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Interview: Alex Pollock on the Fed and Gold | Part II

Published by The Institutional Risk Analyst.

October 10, 2025 | In this special edition of The Institutional Risk Analyst, we feature Part II of the discussion with Alex Pollock, Senior Fellow at the Mises Institute, that we first published on October 3, 2025. You may read Part I of the interview (“Interview: Alex Pollock on the Fed and Gold”). As we noted in Part I, Alex provides thought and policy leadership on financial issues and the study of financial systems. He was president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. We spoke with Alex from his home in Lake Forest, Illinois.

Pollock: Can I give you a great quote on this? An excellent private memorandum on gold viewed in the long term says: “A higher money price of gold is best read as a symptom of a weaker currency. It isn't really the gold going up, it's the dollar or fiat currency in general going down.” That seems to me to be right. And then he says further: “The value of gold lies in being independent from political discretion. Fiat money is a claim on the future discretion of politicians.” Isn't that good?

The IRA: That is a great comment about gold. In the book of Deuteronomy, Moses commands that there be “one measure” of value, something that Fred Feldkamp and I wrote about in Financial Stability: Fraud, Confidence and the Wealth of Nations.” Basically what Moses said was that you have to deal at a mid-market price, no built-in profit from a bid-ask spread. So of course, Jesus of Nazareth points this out in the temple and the money changers, who used a particularly wide bid-ask spread, crucify him. Jesus did not commit any particular religious offenses, he simply outed the money changers in the Temple for violating the laws of Moses and also not paying taxes to Rome on their hidden profits. Forty years later, the Roman legions destroyed the Second Temple down to the last stone to find the hidden gold. In this way, Jesus’ prediction in Matthew 24:2 that the Temple would be utterly destroyed and “not one stone would be left upon another” came true.

Pollock: I didn't know that about Deuteronomy. That's interesting. It's hard to have a dealer market with no spreads, Chris.

The IRA: That depends. In the late 1980s at Bear, Stearns & Co in London, our head trader Paul Murphy made a mid-market price in Canada 9s and the 10-year Treasury every morning to get the customers stirred up. A mid-market price means that if you get lifted by a buyer who has superior knowledge, then you immediately have to adjust. A pure free market. But going back to the earlier point about the Roosevelt era reforms to the Fed and the centralization in Washington, our view is that we need change to make Trump’s reforms meaningful. We’d get rid of the Board of Governors in Washington, make Cleveland a branch of Chicago, convert four branches into new reserve banks in the west, and make all 15 of the Federal Reserve Bank heads presidential appointments with Senate confirmation. We’d take the references to the FOMC out of the statute and let the Fed organize its operations as before 1935.

Pollock: Well, in doing that, you're undoing the fundamental political deal of the Fed which you know very well. The stock of the Federal Reserve is not owned by the government or the Treasury, but by the private member banks. I just read a very good and very knowledgeable book in which the author said, however, that the government owns the Fed. Well, at least the government doesn't own the stock of the Fed. The private banks own 100% of the Fed stock and have since the original Federal Reserve Act.

The IRA: That “ownership” is not enforceable privately because of the very argument you made about Congress and the power to coin money. The federal government retains dominion over the Federal Reserve System no matter who provided the initial capital. To paraphrase Supreme Court Justice Louis Brandeis in the 1925 case Benedict v. Ratner, a transfer of property meant to be security for a debt is "fraudulent in law and void as to creditors" if the transferor retains the right to control, or reserve dominion over, that property. Congress created the Fed and sold stock to the member banks. The fact of private capital didn't prevent Franklin Roosevelt and his New Dealers from stealing the gold that private banks contributed to the original capital of the Fed.

Pollock: That's right. Some people still say that the Fed owns gold. What they mean is the Fed owns something called “gold certificates,” which is simply proof of confiscation by the Treasury, which took their gold and gave them in exchange a paper dollar claim. All the subsequent profit from the devaluation of the dollar against gold in the thirties or anytime goes to the Treasury, zero goes to the Fed. This profit is the origin of the Exchange Stabilization Fund of the Treasury, an exceptionally handy slush fund for the Treasury and the President when they want to do things and don't want to have to get Congressional approval.

The IRA: You mean like bailing out Mexico and banks like Goldman Sachs in the 1980s and 1990s or Argentina today? We used to rail against the use of the ESF to bail out dictators, but nobody in Congress cares today.

Pollock: Yes, like they bailed out Mexico in 1994, etc., as you say.

The IRA: We wuz there, helping Cuauhtémoc Cárdenas run for president in Mexico. So the Fed and the banks could claim that the gold in Fort Knox belongs to them and obviously it does. But when you touch the government, of course, you know that they're going to steal your money. The example of Fannie Mae and Freddie Mac since 2008 is another case in point. Since the 1930s, the Fed and Treasury have essentially been short gold in a sense that policy was directed at avoiding any reference to gold. As you noted, unlike other central banks, the Fed has not been buying gold, even though now since the repeal of the Depression era gold laws they could. If Governor Steven Miran really wants to adjust the dollar lower, shouldn’t the Fed be a buyer of gold for its own account?

Pollock: If you are a seller of paper currency, dollars or any paper currency, then you drive the other side up. All prices are exchange rates, and the price of gold or equally stated, the price of a dollar expressed in ounces of gold, is an exchange rate. Of course, you can move the exchange rate by selling one and buying the other, like the Fed did when massively buying mortgage bonds, more than $2 trillion of them, during QE. The Fed drove up the price of mortgage-backed securities and drove down the yields on mortgage loans financed by simply printing up the money, resulting in much higher home prices.

The IRA: That's right. But if we're Governor Miran and we are concerned that the dollar is overvalued don't we then sell paper and buy gold? Like FDR, we're going to buy gold and essentially devalue the dollar until we get it to where we think it needs to be. Don’t you think it's surprising that nobody in government of either party over the past several decades has even thought about the dollar and gold until President Trump?

Pollock: Yes. The other part of that story is the potential revaluation of the Treasury's gold, the government's gold taken from the members of the Federal Reserve Banks, which is on the books at $42.22 an ounce. The statutory definition of the official price of gold owned by the United States government is “42 and 2/9 dollars per ounce.”

The IRA: The U.S. government's official book value for its gold reserves is $42.2222 per fine troy ounce, a statutory price set by Congress in 1973 that remains constant for accounting purposes. What do you think would be the symbolic impact if we changed the official price?

Pollock: As you say, the official gold price is a matter of law, as established by the Act to Amend the Par Value Modification Act of 1973. You'd have to get Congress to act to change this. If you did get Congressional action, you should just say, as I have recommended, that the official price of gold is “the fair market price of gold as certified by the Secretary of the Treasury” Today that is over $4,000 an ounce. Then you would've a tremendous writeup of the price of gold. The Treasury Exchange Stabilization Fund would get a lot bigger. Like FDR in the 1930s, they could monetize the market value gain by creating new gold certificates, depositing them in the Fed and writing checks on the Fed.

The IRA: I seem to recall that Senator Carter Glass ridiculed FDR in public for this accounting charade. But in a system so dependent upon confidence and inflation, perhaps that is overmuch concern.

Pollock: The gold certificate is a deposit of the Treasury at the Fed, the Fed credits the Treasury's account for the gold certificates, which are already authorized by law. If you change the law to have the Treasury's gold valued at its fair value as opposed to its 1973 value, then Treasury could just write checks and, in effect, borrow the new market value of the gold from the Fed. You could have another nearly $1 trillion of new fiat cash right now. The Eisenhower administration used this gold certificate strategy back in the 1950s, by the way.

The IRA: We don't want to say that too loud. People will get the idea. But the Treasury and the Fed could buy gold for paper. Imagine if you have Kevin Hassett at the Fed. He could start buying gold and force the dollar significantly lower. As you said, it is the dollar that is falling in terms of the gold-dollar exchange rate, not the value of the metal rising.

Pollock: The seizure of gold in 1933 was a profit to the Treasury and an economic loss to the Fed under the Gold Reserve Act of 1934. The Fed had to turn in all its gold and couldn't buy any more. That law was reversed in 1974 in an amendment included in the International Development Association Appropriations Act of 1975 sponsored by Senator Jesse Helms (R-NC). The government stopped the incredibly despotic action of forbidding its citizens from owning gold. I think it's true that the Fed, also from 1974, could have bought gold for itself again. Of course, that would be the opposite, as you point out, of its whole ideology, which is to run the world on fiat paper dollars.

The IRA: Have we not come full circle, Alex? We've gone from the FDR confiscation of gold and all of these laws that were passed to prevent Americans from even thinking about gold. But the Russians and the Chinese particularly have turned this around. The opening of the Shanghai Gold Exchange in 2002 ended the embargo on gold as a reserve asset. Today gold seems to be back in the ascendancy. Was this just bound to happen or was it the US frittering away their franchise with a lot of deficit spending that forced this issue and sanctions and all the rest of it too?

