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Questioned by Paul, Fed denies any interest in gold

Section: Daily Dispatches

3:30p PT Friday, June 3, 2011

Dear Friend of GATA and Gold:

True to his word to when he met a GATA delegation in Washington a week ago, U.S. Rep. Ron Paul, R-Texas, chairman of the House Subcommittee on Domestic Monetary Policy, has begun asking the Federal Reserve questions about gold swaps, such as those admitted to GATA by Fed Governor Kevin M. Warsh in 2009:

At a subcommittee hearing Wednesday, Paul asked Fed General Counsel Scott G. Alvarez flat-out whether the Fed had engaged in any gold swaps. Alvarez denied the Fed's involvement in gold swaps but did so in a deceptive way, by pushing responsibility for the U.S. gold reserve to the U.S. Treasury Department.

"The Federal Reserve does not own any gold at all," Alvarez said, adding that all the Fed's gold was transferred to the Treasury Department in 1934.

While Paul noted that the Fed's books list as an asset the certificates issued by the Treasury against the U.S. gold reserve, Alvarez insisted, "We have no interest in the gold owned by the Treasury." Alvarez went on to suggest that the gold certficates are just antique accounting gimmicks. (Maybe the Fed now will offer the certificates for sale to the public as souvenirs.)

Pressed by Paul, Alvarez also said that he, and presumably the Fed generally, have no position on whether the United States should sell its gold reserves.

Of course the Fed's supposed indifference to gold as described by Alvarez contradicts much evidence GATA has collected over the years, including, just for starters:

-- Fed Chairman Alan Greenspan's famous testimony to Congress in 1998 that "central banks stand ready to lease gold in increasing quantities should the price rise." (See

-- Fed Chairman Arthur Burns' assurance to President Ford in 1975 that the Fed had a secret agreement in which Germany's central bank had promised not to buy gold at a price above the official U.S. price of $42.22 per ounce. (See

-- And former Fed Governor Lyle Gramley's comment to Business News Network in Canada in December 2008 that, far from some antique accounting gimmickry, those gold certificates are actually hugely undervalued assets for the Fed and their repricing at market levels would much improve the Fed's balance sheet. (See

In his questioning of Alvarez, Paul recognized that the most direct culprit in gold swaps may be the Treasury Department's Exchange Stabilization Fund. Maybe that's where the congressman will direct more questions.

Video of Wednesday's hearing has been posted at the C-Span Internet site. The exchange about gold begins at 56 minutes into the video here:

Some excellent commentary on the exchange has been posted at in Toronto here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Lewis E. Lehrman on How to Solve the U.S. Debt Problem

Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, advises that to reduce the $1 1/2 trillion U.S. deficit, the Republican Party must initiate an investment program.

Working Americans are not saving, which enables the banks to lead the country into a cycle of debt, leverage, boom, panic, and bust.

Lehrman says: "Eliminating the budget deficit of a trillion and a half dollars cannot be done overnight. The proposal by U.S. Rep. Paul Ryan was very dramatic -- one Republican called it radical -- but it was not happily received. The solution, of course, is to design an American program for prosperity, because you can solve these entitlement problems with a growing economy.

"We need a tremendous program of investment, and investment comes from savings. When you pay savers, middle-income professionals and working people, 0 percent at the bank, you are not going to encourage them
to save. Then we are left with a bank cycle of debt, leverage, boom, panic, and bust."

To read more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit:

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Sunday-Monday, June 5-6, 2011
Vancouver Convention Centre East
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Prophecy Resource (TSXV:PCY) and Pacific Coast Nickel (TSXV:NKL)
Begin 8,000-Meter Drilling Program Wellgreen Project

Company Press Release, June 2, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. TSX-V:PCY, OTC-QX: PRPCF, Frankfurt: 1P2) and Pacific Coast Nickel Corp. (TSX-V: NKL, US-PINK: PNIKF, Frankfurt: P94) have begun an expansion drilling program on their Wellgreen platinum, nickel, and copper project in the Yukon Territory, Canada. The program has been commenced by Prophecy and will be completed by Pacific Coast Nickel upon completion of the arrangement transaction whereby Pacific Coast Nickel will acquire the Lynn Lake and Wellgreen properties from Prophecy.

The program includes 8,000 meters of solid-core diamond drilling from through September with up to three drills to test at least 17 infill and exploration targets. This drilling will augment the existing resource which is being updated to National Instrument 43-101 standards by Wardrop Engineering, a Tetra-tech company. The resource estimate (based on 701 drillings before 2011) is expected to be released in July. The 2011 drilling is aimed to further augment the
resource estimate.

The grades and type of disseminated mineralization at Wellgreen are highly analogous to those observed in Minnesota's Duluth Complex.

For the complete company statement, please visit: