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U.S. Still On DeFacto Gold Standard

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May 23, 2011 – Comments (9)

I have to admit, I too was stunned that the U.S. dollar is still linked to gold.  No, you can't trade your dollars in for gold.  No, the dollar does NOT say it has any value in gold.  But Mary J. Miller (Assistant Secretary of the Treasury for Financial Markets) argued why the U.S. can not sell its gold to help pay down our debt.  Her conclusion:
A “fire sale” of the Nation’s gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system.

SOURCE

WOW! For a group of people who insist we can not go back to a gold standard, that it is out-dated, this must be like eating crow. 

9 Comments – Post Your Own

#1) On May 23, 2011 at 11:33 AM, chk999 (99.98) wrote:

Care to predict when we will go back on a PM standard?

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#2) On May 23, 2011 at 12:14 PM, XMFSinchiruna (27.97) wrote:

Or perhaps the gold is already spoken for complex swap agreements and leveraged encumberances, and therefore not available for sale?

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#3) On May 23, 2011 at 12:17 PM, XMFSinchiruna (27.97) wrote:

Also, technically speaking, if you go back and review the wording of Nixon's order to suspend international convertiability of USD to gold, the order calls for a temporary cessation of that convertability. In the interim -- and to my knowledge -- that temporary order has never been declared permanent.

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#4) On May 23, 2011 at 12:26 PM, rfaramir (29.57) wrote:

The only assets the government should sell are real estate. Federal buildings and military bases that are no longer needed, wilderness areas, national forests, etc. Especially offshore 'leases' should be made into sales. Then the oil companies can drill whenever it is opportune and not just to maintain a lease.

Private land is better and more carefully managed than leased or rented land. Look at the deforestation that used to occur with clear-cutting here and still occurs abroad. One who leases land has no interest in maintaining the capital value of the land, only in getting as much out of it during the time he has the use of it as he possibly can. This is not conducive to good stewardship.

The gold mustn't be sold off as the government doesn't own it! It was exchanged for dollars forcibly in 1933, but these near-worthless receipts still represent ownership of that gold, even though we cannot yet exchange them for it. Someday that will change. Either that or the dollars will eventually become completely worthless.

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#5) On May 23, 2011 at 12:37 PM, buffalonate (95.89) wrote:

It has nothing to do with gold.  But if we sold it it would make us look desperate which would severely hurt confidence in the dollar. 

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#6) On May 23, 2011 at 5:29 PM, XMFSinchiruna (27.97) wrote:

buffalonate

So selling U.S. gold would be "extremely destabilizing to the world financial system", but that consequence would itself have "nothing to do with gold"? Is that what you are saying?

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#7) On May 23, 2011 at 6:53 PM, whereaminow (42.76) wrote:

ROFL!

David in Qatar

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#8) On May 23, 2011 at 7:43 PM, rfaramir (29.57) wrote:

Since buffalonate usually makes no sense, this is an improvement. Speaking out of both sides of his mouth, we can choose which side to take. I take the second sentence.

Selling the gold held would indeed hurt confidence in the dollar. The only way it wouldn't would hurt would be if every dollar in existence were exchanged for the gold and no new dollars were issued. There'd be no point printing more anyway at that point, since there'd be no more gold backing them, they'd be completely worthless.

Whether such a sale really mops up absolutely all the existing dollars wouldn't really matter, except to those still holding some. Their dollars wouldn't be redeemable for anything once all the gold is gone. The dollar would be kaput.

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#9) On May 24, 2011 at 9:57 AM, ChrisGraley (30.25) wrote:

I'm not sure that we have any gold to sell.

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