Pollock: I think that is true about deficit spending hurting faith in the dollar. Nor has the United States helped itself in this sense by weaponizing our dominant currency to punish people. It does make the rest of the world less willing to hold dollars as assets and as their central bank foreign currency reserves. Now we see this very interesting move to a new reserve allocation around the world, central banks buying gold. Interesting to think that just a generation ago, the central banks were selling gold.

The IRA: Then-Chancellor of the Exchequer Gordon Brown sold a large portion of the UK's gold reserves between 1999 and 2002, a major financial blunder because it happened at a 20-year low in the gold market, just before the price began a massive, sustained rally.

Pollock: The Bank of England, the Bank of Canada and others all sold gold. A friend of mine in Switzerland told me that he knew officers of the Swiss National Bank, the Swiss Central Bank, when they were forced by the politicians to sell some of the bank’s gold along with the other countries in the nineties. The Swiss literally cried, he said, when they were forced to sell. And they were selling at the bottom, although of course the central banks were in the aggregate making the bottom by selling. That really looks bad in retrospect. Now needless to say, they're buying again. But the central bank buying also seems to be making this top if it is a top, at least making this very high price over $4,000 per ounce– getting close to 100 times the official US price and more than 100 times the old Bretton Woods par of $35.

The IRA: The central banks have been buying in volume. They were indifferent to the price. They just told their people to go out and buy, particularly the Chinese but many other central banks as well.

Pollock: And many want to get out of dollars or at least stop accumulating dollars and accumulate gold instead.

The IRA: It is hard to make a case for holding dollars when we look at the behavior of the Fed and Treasury over the past decade. The Fed bought $7 trillion worth of securities during and after COVID and did not stop buying until 2022, after interest rates had gone up. Fiscal policy was likewise running full tilt. Powell's FOMC provides one of the most egregious examples of procyclical government behavior in modern economic history, perhaps the single best reason for Congress to reform the Fed.

Pollock: The Fed led the housing market into a giant house price bubble with prices rising very rapidly. It was still buying and stoking that bubble in 2021 up to early 2022. Unbelievable. To my mind, an amazing blunder. But part of the mystique of being a central bank is you never admit you made a mistake. It must be that when you enter the secret society of central bankers, you have to pledge never to admit to making a mistake.

The IRA: Well, do you think if they confirm Kevin Hassett as Fed Chairman that he's going to betray Trump like all the other Fed chairman have done?

Pollock: I know Kevin personally from our days together at AEI. He is a very smart and knowledgeable guy. There is, of course, the most famous historical story of betrayal. When Harry Truman was President, he forced out Fed Chairman Thomas McCabe in 1951 to make room for a new appointment. Former Chairman Marriner Eccles stayed on the Board as governor to support McCabe and thwart Truman. Eventually the President got Chairman McCabe to resign. The issue was that the Fed would not commit to keep on buying Treasury bonds to peg the yield at 2.5% to finance the Korean War. While these negotiations were going on, the US Army had just retreated 200 miles south down the Korean peninsula. So you have got to have some sympathy for President Truman. He was losing a war.

The IRA: Reminds us that President Trump’s efforts to remove Chairman Powell are not unique in recent US history.

Pollock: After McCabe’s departure, Truman put in William McChesney Martin, a great Fed chairman and the longest serving one. He was appointed by Truman from the Treasury because it was assumed that Martin would follow the Administration line. Martin didn't. Chairman Martin believed in sound money.

The IRA: And Martin defended the independence of the Temple. Hassett is already starting to make noises about the challenges of inflation. Everyone who is confirmed by the Senate as a Fed governor defends the Temple.

Pollock: There's one point when Martin was now Fed Chairman that he runs into Truman, by the Waldorf Hotel in New York. President Truman looked him in the eye and said one word, “traitor!”

The IRA: Well, given all of that, the Trump administration has articulated a lot of things they would like to change at the Fed that would greatly limit the central bank’s ability to do creative things. How do you think that would change things given the deficit and everything else?

Pollock: It would be very dangerous, of course. My view of Fed “independence," if you talk about absolute independence, it's nonsense. You can't have one piece of the government that becomes an autonomous power running around doing whatever it wants. That's ridiculous. But the Fed should be independent of the President and the Treasury. The reason why this is completely clear was explained by none other than William McChesney Martin: The Treasury is the borrower. The Fed is the lender. You can't have the borrower telling the lender what the lender has to do. I think that's wonderful logic, and so true. Instead, the Fed reports to the Congress and telling the Fed what to do is the responsibility of Congress.

The IRA: Unless your President is a former real estate developer.

Pollock: But all presidents wish to control the Fed. Of course.

The IRA: Of course. Thank you Alex.

