Dear Dr. Paul,
I would like to share with you what I think is a brilliant opportunity for you to lead the revaluation of the US gold stockpile from its present book value of $42.22/oz. which, as you say in the video below, "makes no sense whatsoever." I think that when a rare opportunity like the one I’m about to describe presents itself, the least we can do is to give it fair consideration.
While watching your recent hearing on YouTube, I was struck that the Fed's General Counsel Scott Alvarez had to explain to you that the Fed doesn’t own any gold. Here's the clip to which I am referring. It should begin automatically at 1:35:
Had you been reading my blog (not that you would be, of course, but maybe now you’ll start ;) you would have known this by at least last October when I published It’s the Flow, Stupid. Here is an excerpt, and this is important to the opportunity I will present:
Here is something you need to understand about the US gold. The Fed does not own it. The US Treasury does. Following the Gold Reserve Act of 1934, the Treasury gained title to the entirety of the US monetary gold (including $3.5 billion which was currently being held by the Federal Reserve banks). From that point on, the Fed has received [from Treasury] private issues of new-fangled gold certificates in $100, $1,000, $10,000 & $100,000 denominations -- not to be paid out and not for circulation.
So the Treasury took 175 million ounces of gold from the Fed, paid the Fed in DOLLAR-DENOMINATED certificates for this gold at $20 per ounce, then revalued gold to $35 per ounce. So if the Fed had even been able to redeem those certificates for gold in 1935, it would have only gotten back 100 million ounces. The windfall of 75 million ounces of gold ($2.6 billion), in this case, went entirely to the US Treasury and not the Fed.
The entire Treasury windfall was $2.8 billion and was the reason and the funding for the establishment of the ESF, the Exchange Stabilization Fund in 1934. So following the Gold Reserve Act of 1934 100 million ounces of gold were already automatically monetized. The rest of the US gold was eventually monetized through the Fed. The way this happens is the US Treasury issues fancy new non-negotiable, dollar-denominated gold certificates to the Fed and the Fed credits the Treasury account with dollars.
Today, all of the US gold has been "spent" in this way, but only at the price of $42.22 per ounce. That's 261,511,132 ounces of gold monetized at roughly $11 billion, money that was spent long ago.
So you see, the Fed cannot mark the US gold to market. It cannot even revalue the US gold. Only Congress can. And even if Congress DID revalue the gold, it would not change the Fed balance sheet by one penny. The Fed only holds dollar-denominated certificates worth $11 billion, payable in gold, but not really. It's kind of like Aramco in 1945 who owed the Saudis $3 million, payable in gold.
If Congress DID decide to mark the US stockpile of gold to market today it would find it had a new stream of revenue. At today's price of $1,328 per ounce, the US gold would be worth $347 billion. Subtract the $11 billion already on the Fed balance sheet and Congress could immediately ask the Fed to credit the US Treasury with $336 billion new dollars to be spent.
Here is a little more background from a couple of my more recent posts. Hopefully it'll start to be clear where I'm heading with this. This next one comes from January in my post, RPG - Update #1:
"Meanwhile, due to the woefully outdated paradigm established by the US Congress for gold held by the Treasury Department, the gold reserves of the United States are effectively anemic and bedridden upon the books of The Federal Reserve System, where they exist only in certificate form — valued at a static $42.22/oz., forming a paltry $11 billion stake."
That's right! The Fed doesn't even have actual gold on its balance sheet that can be used as a reference point. It has "gold certificates" issued to it by the US Treasury from the past monetization of US Treasury gold at $42.22/oz. I suppose, technically, if the US Treasury wanted to revalue its gold to the market price today, the proper yet antiquated process would be for the Fed to credit the Treasury's spending account with new dollars representing the difference in price. Today that would be about $355 billion fresh dollars for Congress to spend. Yet there would still be no existing mechanism to automatically account for the new and emerging Reference Point: Gold. Something technical is going to have to change!
Did you notice that I underlined $355 billion? And farther above, which was from back in October, it was "only" $336 billion. Well, here's an excerpt from my very recent April post, RPG - Update #2:
Rather than selling the gold, why don't you just value it like the rest of the world? Why not just mark it to the market price of gold on the Treasury books? If you, Congress, are going to insist on an honest accounting of America's liabilities, why not properly account for her ASSETS as well?
And then… the US Treasury, under the daft guidance of [Geithner], can issue new gold certificates to the Federal Reserve. As anyone with even a rudimentary understanding of double-entry bookkeeping knows, the balance sheet must balance. For every asset there is a liability, and vice versa. This is basic stuff. You don't need to be a banking "expert". And so far the Fed only carries $11 billion of the Treasury's gold on the asset side under the gold heading. Today we have room to add $370 billion more, and that means fresh Fed liabilities—also known as US dollars—accruing as fully paid-up credits to the Treasury account for the government to use however it deems appropriate.
