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Gold encumbrances question elicits only hearsay at Paul committee hearing
5:30p ET Thursday, June 23, 2011
Dear Friend of GATA and Gold (and Silver):
The inspector general of the U.S. Treasury Department today testified to a House subcommittee hearing on the U.S. gold reserve that he has been "told" that "not one troy ounce is encumbered," but under questioning he could not say where the gold pledged by the United States to the International Monetary Fund resides or how it has been accounted for, if at all.
The hearing was held in Washington by the House Subcommittee on Domestic Monetary Policy and Technology on legislation proposed by the committee's chairman, U.S. Rep. Ron Paul, R-Texas, to audit the U.S. gold reserve. (See http://www.opencongress.org/bill/112-h1495/text.) Paul opened the hearing with an excellent statement about the secrecy that long has enveloped the U.S. gold reserve, the speculation that U.S. gold has been swapped with foreign central banks or sold, and the inability to arrange a congressional inspection of the gold reserve at Fort Knox, Kentucky. Paul particularly distinguished between ownership of gold reserves and mere custody of them. He complained that the Treasury Department had not released certain information about the gold reserve until his legislation to audit it was filed.
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Prophecy (TSXV: PCY) Secures Russian Far East Seaport Allocation
and Updates Ulaan Ovoo Mine Production
Company Press Release, June 14, 2011
VANCOUVER, British Columbia -- Prophecy Coal Corp. TSX-V: PCY)(OTCQX: PRPCF)(Frankfurt: 1P2) has arranged with the Port of Sovgavan in the State of Khabarovsk, Russia, so the company will have initial access to port allocation of 25,000 tonnes of coal per month starting this month, potentially expandable to 50,000 tonnes per month, representing 300,000 to 600,000 tonnes annually. Prophecy also will be assigned a coal storage area at the port.
This arrangement provides Prophecy's Ulaan Ovoo thermal coal mine with immediate access to the Asian seaborne export coal markets. Sovgavan is strategically located on the seaboard of the Russian Far East. The port is privately owned and can accommodate seagoing vessels of up to 160 meters in length, with the depth of loading site of 9.5 meters. The port has loading capacity of 6,000 tonnes per day and direct connections to Trans-Siberian railroads and uncongested Russian state highways.
Securing the port opens Prophecy to a significant number of coal buyers, and the company is placing top priority to conclude rail transport within Russia and coal offtake contracts.
Prophecy's Ulaan Ovoo mine commenced production in 2011. So far this year the mine has produced 200,000 tonnes of coal, which are being stockpiled. The average quality is 4,200 kcal/kg NAR with 5 percent ash and 0.5 percent sulphur. Those attributes compare favorably to the coal being purchased by local Russian and Mongolian power plants.
For the complete company statement, please visit:
http://www.prophecycoal.com/news_2011_jun14_Prophecy_Secures_Russian_Sea...
The Treasury Department's inspector general, Eric M. Thorson, replied that Treasury audits the gold regularly, and he denounced those who raise doubts about the reserve.
Rep. Blaine Luetkemeyer, R-Missouri, noted that the audit documentation submitted to the committee by the Treasury mentioned nothing about encumbrances of the gold reserve, and Thorson replied, "I'm not aware of anything." But Thorson backed off when Luetkemeyer followed up by asking about the U.S. gold pledged to the IMF and when Paul asked if the IMF's supposed gold is being counted twice, once on the IMF's own books and again on the books of the United States and other IMF member nations.
Three years ago GATA pressed the IMF for straight answers to this very question, particularly as to the possession and location of the IMF's supposed gold, eliciting only evasion and then abrupt termination of the questioning:
Thorson replied weakly to Paul, "We do not audit the IMF."
Luetkemeyer wouldn't let go. Is the U.S. gold contribution to the IMF, he asked Thorson, counted in the U.S. gold reserve? If it is, Luetkemeyer added, audits of the U.S. gold reserve should record the gold as encumbered.
Thorson replied, "We've been assured that none of it is encumbered." But he added that he would have to research the question before providing a definitive answer.
Of course testimony that one has been "told" and "assured" that nothing is happening is only hearsay, and authoritative answers to questions about the U.S. gold reserve and the U.S. government's officially designated agency for surreptitious market intervention, the Exchange Stabilization Fund, probably can be obtained only from the treasury secretary or the president themselves, who under the law have exclusive control of the ESF and answer to no one for it:
http://www.gata.org/node/10009
Much of today's hearing dealt tediously with procedures for assaying and tallying gold bars, which would seem relevant to the question of surreptitious market manipulation only if gold bars in the U.S. reserve have been replaced with tungsten or other base-metal bars coated with gold -- not that a government that establishes an agency precisely to rig markets surreptitously should be given a pass on even the wildest questions.
While the Treasury's having given the Federal Reserve certificates for the gold that was taken from the Fed to the Treasury in 1933 has always seemed to have little meaning, both Thorson and the hearing's other witness, Gary T. Engel, director of financial management and assurance for the U.S. Government Accountability Office, testified that the Fed could never use the certificates to reclaim the gold. They said that any presentation by the Fed of the gold certificates to the Treasury would result only in the Treasury's paying the Fed in dollars at the statutory rate of $42.22 per ounce.
Rep. Carolyn B. Maloney, D-New York, whose work on the committee consists largely of making excuses for the Obama administration and the status quo, made a pompous idiot of herself, arriving in the middle of the hearing and asking the witnesses if they didn't think that Paul's gold reserve audit legislation would duplicate the audits already being done and cost a lot of money. The witnesses had said so in their opening statements and in responses to earlier questions from committee members who arrived on time.
It's not clear where, if anywhere, Paul will take the issue of potential encumbrances on the U.S. gold reserve. But since the most relevant testimony on the issue today was only hearsay, not authoritative, all questions remain open.
The hearing lasted a bit more than an hour and the subcommittee has posted video of it here:
http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=247243
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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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:
http://www.thegoldstandardnow.org/gata