The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

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Interview: Alex Pollock on the Fed and Gold | Part I

Published by The Institutional Risk Analyst.

October 3, 2025 | In this special edition of The Institutional Risk Analyst, we feature a discussion with Alex Pollock, Senior Fellow at the Mises Institute. Alex provides thought and policy leadership on financial issues and the study of financial systems. He was president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. We spoke with Alex from his home in Lake Forest, Illinois.

The IRA: Alex, thank you for taking the time to speak with us today. We were at the Lotus Club yesterday talking about Inflated: Money, Debt and the American Dream. One of our former colleagues from Bear, Stearns attended.

Pollock: Know something you and I have in common?

The IRA: Tell us.

Pollock: You worked for Bear Stearns. I worked for Continental Illinois. Two firms that are no longer with us. Educational experiences.

The IRA: We were looking at the FINRA record while doing CE. It now lists JPMorgan as our first employer instead of Bear, Stearns. Well, so technically we worked for Jamie Dimon once upon a time. Thank you for sending over your latest testimony on the Federal Reserve, “How Congress Should Oversee the Federal Reserve’s Mandates.” It provides an interesting counterpoint to the essay by Treasury Secretary Scott Bessent in The International Economy about reforming the Fed. We don’t think that anything will happen on reforming the central bank before the Republic has another financial crisis, but there you are. We are very happy to be living in Westchester County, though, instead of New York City. Leaving Gotham in 2021 was a good move and cut our living expenses by more than half.

Pollock: I feel the same about Lake County, Illinois.

The IRA: Despite the political and fiscal troubles in Chicago, we see that the developers are all scurrying back into greater Chicago. This despite the carnage for the banks. Developers must do development or they'll be out of business. Somebody just took Bank OZK (OZK) out of their misery in Lincoln Yards. But we digress. Let’s spend a little bit of time talking about the Fed and then we can switch gears and talk about gold if that works for you. Or maybe we’ll just talk about gold.

Pollock: Two highly related topics.

The IRA: What questions and comments did you get from the Financial Services Committee members when you were up on the hill talking about the Fed? Do you think any of them understood some of the points you made in your excellent testimony?

Pollock: The testimony was to a task force of the Financial Services Committee. We got some very good questions, including questions on what is the chief thing the Fed is supposed to do. I like the idea that the guiding fundamental principle should be that the first responsibility of the central bank is to provide a sound currency. I recommended that the Financial Services Committee in the House and the Banking Committee in the Senate should both have subcommittees devoted solely to the Fed. The monetary system is so overwhelmingly important that that would make a lot of sense. And then you would get a focus and a buildup of expertise over time. Members of Congress, if they serve on a committee long enough, become quite knowledgeable. Incidentally, the hearing last month was held in the Wright Patman room...

The IRA: Oh, of course. Rep Wright Patman (D-TX) was a long-serving and populist politician from Texas. Known as a "fiscal watchdog," he served in the House for 24 consecutive terms, from 1929 until his death in 1976. Henry Reuss (D-Wisconsin) succeeded Patman in 1975. We can recall appearing before another great Texas populist, Chairman Henry B. Gonzalez (D-TX), years later. Gonzalez, who thought there was gold hidden below the Federal Reserve Board, became chairman in 1989. Chairman Gonzalez was responsible for discovering the secret FOMC transcripts.

Pollock: Wright Patman chaired what was then the Committee on Banking and Currency for 12 years. He was a big believer in the responsibility of Congress to oversee and direct the Fed. It was the Democrats in those days who thought that Congress should watch the Fed’s operations closely. Did you enjoy my quote from former Democratic Senator Paul Douglas to William McChesney Martin? –the one about, “I've typed out your saying that the Fed is an agency of the Congress. I'm giving you a piece of scotch tape so you can tape this up on your bathroom mirror and look at it every morning.” I got a big kick out of that.

The IRA: Does the Congress really have any operations? I thought they were delegating all of the operational aspects of government to the executive branch.

Pollock: The Fed should and does have oversight and policy guidance from Congress. Congress does not need to operate the central bank. Congress instructs their agency, the Fed, which as is often said, comes under the money power, the constitutional money power under Article One, Section 8. As you know, the Constitution says “coining” money, which we read these days metaphorically.

The IRA: In those early days of the Republic, it was an acute need for an exchange medium that drove the Framers to give Congress power over money. Americans used barter for most exchanges and Spanish “pieces of eight” and pounds sterling for money in the 1700s.

Pollock: The Constitution then says “and regulate the value thereof.” Well, regulate the value of money is a congressional duty, in my view, not just a power. It is a duty under the Constitution and overseeing the Fed as part of that. That power is solely a congressional power and not an executive branch power.

