‘Really? There’s No Gold in Fort Knox?’

Prices for gold and silver tend to be down on the year – gold off 20% as well as silver down 28%. One sage banker explains – in the Wall Street Journal, no less – that the economy is enhancing. Thus people are less inclined to ‘keep their money idle‘ by buying gold, he says. Better to ‘put your money to good use,‘ he says, by channeling it into other investments. Really?

Evidently, this banker-guy missed the category in which the instructor taught which ‘gold is money’. Because there’utes nothing ‘idle’ about holding precious metal. Ask the rest of the world, especially the East. They’re buying gold.

Indeed, my tally of national central banks that have been buying gold, recently, includes Russia, Turkey, India, Brazil, Canada, Mexico, Saudi Arabia and Vietnam. What do they know?

Of course, China is also building a gold stash, but not bragging about it. They’lso are building nuclear weapons, too, and not bragging about it. To paraphrase which oft-noted Las Vegas line, what happens in China stays in China.

Back at Harvard, I learned that gold is money. On the other hand, I learned that in the Geology Division, from the mining geology guy, Prof. Ulrich Petersen, and never in the Economics Department.

Still, each and every now and then – back in the 1970s – one could overhear a Harvard economics professor state something like ‘a dollar is as good as gold’. Yes, it was a reminiscence of the days of the Bretton Woods Agreement, which established the dollar as a currency ‘backed’ by precious metal.

Old monetary habits die hard. Hey, maybe old monetary routines were the right thing to do, within their day. They deserve to die hard.

At any rate, I’ve never thought that US forex was real ‘money’. Those green pieces of zombie paper are merely the medium of exchange, and ‘legal tender for all debts, public and private‘. Where did I get that offbeat, countercultural idea? Well, start with the text that’s printed on every Fed note, that’s where. This says exactly that.

There’s a difference between currency and money. Contemporary America has been able to get aside with blurring the currency-money distinction for a few generations. But with federal investing out of control, each day brings us nearer to our own, contemporary version of economic apocalypse.

Really, that needs a zombie apocalypse, when you’ve had a federal government that spends astronomical amounts of ‘money’ that, apparently, comes from nowhere? Well, okay, it originates from the Federal Reserve. But when you conclude the essence of things, Fed-money is equivalent to a ‘Big Bang money machine’ – from nothing, arrives something.

The Gold in Fort Knox?

This reminds me of a story – a true story, no less. I was within the Pentagon, some years ago, in the era of the Bush II-administration. It was E-Ring stuff. I was in the very spacious office of a very senior guy in the US Air Force. We were discussing energy issues, particularly Air Pressure programs to spur an american ‘synthetic fuel’ industry.

Our discussion touched issues of government funding of private commercial development, and questions about who owns the intellectual property (IP). New energy-development technology has national security implications. Should the IP go into the public domain? Or do we keep parts of it classified?

One of the military staffers at the table spoke up, as well as said, with a downbeat voice, ‘I don’capital t know if we can keep this type of tech classified. We’re terrible from keeping these things under wraps for long.‘

As everyone around the desk nodded in agreement, I decided to check their hearing. I stated, ‘That’s true. Really, the only two national secrets we’ve ever been able to keep are about individuals space aliens, and the captured soaring saucer in Area 51, and that there’s no gold in Fort Knox.‘

The room went peaceful. You could hear a pin drop. The senior Atmosphere Force guy leaned over the desk, and looked right at me. He said, ‘Really? There’s absolutely no gold in Fort Knox?‘

That’s all for now. Thanks for reading.

Byron King
Contributing Editor, Money Morning