Tuesday, May 17, 2011

Heritage Foundation: Sell Gold to Pay Off Treasury Debt

In possibly the worst financial advice ever given to the United States government, Ron Utt, a senior fellow at the Heritage Foundation, says the United States should sell the gold it holds in Fort Knox to pay off its debt. Utt's reasoning:
It’s just sort of sitting there.
Problem one is that there may, or may not,  actually be gold just sitting there at Fort Knox. Ron Paul would like to see a bill passed that requires an outside audit of the gold. Aside from the fact that all the gold might not be at Fort Knox in the fineness of a gold coin, or at all, even the members of Obama's administration think the idea is off the wall. WaPo reports:
Another senior administration official, not authorized to speak for attribution, described the situation more bluntly: “Selling off the gold is just one level of crazy away from selling Mount Rushmore.”
Actually, I would be more in favor of selling Mount Rushmore.

There is only one way the selling off of U.S. gold makes any sense, and that is if one wanted to truly destroy the dollar.  If the United States ever got into a hyper-inflationary state, it would be very difficult for the U.S. to bring the dollar back from the brink without holding some gold to back it up.

If one wanted to pulverize of the dollar as a currency, then by all means sell the gold and then go on a dollar printing binge.

To some anarcho-capitalists, this might be viewed as a positive step.

This, however, is not likely what Utt foresees in his call for selling gold. Utt, in other words, does not get the importance of gold  in tying a nation down relative to how many dollars a country can print. Even President Nixon, who took the country off the gold standard "temporarily", was not mad enough to sell the gold held at Fort Knox (at least not publicly).

There are only two things that can bring the country back to a financially sound base, put the dollar back on the gold standard (which would be difficult to do, if all the gold has been sold) or abolish the Fed entirely and return the evolution of money to the private sector. But if Utt thinks he is going to be able, on a long-term basis, keep any control over the financial sector after selling off all the gold, that's utterly ridiculous


  1. Paging Gordon Brown...

  2. Kinda crappy post. Selling gold is not a panacea, of course, but the blog author is way too one-sided on this

  3. i prefer gold standard over fiat money; however, i do have concerns over the stability of the standard. what if major gold producing countries suddenly withhold their gold export and form cartels like the oil rich countries. what will the world or US going to do?

  4. "The major objection against 100 percent gold is that this would allegedly leave the economy with an inadequate money supply. Some economists advocate a secular increase of the supply of money in accordance with some criterion: population growth, growth of volume of trade, and the like; others wish the money supply to be adjusted to provide a stable and fixed price level. In both cases, of course, the adjusting and manipulating could only be done by government. These economists have not fully absorbed the great monetary lesson of classical economics: that the supply of money essentially does not matter. Money performs its function by being a medium of exchange; any change in its supply, therefore, will simply adjust itself in the purchasing power of the money unit, that is, in the amount of other goods that money will be able to buy. An increase in the supply of money means merely that more units of money are doing the social work of exchange and therefore that the purchasing power of each unit will decline. Because of this adjustment, money, in contrast to all other useful commodities employed in production or consumption, does not confer a social benefit when its supply increases. The only reason that increased gold mining is useful, in fact, is that the large supply of gold will satisfy more of the non--monetary uses of the gold commodity." -- Murray N. Rothbard

  5. Presuming the US still owns the gold, the proceeds of such a proposed sale would be frittered away on new or current spending programs.

    The gold (and silver) need to be minted into coinage and an orderly and generous transition from Federal Reserve notes to circulating gold and silver coin needs to be established.

  6. They better sell it soon, Abby Prechter Doolittle says it's going to $500.


  7. Selling gold would be the first stage to remonetizing it via the Mengerian market process. I would have thought you would be for that.

  8. If the gold standard were to be reintroduced and gold producing countries prevented gold from being exported, everyone would simply enjoying falling prices. In other words, the value of gold would increase. Not a bad thing I say.

  9. Quick reality check please? The only thing putting the gold in Fort Knox up for sale would accomplish is utterly cratering the price of gold.

  10. Umm, head over to Lew Rockwell's new "Political Theater", the latest post focuses on Ron Paul and his endorsement of selling what's in Ft. Know and the NYFed.

    Link to NySun article:

  11. I was thinking the same thing as Ron Paul (apparently). Why not get the gold into the people's hands? Current money isn't backed by gold anyway, so it's just a government asset going to waste like all other government assets.

    If we are to get rid of the Fed, it will almost certainly have to be from changes in the laws to allow for monetary competition. In that case, we'll need the gold in the hands of people who know how to properly use it -- i.e. NOT the government.

  12. If nobody has seen the gold and we can't audit the gold at Fort Knox, than how would anyone know if there is any gold at all ? It possibly could already be gone and we wouldn't know it??? WE ARE ASSUMING THAT THE GOLD IS STILL THERE. WE WILL NEVER KNOW !!!

  13. I don't see the big deal. The end goal is to get precious metal money into circulation, replacing fiat paper money. Minting the gold into coins and selling it off while phasing out federal reserve notes would be preferable.

  14. Nixon, if anything, took the country off the gold standard so he didn't have to sell the gold at Fort Knox.

    Bretten Woods was to sell the gold at 35 dollars an ounce. Nixon defaulted on that agreement and KEPT the country's gold reserve.