I found this quote is wikipedia-- so it MUST be true:
"Gold holdings peaked during World War II at 20,205 metric tons (649.6 million oz. troy). Today, holdings are 4,578 metric tons (147.2 million oz. troy ) in 368,000 standard, 400 oz. troy (12.4 kg or 27.4 lb avoirdupois) gold bars. At August 22, 2011 rates of $1890.04 an ounce [5] it is worth $278.3 billion, while the World War II total of 649.6 million oz. troy would be worth $909 billion."
Well, I'll grant you $278 Billion is NOT enough to even make a dent in our national debt-- but IF we had kept all the gold that we had at the beginning of WWII then the $909 Billion would just about cover the entire amount.
What happened to the 75% of the gold that we lost since WWII. I assume that our government used some of it or maybe all of it to pay some of our past debts. If there is a past precedence for what I am proposing-- why cannot we do it now, especially while the price of gold is so abnormally high???
If the USA were to sell all its gold reserves then naturally the price of gold would drop dramatically. But except for the gold bugs who have put all their savings into this yellow metal-- so what????
I understand that Germany is also sitting on about half as much gold as the USA-- what if they sold all of theirs also???
My guess is that only China and India would be buyers of this gold because they have such a deep cultural lust for the metal.
I also understand that the Federal Reserve Bank in New York has nearly double this amount. OK so a good hunk of it belongs to other countries that we are holding for them-- but what if we (with their permission) sold all that also.
Now we are starting to look at a good hunk of change. Maybe enough to pay off a large portion of our debt, and maybe enough to bail out some of the european countries. My question is "WHY NOT, IF WE CAN FIND SOMEONE WHO WILL ACTUALLY BUY IT FROM US???"
In today's global economy, what do we REALLY need gold for?? I mean really... No one has based their currency on it in years and years. The only people who seem to value it are those who want to save up for a rainy day that comes with a nuclear holocaust.
OK, much of this (but not totally all of it) I am presenting tongue-in-cheek. But if our politicians are considering selling off some of our National Parklands, and privatizing our highways, airports, and transportation systems-- then why are we stubournly insisting on holding on to huge gold supplies that produce zero income for the country. In todays economy where we must look for cuts everywhere-- my feeling is if it does not earn the country some income or make our life better in some way, then we should consider getting rid of it and focusing more on aspects of our economy that do actually benefit us.
Other than some nice fillings in my mouth and some pretty trinkets on my wife-- gold plays a very small part in my day to day existance.
OK-- now it is your turn to explain to me where I am wrong and short sighted.
Comments
A couple of things. Assuming the numbers are correct, the 75% was redeemed back in the late 60's and early 70's, before we went off the gold standard permanently. Us deciding to eliminate the silver from our coinage sparked foreign holders of our paper to redeeem them in gold. Nixon closed the 'window', I believe, in '73.
Many countries, particularly 3rd world are actually buying gold and building their treasuries with gold serving as substitute for many of the heretofore favored currencies. For example, there are only so many dollars you want to hold before the utility cost of some other alternative becomes overly attractive. China has been attempting to diversify their holdings for quite a few years but being damn careful not to spook the market in dollars. There is also enormous demand from a broad spectrum, so I really doubt that any CB selling their gold would have a lasting negative impact on the street price of bullion.
As for the NY Fed, that gold is stored there and I don't believe it's something that's on their balance sheet. The US reserves are in Ft. Knox.
As for what it's worth? feh. Please don't take a Kernan ostrich approach and say you'd rather have cattle. duh. That's not the trade off with gold - it's would you rather have dollars? euros? yen? And to what degree? Folks need to think of gold as money. Not currency, but money.
As for the Unfunded Liabilites (~>$100 TRILLION FREAKIN' DOLLARS), I've read that even if they cut benefits as much as possible AND raise taxes as much as possible, it still wouldn't pay the tab. However, it would make it possible to perhaps monetize the remainder. The monetization that would be required [read: printing money like in QE2, 3, 4, 5, 6 . . . ] would halve the value of the dollar over the next 10 years. Note that this is on top of the dollar losing 96% of its value since 1913 - the first year of the Federal Reserve.
As for why to own gold? I think of it as a security blanket in times of uncertainty. However, the cost of a good nights sleep is hardly 100% of your portfolio. I've been suggesting for years that most folks need to have 3-5% in bullion as part of their overall portfolio.
peace,
rono
The estimates that I've seen range from $65T to $115T. Pick your poison. When I started posting about UL, it was more than a few years back and while perhaps you have seen something that would have shrunk or even contained them, I have not. The official budget deficits have continued to grow while reveneues have continued to shrink. And of the commitments, they too, continue to grow.
What we are starting to see is a growing concern over the problem from many quarters and that's great (or at least more people are acknowledging that there is a problem). However, do you really think that the existing gov't in washington is going to take sufficeint measurers to address it? Geez, they can't agree on anything.
Regardless, there is a growing problem with funding the promises that the gov't has made to a lot of people. What are their choices for dealing with it? On some they'll probably default but that will hardly be politically viable for many. Can they raise taxes to cover them? To some degree here and there, but this is also very questionable from a politically viable perspective. What does that leave but to monetize some portion.
