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Fed Halts Congressman’s Gold Manipulation Investigation

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In a free democratic society, elected officials perform their duties as representatives of their constituents, all comprised of free individuals. We know that at times, perhaps more often than not, this is an aspirational myth more so than a reality.

We suspect, with a firm conviction that borders on absolute certainty, that lots of things go on behind the curtain; things we as Americans have a right to know, things that government won’t allow us to see under the premise of national security.

The same can be said for our economy. One great thing about living in a free capitalist system is that the natural forces of supply and demand, market competition, and unfettered exchange regulate the markets like an “invisible hand.” The only thing, however, is that such an ideal is far from the truth.

We live in an interventionist system, and some of the most potentially destructive interventions take place “off the books.”

Last month, in a letter dated July 27th, Representative Alex Mooney, a member of the US House Financial Services Committee, requested more information and transparency from Fed Chief Jerome Powell and US Treasury Secretary Steven Mnuchin regarding “a few questions were either not addressed at all or not fully addressed.”

What was at stake was the “truth” and transparency regarding the Fed’s and US Treasury’s policy toward gold.

What is under suspicion is that US policy may be geared toward “driving gold out of the world financial system in favor of the Federal Reserve Note or Special Drawing Rights issued by the International Monetary Fund.”

Rep. Mooney provided evidence that the Exchange Stabilization Fund had been intervening in the gold market, noting “the recent correlation of the gold price with the price of the Chinese yuan and the valuation of the IMF’s Special Drawing Rights.” 

As you might know, the Exchange Stabilization Fund is an emergency fund managed by the US Treasury normally used for foreign exchange intervention; its main purpose, to stabilize the US Dollar by influencing currency exchange rates without affecting the money supply. Its operations all take place “off-book.”

Artificially suppressing the price of gold…again.

Mooney noted the correlation between the value of gold and the value of Chinese Yuan as if to insinuate that the US and Chinese governments may have been colluding to suppress the Yuan or to strengthen the Dollar, which in turn is suppressing the “true” price of gold.

Note that Mooney had also written a letter to Fed Governor Kevin Warsh in 2009 regarding similar gold intervention; that too went unanswered.

Both the Fed and Treasury’s “obfuscation” of the facts may be considered by most Americans to be unacceptable, as all citizens, particularly those whose gold ownership is predicated on the natural mechanisms of supply and demand, are entitled to government transparency and accountability; particularly when interventions suppress gold’s “true” value.

But that’s not the case here, as Moonwall’s “stonewalling” only proves that government transparency stands more as an idealized narrative rather than a function. It’s worth noting that the dollar’s purchasing power has declined by 97% since Congress passed the Federal Reserve Act in 1913. The rate of the dollar’s decline accelerated in the early 1970’s when gold had been completely severed.

And although gold’s purchasing power had risen far above the dollar’s decline, it’s disappointing to think that the US government has been suppressing gold to support the declining dollar; all to the detriment of the smarter citizens who have been holding gold as the only true means of anti-inflation and capital preservation.