Fort Knox Fake-Out
Fort Knox Fake-Out
Now it can be told: There was never going to be a Trump-Musk audit of the gold at Fort Knox.
Remember that?
In February, Elon Musk picked up on social media chatter about an audit — even suggesting a live video walkthrough. Donald Trump was receptive, broaching the subject publicly on at least four occasions that month.
It had been over 50 years since the feds made even a nod toward transparency when it came to the government’s gold stash at Fort Knox, Kentucky. We commemorated the 50th anniversary last fall…
It was strictly a photo-op. Not an honest-to-goodness audit. The last time that happened, according to the Sound Money Defense League, was in 1953.
So hopes were high when Musk and Trump played up the possibility of a joint visit.
But as long ago as Feb. 27, our Jim Rickards said in this space that the event would be no more than another photo-op, bereft of any substance.
And of course, any chance even that much would take place has gone bye-bye — now that the Trump-Musk partnership has broken up in acrimony.
Today it’s worth exploring two reasons Jim says a real audit was never in the cards…
For starters, “the U.S. government and the Federal Reserve do not want to call attention to gold’s role as a monetary asset,” says Jim.
“The Fed (along with commercial banks) has a monopoly on the money printing press.
“The government has done everything possible to diminish and deny the role of gold as money, beginning with FDR’s confiscation of gold from U.S. citizens in 1933 and continuing through Nixon’s closing of the gold window for foreign trading partners in 1971. At this point, we have three generations of students since 1971 who know almost nothing about gold.
“Gold is not taught in economics classes. Gold is not discussed in economic or Fed policy circles. Younger students don’t even know that the U.S. was ever on a gold standard or that gold once circulated freely as a form of money (usually in ¼-ounce or 8-gram coins). The government has eradicated any memory of gold as money. Why bring it back to life with a high-profile visit to Fort Knox? Better just to ignore gold if you want to maintain your money monopoly.”
Among the powers that be, it’s in no one’s interest to call attention to gold’s role as a form of money.
Who Holds Rights to Gold in Fort Knox?
“There’s another even more insidious reason why Trump and Musk backed off from their Fort Knox visit,” Jim goes on.
To be clear, Jim believes the gold is there. “The deeper question,” he says, “is whether that gold is leased.”
Even if you’re a longtime reader familiar with how this scheme works, it’s worth a revisit: Gold leasing is how the owner of a gold bar can earn a return.
“Gold does not pay dividends or interest like stocks and bonds,” Jim reminds us. “But you can lease it to a third party and make 2% or so annually in lease payments.”
Key point: “The party leasing the gold does not back up a truck and take it away. The gold stays in the original vault. Gold leasing is a purely paper transaction.
“The gold lessor gets the lease payment. The lessee gets what’s called a right of rehypothecation. That means the lessee can lease the same gold to another party. And that party can lease it to a fourth party and so on. With rehypothecation in play, one metric ton of gold could support 100 metric tons of ‘paper gold’ transactions.”
If this sounds problematic, you’re right.
“The danger is obvious. It’s no different than any run on the bank when it comes to bank deposits,” says Jim.
“If a group of paper gold investors suddenly demands physical delivery, the counterparties have to buy gold in the spot market since the leased gold is not in their physical possession. The gold market is liquid, but not liquid enough to support delivery if there were demand for physical by more than a small slice of the paper gold market.
“A full-scale gold panic could emerge quickly. The spot price of gold would go to $25,000 per ounce before an investor could yell, ‘Buy!’
“I take it that someone (possibly Treasury Secretary Scott Bessent) sat down and patiently explained the paper gold reality to Trump and Musk. Once you understand how the market actually works, you quickly back away from putting on a show at Fort Knox.
“For the masterminds of the paper gold market at JPMorgan and Goldman Sachs, the less said about gold the better. They need to keep the game going.”
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It’s about the size of a shoebox. And it’s in our warehouse, waiting for you.
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But hold on: Four members of Congress have introduced a bill requiring an honest-to-goodness audit.
The Gold Reserve Transparency Act requires a full assay, inventory and audit.
And more: As Jp Cortez of the Sound Money Defense League writes, it would “also require full disclosure of all transactions involving America's gold, including any purchases, sales, loans, pledges, leases, swaps and other encumbrances, dating back 50 years. Such activities have not been publicly disclosed.
"Only a thorough audit, not a public-relations stunt such as the 'live walkthrough' as Elon Musk and others proposed, will suffice" for transparency, says Cortez.
Sponsors include Reps. Thomas Massie (R-Kentucky), Warren Davidson (R-Ohio), Troy Nehls (R-Texas) and Addison McDowell (R-North Carolina).
"Americans deserve transparency and accountability from the institutions that underpin our currency," says Massie.