Again, I realize this doesn't solve any of the big problems, but it does buy some time. And furthermore, it is not a bad or reckless thing to do. It is the right thing to do! America has an untapped asset. You can use it without selling it for gosh sake! And just like the old gold certificates, the new ones will NOT be redeemable by the Fed or any other banks in physical gold. They will simply be an accounting entry on the Fed balance sheet. In the future, that gold can be mobilized, if necessary, in defense of the US dollar. But only with the approval of Congress. The physical gold remains the property of the United States. It will simply be monetized by properly revaluing it as the monetary reserve asset that it is, and placing it—at its proper valuation, updated quarterly—on the asset side of the central bank's balance sheet, just like the ECB.
That's right, it jumped again. From $336 billion in October, to $355 billion in January, to $370 billion in April. And guess what it is today. $390 billion! That's the amount of untapped equity the US Treasury has in its gold today. And that equity can be monetized without selling the gold, by the simple act of Congress ordering the revaluation of the gold.
This is simple logic, Dr. Paul. It doesn't take a room full of lawyers to figure out if it is feasible. It is plainly obvious, which is why it is so stunning to me that Tim Geithner is playing the ridiculous juggling game that he is today, essentially plundering retirement accounts ("disinvesting intragovernmental debt") by $66 billion to keep feeding the big government Frankenstein monster:
"Since May 16, the debt subject to the debt limit has been $14.293975 trillion each day, showing that Treasury has $25 million in breathing room under the debt ceiling.
"...it's not completely transparent how Treasury is managing the debt versus the debt limit on a daily basis... We do know that Treasury has used three of the tools available: Suspending G-Fund reinvestments, redeeming investments of the Civil Service Retirement and Disability Fund (CSRDF), and suspending new CSRDF investments.
"...The ultimate day of reckoning comes when Treasury runs out of cash, not when it runs out of room to issue new debt. Many in Congress and the press appear to confuse the two, and Treasury hasn't worked that hard to draw a distinction..." 
Perhaps there is another "tool". One that doesn't require raiding the retired and disabled.
The gold certificates on the asset side of the Fed's balance sheet are not even paper certificates with fancy fonts and pictures. They are electronic book entries representing the dollar-denominated amount of $11 billion. They no more represent the US gold by weight than they are redeemable in that gold. They are a nominal dollar token accounting entry.
The Fed's "Fisher" was wrong [here] when he said, way back in 1997, that a revaluation of the gold would require selling off other assets to balance the Fed's books. Firstly, if Congress were to revalue Treasury's gold, that would not automatically revalue those "certificates". They have no market value because they are irredeemable, non-negotiable and obviously unmarketable! Secondly, even if it were to automatically affect the Fed balance sheet in some cartoon universe, selling off other assets is not the only way to balance a gold revaluation. The more logical way is for the Fed to issue new Fed liabilities, aka dollars, to the owner of that collateral that is rising in value.
Think back to when house prices were actually rising. If you bought a house for $250K and it was suddenly worth $350K did that revaluation automatically appear on your bank's balance sheet as an additional $100K asset? Of course not! But you, as the homeowner, could put it on the bank's balance sheet with a HELOC or a second mortgage.
Maybe you could call this gold revaluation a GELOC to tide you DC spendaholics over until you can get your act together later this year. And that (soon to be) $400 billion "bridge loan" will not even be debt in the traditional sense, and it certainly won't be "debt subject to the debt limit" any more than Bernanke's QE is subject to limit.
Honestly, the Eurozone is so far ahead of you DC guys on this it's not even funny. They mark their official gold reserves to the market price every quarter, and they just voted to make gold a system-wide acceptable collateral asset. 
"The European Parliament's Committee on Economic and Monetary Affairs Tuesday agreed unanimously to allow clearing houses to accept gold."
OMG! Can it be that a collateral asset that is consistently rising in free market value makes boatloads more sense than ones you have to prop up with quantitative easing and open market "print to purchase" operations??
One last thing. If you start to marking to market the effects of all this money printing, it will not only at least bring some benefit to the country, but it will also highlight the growing value of gold reserves for every American to see and learn from. Perhaps a few will even "save their savings" before it's too late. All those peeps you save might even nickname RPG "Ron Paul Gold!"
Okay, I promised myself I'd keep this post short since it is an open letter to an important and (I'm sure) busy man. And as my readers know, some of my posts tend to run a little bit on the long side. That said, Dr. Paul, I'd like to also invite you to read my last post, which is titled The Return to Honest Money. It's about you, and Rothbard, and Menger, Mises and Hayek as well as a few more. I think you'll like it. But at least it might be worth your fair consideration.
 Treasury Continues To Dip Into Retirement Accounts, Prepares To "Take Out" $66 Billion Chunk To Make Room For New Bond Issuance
 Bid to Use Gold as Collateral Advances -WSJ