Ergo, I see a combination solution including cutting benefits where they can, raising taxes where they can and monetizing where they can.
Now if you don't see a problem - good luck.
peace,
rono
1. Raise income (AKA= raise taxes, sell assets, or INCREASE PRODUCTIVITY (IE GDP)
2. Cut spending
3. print more money
IMHO the very best solution would be to increase productivity which would help unemployment, exports, and increase the tax base. This ultimately is the solution that we must strive for, and I believe BOTH Democrats and Republicans could agree on this. But the problem is that nobody knows a short-term fix for this. Yes, new jobs will help-- but employers do not want to hire more UNTIL productivity warrants it. So we are faced with the typical "chicken and the egg" situation. That is, we need more people working to increase productivity, but nobody is hiring more people until productivity actually does go up.
So let's look at the other 3 options.
The Republican say absolutely NO to #1 because they flatly refuse to raise taxes.
The Democrats say absolutely NO to #2 because they say society needs social welfare programs for the underpriveleged.
That leaves #3-- which I am afraid to say will most likely be the option that we will be using-- at least in the short-term. But we MUST try to learn lessons from history.
Printing more currency did NOT work very well for Germany back in the 1920's as they were trying to re-build after WWI. What came next was unbelievably high inflation, a crazy leader because the people wanted change ( do not misinterpret this-- I am NOT comparing Obama to Hitler, I am referring to leaders that we might elect in the future since actually I personally like Obama, I voted for him, and I support him.) then a massive World War.
But today Germany is the leading economy in Europe, and it ultimately worked out for them. So our problem is how do we design a policy to ultimately save our economy like Germany did, without going thru all the horrific pain, suffering, and tragedy that Germany endured in the 1920-1940's.
Which is why it's unlikely they're selling any gold; the memories of Weimar have not likely faded from the national consciousness. Which is why others aren't selling, because they see that printing would appear to be the preferred response. The whole thing of learning from history is clearly not going to happen in this case, which is what I've been saying for a while now.
You stated:
IMHO the very best solution would be to increase productivity which would help unemployment, exports, and increase the tax base. This ultimately is the solution that we must strive for, and I believe BOTH Democrats and Republicans could agree on this.
I am not clear what you mean by increased productivity which would help unemployment.
Increased productivity in many businesses may mean obtaining more work from the existing work force; not adding workers. I see this today among numerous businesses today.
In related notes, in Michigan: a new auto engine facility put in place within the last 3 years has 150 steps of machining processes starting with the bare engine block, before a human hand touches this piece. This technology did create a few jobs to provide maintenace of the automated line; but a 150 step engine process years ago would have also required "more" workers. Related to this facility, GM announced an additional $387 million investment, but this large sum of money will only create 150 GM jobs; as one may bet the farm that a majority of the money with go to the machines; which do not need pensions, holidays, etc. etc.
Aside from the deeply imbedded structural problems with our economy (meaning many folks are not spending money beyond what they must); and foreign competition from low wage countries, technology continues to modify and adjust how many workers are needed to allow a company to be productive. Today is not unlike the industrial revolution of invention starting 150 years ago.
I'm not convinced that productivity increases means more jobs.
Respectfully,
Catch
You make a very good point about machines taking jobs away from humans. But as the saying goes "you cannot put the genie back into the bottle". I am afraid that technology is here to stay. We will never return to plowing the fields with ox drawn plows when we can use a tractor.
When foreign worker are willing to work for salaries far lower than American workers, the ONLY way American companies can compete is by designing technology to be even more productive than foreign cheap labor.
This will obviously put some industries that cannot adapt out of business.
But we cannot have an economy based predominately with lawyers and financial planners.
Apple is one of our largest capitalized companies, but they have relatively few employees since they mainly come up with the design and then out-source the manufacturing to other companies. IS THIS THE BUSINESS MODEL THAT WE ARE ALL HEADED TOWARDS. I really hope not, since I feel that in order for the country to create wealth IT NEEDS TO PRODUCE SOMETHING. A service orientated economy does not creat new wealth, it just redistributes the existing wealth around.
Brazil and big corporations have basically put the small family farmer out of business.
Back in the 1980's Japan dominated the Automobile and the electronics industry, but even this was NOT powerful enough to prevent Japan from falling into a 20+ year funk far worse than what we are currently experiencing.
So we obviously do NOT want to be like Germany of the 1920's or Japan of the 1980's. So who will be our role model??? I propose that there is nobody out there that we can emulate. I feel that it is up to the USA to blaze the new trail for itself and to lead the rest of the world thru the 21st centry and beyond. Unfortunately, we are getting off to a poor start in the first decade so far.
I do not think it wise to just resign ourselves to the fact that since China's and India's populations are exploding, that they will be the leaders of the 21st century and beyond. If we do not make some big changes to our current business models, I fear that will be our destiny.
So IMHO, in order to make these changes Big Business AND Big Government need and must work together cooperatively to achieve success. Right now they seem to be in direct competition with one another. And this cannot continue, neither the Democrats nor the Republicans are totally right or totally wrong-- but they both must start compromising so that our current dead-heat statis can end.
