Does the Federal Reserve actually have a Gold reserve?

Question

We all know the Fed is a privately owned bank that sells the US it's own money with interest when congress could actually print it's own money free of interest. So why would we pay a big bank for money we can make on our own with legitimate back-up?

Answer 1

Believe it or not, Yes, the Fed does have a gold reserve.

Check out the Federal Reserve balance sheet and you'll see they have about $11B in gold stock. (Ref: http://www.federalreserve.gov/releases/h41/Current/ ).

As a side note, the Federal Reserve bank of New York reportedly has the largest gold repository in the world, even more than Fort Knox. It holds approximately 5000 tons of gold. However, they are just caretakers of this gold for other countries(Ref:
http://en.wikipedia.org/wiki/Federal_Reserve_Bank_of_New_York )

- The statement that the Fed is privately owned is not wholly correct.The Federal Reserve System is organized with a government agency at the top (the Board of Governors), and branches beneath them that resemble private corporations. (http://www.federalreserveeducation.org/fed101/structure/ )

The Board of Governors are all appointed for 14-year terms by the president and confirmed by congress. It operates per it's charter and laws set by congress. it is overseen by congress. There is no structure or mechanism for private ownership at this level. Board members are forbidden by law to have any economic interest in a private bank.

The 12 branches, however, are organized similar to private corporations.

- Also, at the end of the year, the Federal Reserve gives all profit (after expenses) to the Treasury. All that interest they get from T-Bills? Most of it is returned.

Answer 2

Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.

Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.

Answer 3

Today, like the currency of most nations, the dollar is fiat money, unbacked by any physical asset—i.e., a holder of a federal reserve note has no right to demand an asset such as gold or silver from the government in exchange for a note. Instead, the currency is backed by future claims to wealth of American taxpayers and other income sources of the Treasury. [1] Consequently, proponents of the intrinsic theory of value believe that the dollar has little intrinsic value (i.e., none except for the value of the paper) and is only valuable as a medium of exchange.

In 1963 the words "WILL PAY TO THE BEARER ON DEMAND" were removed from all newly issued Federal Reserve notes. Then, in 1968, redemption of pre-1963 Federal Reserve notes for gold or silver officially ended. The Coinage Act of 1965 removed all silver from quarters and dimes, which were 90% silver prior to the act. However, there was a provision in the act allowing some coins to contain a 40% silver consistency. Later, even this provision was removed, and all coins minted for general circulation are now 100% clad.

All circulating notes, issued from 1861 to present, will be honored by the government at face value as legal tender. But this means only that the government will give the holder of the notes new federal reserve notes in exchange for the note (or will accept the old notes as payments for debts owed to the federal government). The government is not obligated to redeem the notes for gold or silver, even if the note itself states that it is so redeemable. Some bills may have a premium to collectors.[citation needed]

The only exception to this rule is the $10,000 gold certificate of Series 1900, a number of which were inadvertently released to the public because of a fire in 1935. A box of them was literally thrown out of a window. This set is not considered to be "in circulation" and in fact is stolen property. However, the government does not seem to care very much about it, as the banknotes are all canceled and thus off the books. Their value to collectors is, roughly speaking, around one thousand dollars.[citation needed]

According to the Bureau of Engraving and Printing, as of July 31, 2000, there was $539,890,223,079 in total currency in worldwide circulation, of which $364,724,397,100 was in the $100 denomination.

In September 2004, it was estimated that if all the gold held by the U.S. government (261.7 million ounces = 8 140 Mg) were again required to back the circulating U.S. currency ($733,170,953,704), gold would need to be valued at $2,800/ounce (90 $/g).

Answer 4

While it is true that the dollar is not backed by gold, the US does hold a gold reserve. As of 12-31-2006, the US has about $164 billion in gold reserves.

Answer 5

No, we are no longer on the gold standard. Richard Nixon took us off of it. So the money is ONLY backed by the FAITH in the govt. That way they can print up as many sheets of green paper that they care to. Under the gold standard, they could only print what they could back.