GATA Says Much of U.S. Gold Reserve is Encumbered
8/15/2001 9:25:00 AM
DALLAS, Aug 15, 2001 (BUSINESS WIRE) -- "Hard as it
is to fathom, it appears that much of America's gold is essentially gone or in severe
jeopardy," says Gold Anti-Trust Action Committee Chairman Bill Murphy.
Murphy points to an astonishing discovery by GATA
consultant James Turk in his new essay, The Mystery of the Disappearing SDR Certificates,
published at the GATA Internet site, www.GATA.org. An
SDR, which is acronym for Special Drawing Rights a.k.a. 'paper gold,' is a monetary
instrument issued by the International Monetary Fund, representing special drawing rights
for one 35th of an ounce of gold.
Turk has discovered that the SDR certificates on the
books of the U.S. Treasury Department's Exchange Stabilization Fund have dwindled from
9,200 millions to 2,200 millions.
Exchange Stabilization Fund
(Assets) (Liabilities
(in millions)
SDR
SDR
Holdings Certificates
Dec. 1998 10,603
9,200
March 1999
9,682
8,200
June 1999
9,719
8,200
Sept. 1999
10,284
7,200
Dec. 1999
10,336
6,200
March 2000
10,335
6,200
June 2000
10,444
4,200
Sept. 2000
10,316
3,200
Dec. 2000
10,539
2,200
Source: US
Treasury Bulletin
Turk
explains why this is important:
"The U.S. Gold Reserve does double duty. It sits in
the vaults at Fort Knox and the other depositories, but the U.S. Treasury has issued Gold
Certificates against it. The Federal Reserve owns these Gold Certificates, giving the Fed
a claim to the 261.6 million ounces in the U.S. Gold Reserve. Simple enough, and the same
transaction is used for 'paper gold' -- the SDR's -- with just one small difference. The
U.S. Treasury has transferred its SDR's to the Exchange Stabilization Fund (ESF), so the
ESF and not the U.S. Treasury issued the SDR Certificates now owned by the Federal
Reserve."
Turk
continues:
"The ESF by law cannot issue more SDR certificates
than it has SDR's. The largest amount of SDR certificates outstanding was 10,168 million
in December 1995, a significant date, because I have contended all along that government
actions that have depressed the gold price began in 1996, which is the same year that the
SDR certificates began to decline. From this peak to the present, the SDR certificates
have been reduced by 7,968 million. Given that there are 35 SDR's per ounce of gold, this
reduction in the SDR certificate account equates to 227.7 million ounces, or 87 percent of
the U.S. Gold Reserve...."
"Everything is fitting into place," Murphy
says. "It appears that the SDR certificates are being used by the ESF to hide its
gold transactions from the American public."
GATA has long claimed that central bank gold loans are
two to three times the commonly accepted 5,000 tonnes cited by the gold industry.
"Eighty-seven percent of the U.S. gold reserves is very close to 7,000 tonnes, which
would increase to 12,000 tonnes the official sector gold out on loan in some way,"
Murphy notes.
"No wonder former Treasury Secretaries Robert Rubin
and Lawrence Summers and current Secretary Paul O'Neill have refused to directly answer
members of Congress regarding their gold market queries," Murphy goes on. "The
ESF reports only to the president of the United States and the treasury secretary, which
means that these men are very aware of the mechanics of manipulating the gold price."
"This is most disturbing," Murphy says,
"because there is a pattern of deception, first by treasury secretaries not answering
pointed questions and then by others who apparently are involved in or knowledgeable about
the U.S. government's intervention in the gold market and who are conveniently forgetting
the facts."
Murphy cites a June 8, 2001, memo to Fed Chairman Alan
Greenspan from Federal Reserve lawyer A. Virgil Mattingly, who denies any knowledge of
gold swaps, even though the transcript of a 1995 meeting of the Federal Open Market
Committee records him as using those words to explain the authority and apparent activity
of the ESF.
Then in an August 7, 2001, letter, John P Mitchell,
deputy director of the U.S. Mint, offers no explanation why 1,700 tonnes of U.S. Gold
Reserves stored at West Point, N.Y., were reclassified in September 2000 from "Gold
Bullion Reserve" to "Custodial Gold." In May this year all 7,700 tonnes of
the U.S. gold reserves in Treasury Department depositories were reclassified as "Deep
Storage Gold."
Mitchell says the U.S. Gold Reserve was "not
reclassified -- it was renamed to better conform to our audited financial
statements."
"But Mitchell offers no explanation why that change
is being made now. Could it be that these changes to conform to accounting principles were
necessary because of the dramatic reduction in SDR Certificates and encumbering of the
U.S. Gold Reserve?" Murphy asked.
"This is most frightening," Murphy says. The
U.S. Government defaulted on its gold obligations in 1933 and 1971. Could it be happening
all over again?
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