBS where individuals, companies and other entities park their cash.

By a sample analysis of the Fortune list of the largest 500 American companies, I arrived at a ‘cash’ position of $380 billions for the entire list, based on balance sheets dated 2010 thru 2011.  And, I would be surprised if more than a few thousands of this total shows on any bank balance sheet.

Then we have to add numbers for wealthy individuals, other companies, hedge, mutual, pension funds et cetera et cetera.  I think a trillion would be a conservative amount, two trillions might be excessive.  Let’s choose $1.5 trillion.

Foreign investors bought these MBS also; foreign governments, also, offer to insure bank deposits.  Another $1.5 trillion for the world outside America.

Foreign currency issued against dollar assets

The FR reports, for 2011 Oct 5, that it held $3.425 trillions of US Treasury securities and MBS “in custody for foreign official and international accounts”.  This represents dollar assets accumulated by Foreign central (and, presumably, private) banks, and which they purchased with newly issued currency and currency equivalents within their own countries.

Ordinarily, such international transactions would be settled by shipping gold in exchange for paper (or equivalent).

However, in our case, the gold remains at Fort Knox; and dollars accumulated by foreign central banks are converted to US Treasury securities.  In other words, these dollar assets are collateralized just as all others are: by Treasury and Agency debt, MBS, and a gold certificate.

We have already established that Treasury and Agency debts are constitutionally and practically uncollectible – and ethically reprehensible; and that Congress, thru its agent the FR, has no authority to purchase MBS.

That leaves the gold certificate as collateral for,

Currency in circulation (FR notes) 1,001
FR currency equivalents
Deposits 98
Reserves 753
MBS  as currency equivalents
domestic 1,500
Foreign 1,500
Foreign currency and equivalentsIssued against dollar assets 3,425
Total 8,277

Table 5.  Currency and currency equivalents (foreign and domestic) issued against Fort Knox gold, 2011 Oct 5 (billions).

To redeem this total with 261 million troy ounces of Fort Knox gold would require a dollar price of thirty one thousand (31,500, rounded); if half of this gold is missing, 63,000.

A Reality Check

Let’s be realistic: we won’t see such prices in a day, maybe not in a year.   The delusion that a house of cards is a stable and secure collateral for currency will die hard.  The vast majority of men will die or kill rather than give up their wishful thinking.  But die it will.  The false flag operation of 2001 September 11 and the bailout of 2008 were acts of unprecedented desperation – and indicate the criminal elite sense the end is near.  As more people sense the same, the rate of economic destruction will accelerate to an avalanche – until it will no longer be possible to measure the value of anything with dollars, or any other paper currency.

The constitutional considerations explained above were merely academic in nature.  I would be astounded if any judge in this country would give a constitutional decision regarding those considerations.  I don’t think there is a judge that stupid; he, or she, knows, and a lot of other people know, that, if he gave such a decision, it would not be a wise idea to fly on the same airplane with that judge; it would plow into some private or public office building – especially one where a team of accountants is trying to trace how trillions of dollars went missing from the Defense Department… or the Social Security Administration… or the Department of Housing and Urban Development.

We must deal with unprecedented crimes, and with perpetrators who are capable of unprecedented desperation.

All American judges understand their marching orders: strictly adhere to constitutional principles where socialists, crime bosses, felons or crooked politicians are involved; throw such principles out the window when dissidents are involved.  If you don’t believe this, let me tell you what happened to my customers and me.  On second thought, perhaps I shouldn’t; you’ll turn white, and go without peaceful sleep for several weeks.

With regard to the gold prices I have suggested above, no one should expect to see them any time soon; at least not within two or three years.  Such prices, however, are inevitable.  Once people successfully complete their search for dependable counterparties for their cash positions, it will not be possible to measure gold with dollars.

The first counterparties to be questioned were banks.  When governments guaranteed bank deposits at amounts far below mega accounts, it guaranteed banks could not be dependable for amounts over the insured amount.

People and companies chose US Treasury debt as counterparties for their mega accounts.  But here, they only examined the immediate counterparty, and gave no thought regarding ultimate counterparties, unborn generations of Americans.

When the supply of Treasury debt could not meet demand for mega-accounts’ parking lots, attention turned to mortgage-backed securities.  Counterparties here, paper secured by thousands of homes for each security, looked very reasonable – until somebody scratched the surface and found lending standards and document transfers significantly at variance from principles and law hundreds, even thousands, of years old.

In the meantime, the world seems to be searching for the medium with the ultimate counterparty: gold.  Here, ‘counterparty’ should actually be plural; for, counterparties for gold are every person on the planet who provides labor, services or products to the market – there is a very active market for gold all over the world: time, you see, has shown man that gold is the superior medium by which to preserve his labor.

The solution to this problem will not come from Congressmen or professors, judges or military; they all look forward to collecting up to $250,000 a year in retirement checks from retirement systems largely or entirely funded by taxpayers.  And, they will do nothing to threaten their collection of booty.  Look at Ron Paul: one Congressman in two hundred and twenty years who rejected such booty.  We must endure infinity to find another two or three.

The solution will come from the private sector; individual by individual, company by company.

As to how a solution should be done, we must learn lessons of the American Founding Era.  I had to search dozens of old and lost law and history books to discover these lessons.  The result was my book, The Lost Right, edition 3.5.  This book deals with the general principles of redress, from start to finish; my article pertaining to the mortgage crisis deals with a particular and very timely application of such principles.

[1] Gibbon, Edward, Decline and Fall of the Roman Empire, abridged by D. Lowe, ed., 141.

Timely, and related, pages,

Turn Back the Clock.  I’m 69 (in two months) but I have the health, vitality and body of a near-professional athlete, aged 25 to 35.  I routinely have former pro and college baseball players tell me I would “do well” (a modest remark) if I played “men’s senior league”, a level of play equal to a major college.  In other words, I’m living proof that people do not have to grow old; they can retain or recover the health and vitality of youth; they don’t have to suffer from arthritis, diabetes, kidney failure or any of hundreds of other ailments.  Look what you’ll gain: more strength and a longer life to enjoy the adventures we all know are coming.  You might even want to take part in them.

Is the Mortgage Crisis the Mother of Opportunity?  The mortgage crisis revealed that those banks too-big-to-fail produced 50 million mortgages with seriously clouded titles.  It produced a situation where no one could provide lawful authority to collect or foreclose on such mortgages.  In other words, property law 4,000 years old had been violated on a national scale.  So far, solutions require that bank shareholders, bank depositors, and taxpayers suffer losses -while those who engineered the crisis waltz away each with millions in plunder.  What can be done about it – without creating a new class of victims?  Please see the full article.

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