Funny money: Gold revaluation, Bitcoin reserve, and other shell games

Rumors of gold revaluation have been in the news lately. One thing is clear. Politicians have no interest in using the nation’s gold reserves for anything like the original purpose.

Americans get smoke and mirrors instead. Officials may like to point to the large reserves and talk about the confidence all that gold inspires.

They just don’t want to impose any restraint on their ability to borrow and spend.

Nobody in Washington is talking about making the Federal Reserve Note back into genuine dollars, which are redeemable for gold or silver. The likely result of any revaluation will be a weaker money, not stronger.

One proposal is to use freshly minted dollars to create a “Strategic Bitcoin Reserve.”

Fans and speculators were hoping the federal government would wade into the Bitcoin market with nearly three-quarters of a trillion dollars to spend – driving up prices and bestowing the cryptocurrency with legitimacy as a “reserve” asset.

Treasury Secretary Scott Bessent threw cold water on that idea last week. Some in the Bitcoin community felt betrayed. Candidate Trump had announced his intention to create a reserve at the Nashville Bitcoin Conference in July 2024.

Bessent floated a different idea in February. He suggested the government could “monetize the asset side of the U.S. balance sheet.”

Some speculated that meant the U.S. might create a windfall of dollars by formally revaluing the gold reserves, which are currently held on the books at $42.22 per ounce.

Nations like Norway and Saudi Arabia are creating sovereign wealth funds. Public money is invested in stocks of publicly traded companies, oil fields, real estate, and other assets.

Last week, Trump administration officials suggested the U.S. government may take a direct stake in chipmaker Intel, where share prices have floundered for years.

There is no question such a move would be wonderful for prices in whichever assets officials decide to buy. There are, however, plenty of questions as to whether bureaucrats and politicians should be picking winners and losers.

Meanwhile, the Treasury has the ability to assign any value they want to the nation’s gold reserves. The value is currently set at $42.22/oz – about 1/80th of gold’s current value.

They could just as easily set the value of the gold at $275,000/oz – roughly 80 times the current value – although this would mean little unless the Treasury transacted using this number or forced the Fed to issue more Federal Reserve Notes in connection with the U.S. gold certificates it holds.

The total Federal Reserve Note value of the gold would suddenly be north of $40 trillion, more than what is needed to retire the entire national debt.

That won’t happen. Why? Because it puts a spotlight on the real problem.

The value of the gold doesn’t go up...

Rather, the value of the money collapses.

A few years back, far-left politicians proposed minting platinum coins, each with a face value of $1 trillion, which the Treasury would exchange at the Fed to help pay off debt or finance the deficit.

It’s only a matter of time before the public recognizes the sham that is our current monetary system.

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