We’re not holding our breath that this bill will sail through Congress — but we’ll keep tabs regardless.
Trade Talks Sabotaged Before They Began?
The stock market begins a new week treading water — perhaps awaiting headlines from a new round of U.S.-China trade talks, underway as we write in London.
We don’t have any special knowledge, but we suspect the talks got off to a rough start.
No sooner did Donald Trump and Xi Jinping get off the phone last Thursday than the Commerce Department suspended export licenses for U.S. firms that want to sell equipment for Chinese nuclear power plants.
Among the U.S. companies affected are Westinghouse (owned these days by a Canadian consortium) and Emerson (EMR).
Gee, just when it seemed the tensions were easing and maybe Beijing might loosen its restrictions on rare earth exports to the United States…
In any event, the major U.S. averages are mixed — the Dow down, the Nasdaq up, the S&P 500 flat.
The S&P ended last week a hair over 6,000 and is holding that level at last check, if barely.
In the precious metals complex, there’s no stopping silver right now — up another 66 cents or 1.8% to $36.56. Gold’s gain is more modest — $17 or a half percent to $3,326. Crude has pushed over $65 a barrel for the first time in over two months.
Bitcoin is starting the week in the green, approaching $108,000.
The big economic number of the week comes Wednesday when the Labor Department issues the official inflation rate.
Milei’s Gift to the Pope
Hmmm…
Argentina’s free-market president Javier Milei paid a call on Pope Leo XIV at the Vatican this weekend.
Milei was seen presenting the pope with a copy of a landmark book by the Nobel prize-winning economist Friedrich Hayek — The Fatal Conceit.
Hayek was a leader among the 20th-century Austrian School economists. The Fatal Conceit was published a few years before his death in 1992.
On one level, the book is a takedown of socialism. On another level, it’s a powerful summation of Hayek’s signature insight from over 70 years of study — that an economy is far too complex for any government official or central banker to issue commands and expect predictable results.
That is, the economy is not a machine — push a button here, pull a lever there. It’s a complex ecosystem with more interdependencies than any bureaucrat or group of bureaucrats could possibly understand. Their interventions inevitably result in second-order effects and unintended consequences.
Or as Milei explained in Spanish — one of five languages in which the pope is fluent — "Trying to control the levers of the economy is a fatal conceit. It's like believing oneself to be God."
We’re not altogether familiar with the American pope’s views on economics, but he doesn’t seem thrilled with his gift in that screengrab!
Mailbag: Misunderstandings, Musk
I confess to misunderstanding a reader who submitted a contribution for the mailbag in Thursday’s edition.
“Dave, your missives are so needed. But just because I said things like Ukraine’s drone attack would bring Putin to the table was not by any means an ‘OK with it.’
“I’m not OK with ANY of it.
“I’m glad you could use my remark to make a point. But when I saw Mitt Romney excoriate Trump during the 2016 campaign, then publicly beg for the secretary of state job immediately after Trump won, I knew the ‘Ukraine plan’ was a huge deal for the deep state. Something they could not let go of.
“I lived through the ‘duck and cover’ age. It was my generation’s global warming fear porn. It’s a mess.”
Meanwhile a couple of readers weighed in over the weekend after our hot take on the rift between Elon Musk and Donald Trump…
“I would argue that the point of the dustup between Musk and Trump is that Tesla stock had been tanking,” says one.
“Musk was the darling of the left and Tesla was all the rage until Musk went MAGA. Admittedly it started when he bought the left's sacred sandbox, Twitter, but actually joining the Trump administration was the last straw. Then the left peacefully torched Tesla dealerships. Musk has to stage a break with Trump to save his bottom line.”
Says another: “I think Elon’s replacement ‘special government employee’ should be chosen by Sen. Rand Paul, a proven generational advocate for government efficiency and service to the American people.
“THANKS for all your tireless dedication to the true spirit and trust of journalism!”
I didn’t have room for this observation in Friday’s edition… but the one instance where Musk seriously misstepped last week was when he went “full Epstein.”
And no, this wasn’t some sort of 3-D chess move coordinated with Trump.
As the theory goes, Musk saying that Trump turns up in the Jeffrey Epstein files is supposed to prod Democrats to demand the immediate release of those files and finally the truth will out.
In the first place, Democrats are holding their tongues.
In the second place, we already know Trump crossed paths with Epstein; it would be no surprise if Trump’s name turns up in the files, but that does not implicate him in any wrongdoing.
Finally, it’s a terrible look for Musk to say something like that after leaving government service. If the suggestion is that Trump committed wrongdoing, he should have spoken up the moment he knew.
No, it’s just one more instance of Musk being Musk. Remember when he called a British cave diver “pedo guy”?
Even Musk realized he went too far with his Trump-Epstein post — judging by the fact he deleted it over the weekend…
Best regards,
Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets
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