The IRA: The central bank is clearly a peculiar institution because of the Constitutional empowerment regarding money, something that was extremely controversial at the end of the 18th Century. The fact that the Framers gave Congress this first mandate does not receive enough attention and supports your call for greater congressional oversight.

Pollock: Congress ought to want to take it seriously, the way Wright Patman and Henry Gonzalez did in their day. But the Democrats flipped and said, well, we ought to let the Fed do whatever it wants. It's very historically interesting, that flip. Anyway, there's another power though that's very relevant and that is the taxing power. The power of taxation under the Constitution is given solely to the Congress, in that same article of the Constitution. Inflation is a tax. Inflation is simply taking purchasing power away from the people and giving it to the government. The Fed creates inflation. The Fed is taxing. The Fed is responsible to Congress for its taxing activity.

The IRA: As Robert Eisenbeis of Cumberland Advisors taught us years ago, the Fed is always an expense to the Treasury when you net out all of the cash flows. The Fed gives the Treasury back its own money earned from securities, less operating expenses. And you are correct that the Fed is a taxing unit, an instrument of financial repression. But the Bernanke Fed onward with QE expropriate the assets of the Treasury without congressional authority and proceeded to lose money on their speculations! They also mismanage the Fed’s assets and liabilities.

Pollock: Those losses are also a tax. When the Fed created a giant savings and loan type balance sheet on its own books, and has now lost $242 billion as a result, that is taxation, that is spending the taxpayer's money in a fiscal action without authorization of Congress. It comes right out of the remittances to the Treasury.

The IRA: Ben Bernanke and Alan Greenspan before him figured that Congress had no idea so better just do what is necessary to keep the ship moving forward. But Alex, don't you think the evil goes back to 1935 when FDR created the Board of Governors and brought all of this to Washington? Since the New Deal, the Fed has taken on the role of a state planning agency like the Soviet GOSPLAN. Bernanke creates quantitative easing, where the Fed buys trillions in Treasury securities and also mortgage bonds, driving up home prices. And this is all done under the rubric of the Elastic Clause in Article I, Section 8, “necessary and proper”. The Fed is basically free riding on that part of the Constitution.

Pollock: The 1935 Banking Act centralized the power of the Fed under FDR. Senator Carter Glass (D-VA) in his day used to ask witnesses before the Senate Banking Committee if the United States had a central bank. The answer he wanted was, “No, it does not. It has a federal system of regional reserve banks.” That was the Jeffersonian idea of Glass until 1935. And as you are saying, they flipped this around and centralized the power in the Board of Governors in Washington–the name was changed as a symbol of the power shift. The heads of the regional reserve banks were originally called “governor,” the Governor of the Federal Reserve Bank of New York or Chicago or whatnot. Also, Congress created the Federal Open Market Committee as a statutory body in 1935. It was originally a committee of the Federal Reserve banks themselves.

The IRA: FDR turned the Fed into a unitary central bank a la Europe.

Pollock: The Fed became a centralized body dominated first by the Board of Governors, but really by the chairman. So you got two centralizations going on here in the Fed after 1935. One is a centralization of power out of the rest of the country into Washington, into the Board. And the second is the centralization of power in the office of the Chairman of the Federal Reserve Board, who is the chief executive of that agency and for whom all the staff works. All the hundreds of PhD economists and everybody else all work for the Chairman. And so you get this much increased power of the Chairman hitting a peak, I will say, in the days when Greenspan became “The Maestro.”

The IRA: Clearly some of the Governors and Reserve Bank presidents were unaware that transcripts of meetings were being stored by Greenspan. We first reported on Chairman Gonzalez catching Greenspan obfuscating regarding the FOMC minutes in 1993 for the Christian Science Monitor. Now the Trump White House may not allow the reappointment of Reserve Bank presidents unless they toe the MAGA line on interest rates.

Pollock: Greenspan had become enormously powerful, a kind of a media star. But then as you point out, the Fed’s mission creep hit another peak in the days of Bernanke and quantitative easing, manipulating the bond market, manipulating the mortgage market by buying a couple trillion dollars of 30-year fixed rate loans, which never were historically and never should be on the books of the Fed.

The IRA: The Fed may own those securities for decades to come. The Fed’s MBS have such low coupons that the average lives for the securities may be close to 15 years. There are a lot of lenders who would like the Fed to resume buying MBS. And I'm a little worried that Trump, who's not really a conservative, may want to go there if he puts Kevin Hassert in as Fed chairman. Having the Fed buy MBS will just push home prices higher.

