Monday, February 15, 2010
It is fascinating just to see a story like this in a publication like Parade Magazine, asking what should be done with the nation's stash of seemingly useless gold bars, but, the fact that an overwhelming majority of readers think the metal is still relevant is a surprising bonus.
The U.S. has the world’s largest gold reserve—more than 8000 metric tons. That’s far more than Germany’s, which comes in second with 3400. At current prices, our reserve is worth an estimated $288 billion. Since the U.S. government could certainly use the funds, why not sell this valuable commodity? Does our country need to keep all of that gold?It really is astonishing to think that the nation's entire gold stock represents only about two percent of its debt and, setting aside what the constitution says about gold and legal tender (see this lively discussion at The Daily Paul for more on that subject), the idea that if any of the gold reserves are sold the proceeds must be used to pay down debt is just dripping with irony, given where we now found ourselves in history.
“Our gold holdings swamp annual demand,” says Andrew Williams of the U.S. Treasury. “Even talk by the government of perhaps selling gold might cause the price to drop,” adds James Barth of the Milken Institute, an economic think-tank. He says that selling gold “could be viewed as a sign of weakness” by other countries and send the undesirable message that the U.S. is desperate for revenue.
While the President can authorize the Treasury to sell gold, that hasn’t happened since 1979. But even if he were to authorize a sale, he couldn’t spend the funds on health care, defense, or any other programs—the law requires that “all proceeds from the sale of government gold be used to pay down the national debt,” according to Williams. Despite how large the reserve seems, liquidating it would barely make a dent in the $12.3 trillion debt.