Tubman on the Twenty might not be a priority, but what does he want with Ft. Knox?
By Hubert Walker for CoinWeek ….
Former Goldman Sachs banker and current Treasury Secretary Steven Mnuchin recently took a delegation of Kentucky politicians on a visit to the gold vaults held in the United States Bullion Depository at Fort Knox. Accompanied by Senate Majority Leader Mitch McConnell (R-KY), U.S. Representative Brett Guthrie (R-KY2) and Kentucky Governor Matt Bevin (R), Mnuchin made the surprise inspection on Monday, August 21.
Claiming to be checking on “national assets”, events were apparently lighthearted. At a Chamber of Commerce luncheon in Louisville right before the visit, Mnuchin cracked wise, saying that he “[assumed] the gold was still there” and joking about what a movie it would make “if [they] walked in and there was no gold”.
This was a reference to the multi-faceted Mnuchin’s previous gig as a movie producer, who brought us such modern classics as Mad Max: Fury Road (2015), Lego Batman (2017) and Wonder Woman (2017) before he joined the Trump campaign as its national finance chairman in 2016.
The Secretary later tweeted his thanks to his hosts and casually commented that he was “glad [the] gold is safe”.
The gold is safe, ladies and gentlemen
And like the tweet also said, Mnuchin was the first Treasury Secretary to visit Ft. Knox since John Wesley Snyder in 1948. Incidentally, Snyder’s term in office was marred by charges of cronyism (he was close friends with President Truman) and the mismanagement of the U.S. economy’s transition from a wartime to a peacetime footing.
But what about the other members of the Wildcat delegation? It seems that Representative Bevin was a coin collector as a kid, and consequently the highlight of his visit was when he got to hold a 1933 $20 double eagle gold coin. He also expressed confidence in the security of the facility.
Senator McConnell, however, refused to comment, citing security concerns.
The U.S. Bullion Depository at Ft. Knox
Obviously security is a major concern when you’re housing nearly half of the country’s official gold reserves (the rest is kept at the West Point Mint, another Treasury facility associated with the military). As of Tuesday, September 19, the 147.3 million troy ounces estimated to be in the depository at Fort Knox would be worth almost 194 billion dollars.
The gold vault itself lies beneath the imposing main structure, in a granite room accessible only through a 21-inch thick, 20-ton blast-proof door (though apparently there is an emergency exit of similar build in case someone gets stuck down there). And according to reports of the Mnuchin visit, a plastic “seal” of some sort had to be cut open in order to allow them inside. Construction on the entire structure began in 1936, and the federal government delivered the first gold bars for storage in 1937. And while the land upon which the building and the vault are located is within the jurisdiction of the Fort Knox army base, the Department of the Treasury has maintained and operated the facility since 1937.
The last civilian delegation to inspect the gold vault was lead by United States Mint Director Mary Brooks on September 23, 1974 and included several members of the press, numismatic and otherwise. It was initiated in response to right-wing conspiracy theories expounded by Washington-area attorney Peter Beter. Such theories have not abated in the decades since, and any visit to the Bullion Depository by a government official tends to inspire them again.
But the extreme secrecy of the site is bound to provide fodder for speculation. You probably noticed earlier that the total amount of gold bullion stored at the facility was estimated to be 147.3 million troy ounces. There has been no official audit of the gold in Fort Knox since 1953.
Misuse of Government Property?
Adding to the curious nature of Mnuchin’s visit, it was quickly revealed that the whole trip may have been an excuse for the Secretary and his newlywed bride, actress Louise Linton, to watch 2017’s total eclipse from the roof of Fort Knox. Mnuchin even posted pictures to his Facebook account showing himself and Linton observing the eclipse from just that location.
If his motivations were less than official, then he may have broken several travel, ethics and appropriations laws or policies. And after complaints from such pressure groups as Citizens for Responsibility and Ethics in Washington (CREW), the Treasury Department’s Office of the Inspector General is now investigating Mnuchin’s flight to the Bullion Depository on a government airplane. George W. Bush-appointee Eric M. Thorson, the current Inspector General, is handling the investigation.
Individuals on the plane included Senator McConnell, Secretary Mnuchin, and his wife. Ms. Linton attracted her own controversy on social media when she got into an Instagram fight with people who had criticized her posts regarding the trip, which appeared to flaunt her extreme wealth and conspicuous consumption in a politically-insensitive manner. She has since taken these posts down.
