JP Koning wins “Beowulf” Award

JP Koning writes an awesome post about the valuation of gold on the fed balance sheet, and he points out something very, very interesting:

“If you read the fine print, the Fed doesn’t actually own gold ounces. Rather, it owns gold certificates that have been issued to it by the Treasury. There is a long history behind this. At the end of 1933, the Fed owned some 195 million ounces comprised entirely of physical gold. Valued at the then official price of $20.67, this stash would have been worth around $4 billion. The Gold Reserve Act, passed on January 30, 1934, required the Fed to transfer all of this gold to the Treasury in return for $4 billion worth of gold certificates.

Here’s the kicker. Unlike most gold certificates, the ones issued by the Treasury to the Fed were not payable in a fixed quantity of physical gold. Rather, a $10,000 gold certificates simply promised to pay to the bearer $10,000 worth of gold.”

Whoa!  That is some awesome detective work. I knew the fed had a mountain of gold in the basement, but I didn’t realize the gold wasn’t really owned by the Fed. And who knew the gold certificates wouldn’t be for the ounces, but rather for a proscribed value of gold?

Nice detective work, JP. For this outstanding investigation, you get our first “Beowulf” award, which is awarded for investigation into highly obscure legal areas which could end up having a profound effect on our monetary system and economy.

(h/t to Alea.  😉   )


Expert in business development, product development, and direct marketing. Developed strategic sales plans, product innovations, and business plans for multiple companies. Conceived the patent pending Spot Equivalent Futures (SEF) mechanism, which allows true replication of spot and swap like products in the futures space.

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4 years 6 months ago

Maybe it’s behavioural economics or something, but I suddenly have this urge to buy precious metals.