Is Auditing the Fed Positive for Gold?

July 25, 2012 should go down in history as the date the Federal Reserve may become fully accountable to the US government. A motion to pass bill H.R. 459 from Rep. Ron Paul as amended was unanimously approved by the House to require a full audit of the boards of governors of the Federal Reserve System and banks. This will be done by the Comptroller General of the US before the end of 2012 and they are required to issue their report within 12 months of enactment. The votes in the House in the bill’s passing this was 326 yea votes to 99 nay votes with 7 non votes. Interestingly enough it was the Republicans that strongly supported this bill with 239 yea and 1 nay vote, while the Democrats voted 88 yea and 98 nay.  

 

There are many hurdles ahead of this bill before it takes effect; it still has to be ratified by the Senate and the President. However, finally getting approved in the House is a step in the right direction. Even if it does pass how much effect will the audit have in reality? Probably not much since the banking institution known as the Federal Reserve operates outside of any law. Even if they are found guilty of any wrong doing in managing the value of the US dollar or being involved in rigging the Libor rate, who will be there to prosecute them? Remember they operate outside the law, so even if they are found guilty, it will be the US citizens and holders of paper/digital US dollars that will somehow pay for it. 

In a world where bank’s losses are socialized, the Federal Reserve (the banker for banks) misconduct has always been socialized on the people. Of course, this socialization of losses by the Fed has been taking place ever since its illegal inception. In 1913, the Federal Reserve stole the power to issue and control money by introducing the Federal Reserve note, something we call the US dollar. Since then, it is estimated that the dollar has lost 95% of its purchasing power by way of inflation (the increase of the money supply), so it really has only 5% left to go. As the value of the US dollar moves towards its intrinsic value of zero, gold and silver as true money has only one way to go and that is up.

Usually first reactions are correct and looking at this news the value of the US dollar reacted negatively, while gold went higher in most major currencies around the world. 

 

Could This be the Catalyst that Gold Needs for a Major Break Out to the Upside?  

In a manipulated market, it’s tough to say, but the fact that there is support for auditing the Fed and making it accountable is definitely a step in the right direction.  With the recent news about major banks manipulating the Libor rate, any investigation into the Fed’s involvement is most welcome and has to be gold-positive.  Recently, we have been writing about how gold is moving towards the financial system with several different proposals for making it a tier 1 asset class and its use as collateral by financial institutions. If these proposals take effect, they are planned for January 2013, which coincides nicely with this audit being completed by the end of 2012. 

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