Pollock: A central bank in principle can buy anything–not necessarily legally, but in principle. For example, as you know, the Central Bank of Switzerland has a giant equity portfolio. It's a big investor on the New York Stock Exchange. The dollar investments in Switzerland were part of their keeping down the Swiss franc. But they also of course own gold. We're going to get to gold later, but how much gold does the Fed own?

The IRA: None.

Pollock: Zero. Not one ounce. I think it's one of the few major central banks that doesn't own any gold.

The IRA: But the absence of gold was part of the American management of the post Bretton Woods period, when US officials poo-pooed gold and didn't want anybody to talk about it. As we can now see, that strategy ultimately failed and gold is again the largest reserve asset in the world. If you look at the timeline of all of the official actions that were meant to discourage people from talking about or owning gold, ultimately they failed in the late 1960s. The US withdrew from the London gold pool a year before Nixon shut the gold window in 1971.

Pollock: There is a great story in Paul Volker's autobiography, Keeping At It: The Quest for Sound Money and Good Government. Volcker was at the Treasury under Nixon and they knew they had a big problem with dollars and gold. They knew that they were going to have a lot of trouble maintaining the $35 peg. He tells the story in the book they were having meeting after meeting over what are we going to do, coming up with scheme after scheme to somehow prop up the dollar and hold down gold and so on. And he said there was an old Treasury guy who'd been at the agency for decades, and he would sit in these meetings when they'd come up with some scheme or other, and at the end of the discussion, this guy would say, “It won't work.”

The IRA: You mean like selling gold to force the dollar down? Thats Steven Miran’s idea. The history of the United States suggests that selling paper and buying gold is a better strategy. But then again, many of these same people think that crypto tokens are the future of money. Americans are the only people dumb enough to think we can use buttons as money.

Pollock: Well, the guy in Paul Volcker’s story was right. There was nothing they could do. By that time the dollar peg to gold was on the way out. By then the game was already lost. I guess maybe they could have devalued instead of simply defaulting on the commitment of the American government to redeem dollars for gold at $35 an ounce. You could have devalued and set a new price, but it would've been a big devaluation, like $70 or even a hundred dollars an ounce, something like that.

The IRA: The dollar is already down below the lows of Trump I. But that's the history of the fiat currency. On the one hand, the legal tender fiat dollar is the greatest invention ever. But if you don't have some degree of fiscal restraint, and you can't in a democracy, then ultimately it doesn't work to the point of the Treasury official in Volcker’s story. That's where we're are today.

Pollock: Where we were and maybe where we are again. Can I give you a great quote on this? An excellent private memorandum on gold viewed in the long term says, “A higher money price of gold is best read as a symptom of a weaker currency. It isn't really the gold going up, it's the dollar or fiat currency in general going down.” That seems to me to be right. And then he says, “The value of gold lies in being independent from political discretion. Fiat money is a claim on the future discretion of politicians.” Isn't that good?

The IRA: Indeed. Thank you for your time Alex

END PART I

We'll feature the second part of the discussion with Alex Pollock regarding the Fed and gold in a future issue of The Institutional Risk Analyst.

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Appropriations, Ambition, and the Madisonian Constitution

Published by American Institute for Economic Research.

This insulation from both Congress and the President was backed by the unique funding mechanism designed for the CFPB. While nominally identified as a “Bureau” of the Federal Reserve, the CFPB was not subject to annual appropriations by Congress, as is, say, the Federal Trade Commission. Instead, the CFPB is entitled to bypass Congress’s annual appropriations process and draw funds directly from the Federal Reserve Board, subject to a statutory percentage-based cap (which the CFPB has never approached) based on the Fed’s total annual operating expenses.[13]

…

[13] Dodd-Frank Wall Street Reform and Consumer Protection Act §1017(a)(1). A separate issue, not discussed here, is the provision that the transfer be funded by “earnings” of the Federal Reserve Board. It has been argued that for several years the Federal Reserve has not had “earnings” but has instead has suffered losses. See Paul H. Kupiec and Alex J. Pollock, LawandLiberty.org, Can the Fed Fund the CFPB? (June 5, 2024), https://lawliberty.org/can-the-fed-fund-the-cfpb/; Brian Johnson, Examining the New Debate on CFPB Funding, Patomak.com (July 9, 2024), https://patomak.com/2024/07/09/examining-the-new-debate-on-cfpb-funding/.

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Penny-Ante Inflation?

