Gold

Posted by $ TomB666 9 years, 3 months ago to Economics
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After reading the above FAQ I did a little arithmetic. According to the FAQ, official gold in the Treasury's possession is still valued at $42 1/9 OZ ($42.222...) and the Treasury has about $600 million in gold. That translates to 14,210,533.8 OZ of gold which at this moment is worth $16, 993,951,049.45 or almost $17 billion, which is roughly 0.09% of the current national debt. Does anyone doubt that the US is broke?
Alternatively, Treasury could simply revalue its 14,210,534 OZ of gold to $1,297,910 per OZ and it could cover the debt.
I hope I did not make a math error - but if I did not you can see how absurdly over valued the dollar is now. I think we have "The Great Society" and our “crony socialistic/big business” national governance to blame. (I dislike the expression “crony capitalism” as the system has nothing to do with capitalism and everything to do with political pull.)
SOURCE URL: http://www.federalreserve.gov/faqs/does-the-federal-reserve-own-or-hold-gold.htm?inf_contact_key=e200f69eb2b41b0ebe873f95ae6249c1daedc1649e0686d1a9c595b5d3a41aab


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  • Posted by $ MikeMarotta 9 years, 3 months ago
    This is wrong. First your maths are off.

    Second, money is SECOND use of gold. Jewelry is first - and for that, the price is apparently inelastic.

    Third, the USA is only one national government. Germany is in a much better position. You would have to look at China, Russia, and the others to get an idea of what the "real" price of gold "should" be, if they all decided to cover their debts with gold.

    Realize also, that minor nations such as South Africa and Australia enjoy huge natural deposits - that could be a factor in a global washout. South Africa's gold is controlled by a consortium. However, in Australia, some people walk the outback and bring large nuggets to the Perth Mint.

    The US Government could pay its debts with all kinds of media, not just gold. The US Federal Government owns 28% of the 2.27 billion acres in the USA. http://en.wikipedia.org/wiki/Federal_lan... The government holds untold treasures in historic objects and artifacts.

    As for the facts and the maths:
    debt to the penny = $18,029,014,745,208.99
    http://www.treasurydirect.gov/NP/debt/cu...

    Treasury gold holdings
    261,498,926.230 fine ounces
    http://www.fiscal.treasury.gov/fsreports...

    Valued at $1200 per ounce that comes to $313 billion ($313,798,711,200).
    313 billion divided by 18 trillion is about .0174 or 1.74%.

    And again, the governments of the world do not need to pay off their debts with gold. Gold is just a slightly uncommon metal with some convenient properties. Both Ayn Rand and Friedrich Hayek knew that gold is only worth what you can buy with it. Productivity, invention, and intelligence give value to gold. Gold has no intrinsic value.

    (We have gold within the USA in California, Alaska, even Michigan. We do not have tin or platinum. If you want to wring your hands, worry about the government stockpiles of those metals. And then there's the rare earths, the Lanthamum series… in God's great Wisdom, He seems to have granted them all to China.)
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    • Posted by Robbie53024 9 years, 3 months ago
      Jewelry is not sold as a sole function of the components and added labor - it is sold over and above those amounts based on the "value" of the desirability of the item. Old, out of style, jewelry is less valuable and may actually only be worth the raw price of the components. New style jewelry can fetch many multiples of the value of the components.
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    • Posted by $ 9 years, 3 months ago
      Thanks Mike. I was afraid I misplaced a decimal somewhere :-)

      You do realize that the debt to the penny is at a point in time - in the case above that was the debt on the 18th. For a running account visit http://www.usdebtclock.org/ which is a bit behind debt to the penny as of this moment.

      Would you happen to know where that gold is held?
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    • Posted by $ 9 years, 3 months ago
      I rechecked my math thanks to you and see where I went wrong - that $600m is only 5% of the treasury's gold.

      I am not advocating a gold standard again, but I do see that the major economies of the world place a lot of stock in it. They have even gone so far as to create 'paper' gold.

      But that is only one of the many problems with a gold standard. There is nothing to stop a government from recalling and then revaluing gold - witness FDR's massive theft from the people when he recalled gold and then revalued it.

      We cannot trust any government to be honest with our money. But then what to we invest in?

      Money is supposed to serve 3 purposes:
      1. A store of value
      2. A unit of account
      3. A medium of exchange.
      The dollar fails miserably at being a store of value.

      I used to shock my students in a finance class I taught when I would ask "Who redeems your dollars?" Most thought the government did so until I pointed out the government would only trade paper for paper (or junk coins) - dollars are redeemed at the gas station and grocery store - not by the government.

      So again I ask, where do we find a store of value?
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