For his part, Mnuchin claims to have sought approval from the White House for the expenditure, and that he personally paid for his wife’s expenses. Unfortunately, he had previously requested the use of a government jet that would’ve cost $25,000 an hour for his personal use on his honeymoon. Mnuchin claimed it was for security reasons, since he is a member of the National Security Council and responsible for the Office of Terrorism and Financial Intelligence.
The Treasury Department turned him down.
Secretary Mnuchin has even managed to stir up numismatic controversy.
Firstly, his signature was deemed too poor to be legible on Federal Reserve notes, forcing him to revise it.
Secondly, and more importantly, were his comments regarding the addition of abolitionist and African-American woman Harriet Tubman to the $20 bill. Former Treasury Secretary Jacob “Jack” Lew had finally, after some revision of the plan, decided to add Tubman to the new $20 note to be released in 2020. When asked about these plans in an August 31 interview on cable news channel CNBC, Mnuchin stated that it was not “something [he] was focused on at the moment.”
He went on to say that “People have been on the bills for a long period of time. And this is something we will consider. Right now, we’ve got a lot of important issues to focus on.” Mnuchin said that he was more concerned about those changes to the nation’s currency necessary to combat counterfeiting.
Unaddressed are other issues, such as whether the back of the $10 note will still be revised (founding father and pop-cultural celebrity Alexander Hamilton will stay on the front) to feature the 1913 march for suffrage that ended on the steps of the Treasury building and featured such luminaries of the feminist movement as Lucretia Mott, Sojourner Truth, Susan B. Anthony, Elizabeth Cady Stanton and Alice Paul. Likewise in limbo is the back of the $5 bill, which was to feature great events of the modern Civil Rights Movement that took place at the Lincoln Memorial, such as Martin Luther King, Jr.’s 1963 “I Have a Dream” speech or opera singer Marian Anderson’s 1939 concert.
Conspiracy Theory Redux
But in the end, perhaps his and his wife’s faux pas and all of the controversy he has recently engendered was just a smokescreen, and Treasury Secretary Steven Mnuchin will go down in history as an economic hero, saving the Republic from a debt crisis the likes of which the world has never seen.
If economist and New York Times bestselling author Jim Rickards is correct, this might be a plausible scenario.
According to Rickards’ telling , the story goes back to 1933 and President Roosevelt’s Executive Order 6102, which required everyone from private gold owners to commercial banks to relinquish ownership of their gold to the Federal Reserve Banking System. Once this had been achieved, the Gold Reserve Act of 1934 ordered the surrender of all gold held by the Federal Reserve to be handed over to the Treasury Department. However, the Fifth Amendment to the Constitution of the United States prohibits the federal government from seizing private property without just compensation, and since the Federal Reserve System is, in fact, privately owned, the treasury could not legally take ownership of the gold so directly.
So, according to Rickards, the Treasury Department issued a gold certificate for the 1934 value of the gold to the Federal Reserve in exchange for possession of the gold that had been surrendered to it under FDR’s executive order. The gold was then delivered to Fort Knox, where all available evidence says it has been ever since.
That gold certificate is still on the books, according to Rickards, and the Treasury Department still values the gold in its vault at $42 dollars per ounce–its price from 1973 for some reason, two years after President Nixon took the United States off of the gold standard.
As of the time of writing, the value of the 147.3 million ounces of gold in Fort Knox are worth approximately $194 billion. This is based on today’s (Sept. 19) spot price of $1,314.80 per ounce – a far cry from $42. If the government were to somehow cash in on this spread, then such things as the effects of a $20 trillion federal debt or political games of chicken with the encroaching debt ceiling could be staved off, albeit temporarily. Roosevelt pulled a similar trick when he confiscated private gold in the first place (consult Rickard’s articles here and here for a more thorough explanation of the mechanics).
It is perhaps for this reason, Rickards suggests, that Mnuchin really visited Fort Knox.
Whether that’s true or not, whether Mnuchin is a hero or the consummate corporate insider, one thing is certain: in a few years, we will be able to buy a Steven Mnuchin medal from the U.S. Mint’s online catalog to complement our Henry Paulson and John Snow (really!) bronze three-inchers …
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