The Chairman Didn’t Respond

November 5, 2001 – I wrote to Federal Reserve Chairman Alan Greenspan on September 14^th. Here’s what I said:

Dear Mr. Greenspan:

This is to ask for your kind assistance on the following matter.

You are probably not aware that the report of US Reserve Assets published monthly in the Federal Reserve Bulletin has been changed, significantly reducing therein the information provided on the gold stock. Effective with the February 2001 report, instead of reporting the “Gold stock, including Exchange Stabilization Fund”, the report of US Reserve Assets only discloses the “Gold stock”, and no longer includes the gold within the Exchange Stabilization Fund. The effect of this change makes it impossible to measure the month-end gold position of the ESF. Moreover, the gold stock balances that had already been reported in previous months were restated to eliminate the ESF’s gold position.

There is no reason to withhold this information from the American public. Indeed, the ESF’s gold position has been reported for many years, and it is important for the purpose of full, fair and open disclosure that the American public be able to see the month-end gold position of the ESF, just as it now can see the month-end gold position of the US Treasury.

Therefore, this is to ask that you direct the members of your staff who made this change to again prepare these reports as they have in the past, including the gold position of the ESF. Thank you for your assistance. Yours Sincerely,

He didn’t respond. Instead I received a reply from Karen Johnson, Director, Division of International Finance. It’s a short, 4-paragraph letter, but the important part says:

“With the publication of the February, 2000, Bulletin, the stub line for line 1 on Table 3.12: U.S. Reserve Assets was changed from “Gold stock, including Exchange Stabilization Fund” to “Gold Stock.” This change was to reflect the fact that the ESF does not hold any gold. (Gold was removed from the ESF in December, 1974.) In the February Bulletin, the figures reported in line 1 were changed slightly to reflect routine data revisions/corrections. These revisions/corrections in no way reflect a change in the types of assets reported in this line.”

Ms. Johnson’s response contained obvious errors. When taken as a whole and read within the context of my letter to Mr. Greenspan, her letter seemingly attempts to deliberately disinform me. I’m not one to take such a response lightly. In fact, I am compelled to write back to Mr. Greenspan, and for that reason I have done so. Here is my letter dated November 2.

Dear Mr. Greenspan:

This is in reference to the October 11, 2001 letter I received from Karen Johnson, in reference to my September 14 letter to you. Copies of both letters are attached for your quick reference.

Ms. Johnson’s letter does not address the subject of my letter. Namely, I have requested that the Federal Reserve again begin reporting the month-end gold position in Table 3.12 of theFederal Reserve Bulletin to include the ESF. Instead, Ms. Johnson attempts to explain – and does so most unsatisfactorily – why this information is no longer reported. Consequently, I am now writing to you on two matters.

First, I would like to repeat the request of my September 14 letter that the Federal Reserve again report the month-end gold stock of the ESF, including the back-data from February to present. As I said in my September 14 letter, there is no reason to withhold this information from the American public. However, if I am incorrect and you believe that there is reason not to report the ESF’s gold position, then I would very much appreciate your reasons in this regard.

Second, Ms. Johnson’s disingenuous response defies belief. My reasons for saying so include the following:

1.As only the Secretary of the Treasury and the President have the authority to speak for the ESF, as it is under their control, Ms. Johnson is in no position to state, “the ESF does not hold any gold.” She may be stating what she believes to be true, but she does not have the knowledge or authority to be declaring any factualstatementabout ESF gold positions.

2.Ms. Johnson said “the figures reported in line 1 were changed slightly”. While that may have been true for the Bulletin restatements in the few months immediately before you stopped reporting this data, the ESF gold position one year earlier was $41million, which at the so-called official price is a 971,000-ounce position. A position of this size is anything but ‘slight’.

3.Ms. Johnson called these changes “routine data revisions/corrections”. This statement is obviously incorrect. What she calls revisions have been occurring regularly since 1996. It defies belief that such a repetitive pattern could go on for so many years unless the data was correct.

4.Further, what Ms. Johnson calls a data revision does not only occur in the 1990’s. The Federal Reserve Bulletin reports that there was ESF gold activity in 1986 through 1987 because line 1 of Table 3.12 shows that the “Gold stock, including Exchange Stabilization Fund” was different than the Treasury’s holding of gold as reported in the Treasury Bulletin. It is possible that more ESF gold activity occurred in previous years, but I did not have the opportunity to examine earlier Bulletins.

5.In addition to the repetitive occurrences of ESF activity noted in #3 and #4 above, the size of occasional positions indicate that these can hardly be called “routine”. To categorize the 971,000-ounce gold position in December 1999 as “routine” is simply incredible.

6.Ms. Johnson says that: “These revisions/corrections in no way reflect a change in the types of assets reported on this line.” I don’t know what to make of this statement. Of course the type of asset didn’t change, as gold is the only asset reported on that line. But gold owned by the ESF is different from gold owned by the Treasury. Ms. Johnson’s statement seemingly attempts to obfuscate the underlying accounting. Is she deliberately attempting to mislead me?

I could go on, but I think the point is clear. It is obvious that the Federal Reserve has changed its reporting on Table 3.12 for reasons other than “routine data revisions/corrections”. I also think that Ms. Johnson should be reprimanded for apparently attempting to disinform me by her disingenuous response.

As stated in my September 14 letter, this is to request that Table 3.12 of the Federal Reserve Bulletin be prepared as these reports have always been prepared in the past, including the gold stock of the ESF.

I look forward to your response, and your confirmation that the Federal Reserve will again begin including the ESF’s gold stock on Table 3.12 of the Federal Reserve Bulletin, including back-data to February 2001. Thank you. Yours Sincerely,

As children we learn the many reasons not to tell a lie. One of those reasons is because that first little white-lie will lead to other lies, which will lead to still more lies, and on and on until the story you are concocting to support that first, little white-lie will appear completely fabricated to everyone except the most cataleptic observer. Apparently, some government officials never learned that lesson.

The lies that they have been concocting to explain away hard evidence of government activity in the gold market are rapidly becoming incredible and far-fetched to even the most casual observer of the gold market or government intrigue. Then add to that picture of lies the stonewalling by the Treasury Secretary, as evidenced by his unwillingness to respond in writing to all the letters written to him concerning the ESF. This lack of written replies makes it clear why he doesn’t put anything down on paper – it creates a paper trail that could come back to haunt him in some future Senate investigation of government involvement in the gold market. It doesn’t take much to get the sense that there’s as much smoke here as when some burglar’s broke into the Democratic Headquarters in the Watergate Building.

Back then it took two years for the truth surrounding that burglary to emerge and catch up with Mr. Nixon. So far, it has taken longer to get to the truth about the government’s involvement in the gold market, but the truth will eventually prevail. It will be revealed. It’s only a matter of time.

So will Mr. Greenspan respond to my latest letter? We’ll see, but I sincerely doubt it. If he responds, he will have to tell the truth. If he doesn’t tell the truth, he subjects himself to potential punishment when the truth is ultimately revealed about the government’s involvement in the gold market. So what will Mr. Greenspan do?

Probably what he has already done with my first letter – get someone else to respond who doesn’t know what’s really happening. So Ms. Johnson is not to be vilified; rather, she should be pitied. She’s just following orders and is oblivious to the big picture, and the whole truth. She is being used by others to perpetuate the lie. She is a salary-slave, afraid to question anything she sees outside the 10-square feet of her desk-top. That’s why they’re called bureaucrats.