OK-- now someone else can take over this soapbox-- I am dome with it for now.
We need to grow GDP which will in turn grow revenues. The only way we can get out of this bind is through growth. Otherwise, spending cuts will simply decrease demand side of the equation causing economy to shrink further which will cause another round of cuts, ... thus racing to the bottom. They did that prematurely in 1937 which caused a-relapse of recession.
You can only draw stimulus (gradually) and really reduce deficit when the growth takes hold.
Reply to Mo about reducing regulations. Your examples are classic and nasty and should be eliminated. That said, 99% of what I'm hearing the repubicans ask for is elimation of the clean air act, the clean water act, selling off or making accessible the national forests and parks, etc. I see a disconnect.
Anyone suggesting that environmentalism doesn't create jobs is someone that's speaking for the smokestack industry. Of course it creates jobs but different jobs for different businesses. You can be green and still a capitalist.
A great read is called Natural Capitilism.
rono
Granted that the industrial age is over and this is the information age. Dr. Ballard stated that the auto industry peaked in 1973 and has been in decline since. This type of mfg job is gone forever.
However, you can take an approach to production that puts more focus on human capital. Kantos (Cantos) was on CNBC this morning and made an offhand statement that in this country the focus is on capital instead of labor. The implication was that it is something that we've chosen and didn't have to be a given.
And that brings us to the SupplySide/Demand Side stimulus issue. Supply Side, or trickle down economics is such unmitigated bullshit in most economic situations - and paritcularly our today. QE 1 & 2 did a lot of good for corporate america and wall street, but didn't do a thing for employment or main street. I told everyone repeatedly about the Bush Tax Cuts that while there were great things in there, there was not nearly enough giveback at the low end of the income ladder because of the Marginal Propensity to Consume. At the low end, they spend 100% of every additional dollar. At the high end, they save most. The theory was that by giving the high end more, their saving and investing would make capital available for investing in new P&E, etc. Sure. It's available but that doesn't mean it will be applied. For example, the Bush cuts drastically reduced taxes on CapEx and interest rates were (and are still) zero and there was lots of money available for new P&E. Ah, but there's many a slip betwixt the leap and the saddle - if my plant making wigits is only operating at 70% capacity, I am not interested in building another or expanding or hiring.
Right now, all the cheese is going to big biz and wall street and main street in in the midst of a full blown depression. And unless things change, I fear will see rioting in the streets before long.
peace,
rono
In terms of green companies, someone mentioned Tetra Tech (TTEK), which looks interesting,
I'm not sure anything about censoring, but " If we censored posts based on the level of nastiness, I imagine that quite a few of yours would be axed well before mine"
My fundalarm posts (like the ones where I argued that the banks weren't fixed or that QE would not lead to some new and wonderful utopia and people acted like I was nuts - those) still are nastier than anything seen on this board (which has been quite a bit calmer.)
Sorry, but you misunderstood me. I was agreeing with you that there are many examples of regulations that are BS. I would never censor you or anyone around here. I might disagree with you but that's different. Your examples are classic cases of bad regulations that should be eliminated.
I also agree that there are great examples of the gov't subsidizing stuff that should be able to make it on their own. In spite of what you might think, I'm not in favor of subsidies, particularly operating subsidies. Gov't aid should be in a form of a capital loans if at all. Same/same for welfare. I'd rather teach a man to fish than give him a fish to eat.
As for green energy, et al., the best action for the gov't would be to support R&D only and let the free enterprise system take care of the rest.
Oh, but please don't tell me about subsidies for failing companies. How about the banks in 2007 and for that matter the car companies. You can't have it both ways. I say that if you want capitalism to work, you have to have competition and you have to allow failure. Failure is what cleanses the system and reallocates resources to successful businesses.
So, anyways, please understand that I was NOT disagreeing with you. And, also, please listen to the biz talk shows and the folks screaming for the same sort of massive deregulation that gave us the housing meltdown.
peace,
rono
No apologies needed, nor deserved. At times I can be rather opaque.
I was hearing today that much of the current bank problem in Europe is that they are so loaned out all the time that they need a lot of short term bridge financing and that's why they moved this morning.
Getting back to regulations - ever look at your state agency that licenses various and sundry professions? At the beginning they might have had good intentions, but after years of involving the industry in setting the rules, the rules mostly serve to raise barriers to entry to new participants. Good God, why are barbers regulated? There are probably some professions that should be licensed, but if you look at doctors, hospitals, and the insurance and drug companies, how much of the licensing has resulted in the highest costs for health care of any country on the bloody planet. 30 years ago, they were touting 'bed reduction' as a way to lower health care costs. Damnit, reducing the supply has never resulted in a lowering of the price. Never.
First off, the gov't should spend the majority of their scarce resources on education, the environment and infrastructure. Do that and the vast majority of the other problems will disappear.
Defense? Declare victory and bring ALL the gd troops home and defend the shores like the constitution says. You could cut defense spending by 13/ ($200B) and at the same time improve the quality, training and technology of our military.
and so it goes,
peace my friend,
rono