Quoted in The New York Sun:

That’s because under a fiat money regime, currency loses any relation to the value of the circulating medium. The cost of the metals that now comprise a penny — mostly zinc, with a dash of copper — now exceeds the face value of the coin. “The demise of the penny,” a former Treasury official, Alex Pollock, a Sun contributor, tells Mr. Grant’s newsletter, “is a pointed reminder of the Federal Reserve’s unrelenting depreciation of the U.S. currency.”

Mr. Pollock takes 1950 as a point of comparison to explain the penny’s fate. In the 75 years since then, he says, “the purchasing power of a penny has dropped by 93 percent,” meaning that today’s coin “is worth about 1/13 of a 1950 penny.” He traces the penny’s doom to the fact that “nobody in 1950 thought they needed a coin worth 1/13th of a cent and we don’t need a coin of such little value, either.”

Following this logic, Mr. Pollock adds that “a nickel in 2025 is worth about 3/8 of a 1950 penny, and a current dime is worth 25 percent less than the former penny.” Is the writing on the wall for these coins, too? “With the Fed’s earnest promise of perpetual inflation, we soon won’t need nickels and dimes,” Mr. Pollock reckons. “Meantime, the current quarter is worth 1.8 pennies of 1950,” he adds.

So it is that, in Mr. Pollock’s telling, “the Fed has transformed two bits into less than two cents.” He marvels that “continuous inflation has remarkable shrinking power.” It marks the vindication, too, of a warning in 1966, in the twilight years of honest money, by National Review’s William Rickenbacker. He lamented how America had just removed the silver from its coinage, “practically unchanged from the birth of the republic.”

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Art of Default

Published in Grant's Interest Rate Observer.

"The demise of the penny," reader Alex J. Pollock reflects,

is a pointed reminder of the Federal Reserve's unrelenting depreciation of the U.S. currency. Taking 1950 as a convenient starting date, that being 75 years or about one lifetime ago, the purchasing power of a penny has dropped by 93% as the Consumer Price Index has gone in round numbers from 24 to 321, so a penny in 2025 is worth about ¹⁄₁₃ of a 1950 penny.

Naturally, nobody in 1950 thought they needed a coin worth ¹⁄₁₃ᵗʰ of a cent and we don't need a coin of such little value, either. A nickel in 2025 is worth about ³⁄₈ of a 1950 penny, and a current dime is worth 25% less than the former penny. With the Fed's earnest promise of perpetual inflation, we soon won't need nickels and dimes. Meantime, the current quarter is worth 1.8 pennies of 1950: The Fed has transformed two bits into less than two cents. Continuous inflation has remarkable shrinking power.

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Government's Role in Central Banking - Playing with Fire

Featuring interviews with Ron Paul, Tom DiLorenzo, Joseph Salerno, Mark Thornton, Jim Grant, Alex Pollock, and Jonathan Newman, Playing with Fire explains what the Fed is, where it came from, and why it is so dangerous. Perhaps most importantly of all, Playing with Fire shows why we need to end the Fed altogether. Watch the full film here: https://bit.ly/4hh2pBB

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Countries Don’t Go Broke. Governments Do.

Published by the Mises Institute:

The United States is not immune to this, but remains relatively insulated—for now—thanks to the fact that the dollar is in greater demand than sterling, and therefore so is US debt. I asked Mises Institute Senior Fellow Alex Pollock about Dalio‘s comment, and Pollock replied with an important point about whether or not “countries” go broke: 

Ray Dalio is certainly right to highlight the issue of sovereign defaults.  Based on the FT‘s article, I have already ordered a copy of Dalio’s forthcoming How Countries Go Broke.  

I do want to object to the book’s title, however. It is not countries, but governments, which overborrow and go broke.  The debtor is the government.  The government is quite distinct from the country, although in common parlance the two are often confused.  It is the government of the United States, for example, not the country, which defaulted five times on its debt between being unable to pay interest on time in 1814 and reneging on its solemn commitment to redeem dollars for gold in 1971.  These five defaults do not count the failure to pay its debt by the Confederate government, defaults by a number of individual U.S. state governments, or the historic bankruptcies of the governments of the City of Detroit and the Commonwealth of Puerto Rico.

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Monetary Policy That Holds the Fed Accountable

Published by the Cato Institute.

The so‐called dual mandate calls for the Fed to achieve both price stability and maximum employment. Now that the Fed has also become responsible for guarding against financial instability, it really operates under an even broader mandate.[2]

2. The Fed Is as Poor at Knowing the Future as Everybody Else, Before the US House of Representatives Subcommittee on Monetary Policy and Trade of the Committee on Financial Services, 113th Cong., 1st Sess. (September 11, 2013)(testimony of Alex Pollock).

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Caution warranted on Strategic Bitcoin Reserve

Published by the Competitive Enterprise Institute:

At a recent price of Bitcoin of $100,000, the purchase prescribed by this bill would cost the government $100 billion. But there’s more. Paul Kupiec and Alex Pollock – scholars respectively of the American Enterprise Institute and the Mises Institute — point out in The Hill that if this purchase were made by the Federal Reserve, the Fed would have to borrow money for this purchase at current interest rates, which are now above 4 percent. That means that over 20 years, the Fed’s operating cash losses could come to “more than 100 percent of the investment.”

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The Great Pretenders

It is 50 years ago Wednesday that economist Friedrich Hayek accepts his Nobel Prize with a warning about economists.

Published in The New York Sun.

It will be 50 years on Wednesday since economist Friedrich Hayek’s Nobel Prize lecture, “The Pretense of Knowledge,” our Alex Pollock reminds us. That was the speech in which Hayek decried the “accelerating inflation” of the day — and the bitter irony that it had “been brought about by policies which the majority of economists recommended and even urged governments to pursue.” He concluded: “As a profession we have made a mess of things.”

It was of a piece with Hayek’s role as a contrarian in the economics profession that his “brilliant presentation,” Mr. Pollock notes, “explained the inherent limits of economics and the inevitable failure of trying to make it a predictive mathematical science.” Fifty years on, Hayek’s warning “applies particularly to central banks and their yearning to be economic philosopher-kings,” Mr. Pollock adds. Is this anniversary being marked by the pretenders at the Fed?

…

The refusal to consider gold as a factor in monetary deliberations reflects the failure to heed Hayek’s warning of 50 years ago. Mr. Pollock conveys a hope that institutions like the Fed “have taken to heart Hayek’s lesson that the ‘insuperable limits to knowledge’ ought to teach humility.” Central bankers, in Mr. Pollock’s telling, have reason to be “skeptical about their own forced guessing.” Yet if there is one thing that is in short supply at the Fed, it’s humility.

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The Revolt at the Fed

Editorial published in The New York Sun:

Congressman Wright Patman was trying to get the Fed audited like any other federal agency. The bank demurred. The late Patman is lucky he’s not alive today, when, as our Alex Pollock has been warning, the Federal Reserve’s real capital is now negative $158 billion. That puts its own light on Martin’s contention that the bank is not part of the government’s three branches. Who’s on the hook for that negative capital?

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We Sure Do Need to Talk about Inflation

Published in National Review:

Writing for AIER, Alex Pollock has a superb review of a recent book by Stephen King: We Need to Talk about Inflation. Since that topic is very much on people’s minds these days and with true  believers in omnipotent government like Kamala Harris blaming it on greed and proposing price controls, the book is most welcome.

Pollock writes:

Reflecting on the enduring temptation of governments to inflate and depreciate their currencies, King rightly observes:

  • “Inflation is very much a political process.”

  • “Left to their own devices, governments cannot help but be tempted by inflation.”

  • “Governments can and will resort to inflation.”

  • “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” (Here he is quoting J.M. Keynes.)

Absolutely right. Rulers (whether monarchs, elected politicians, military despots, or any other kind) can be counted on to extract wealth from the citizenry to pay for the things they want to do, but prefer to extract it in a hidden fashion by cheapening the currency. And of course, they will try to pin the blame elsewhere.

This new book is must reading.

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Examining the New Debate on CFPB Funding

Published in Patomak Global Partners.

To generalize, one side, led by Hal Scott, Alan Kaplinsky, Alex Pollock and Paul Kupiec, offers a relatively narrower construction of the term that means something like “net income” or “profits,” while the other side led by Adam Levitin and Jeff Sovern, offers a relative broader construction that means something like “any income.” The correct construction of the term appears material to CFPB operations, with the narrower construction perhaps prohibiting transfers from the Board of Governors under present circumstances, whereas the broader construction permits them. The debate has now advanced past the theoretical, with Director Chopra fielding questions about the meaning of the term in Congressional hearings last month. This post does not presume to resolve the debate today, but instead seeks to offer additional context that may be relevant to continued scholarship.

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Conservatives set the stage for another CFPB funding fight

Published in The Hill.

Alex Pollock, a senior fellow at the right-leaning Mises Institute, suggested that the Dodd-Frank Act blocked a future Congress from “disciplining” the agency with “the power of the purse” by granting it a share of the Fed’s earnings. 

“With inescapable logic, however, that depends on there being some earnings to share in,” Pollock wrote in a post on the blog run by the Federalist Society, a conservative legal group. 

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