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Thar's GOLD In Them Hills
Not For Sale Yet
In The Bad Idea Category
I was reading recently and hit a short blurb about the subject of selling all the gold in Ft. Knox to help pay off our national debt. So I hopped in my supersonic frog transporter and took a cruise to see who and what was behind this sort of proposal. As I read along here and there I remembered why I would be hesitant to vote for Ron Paul for President. He has some good ideas but this one falls into the "very bad idea" category. We might want to audit the Federal Reserve, which is a splendid idea, and audit the gold reserves in Ft. Know too since it has been over 50 years since a valid audit was done by all accounts. But sell all the gold in Ft. Knox to reduce the national debt? I don't think so and I'll explain why.
First, realize that the price of gold is at a historical high. The dollar is sliding and continues to slide due to this nation's economic outlook which isn't exactly rosy. There used to be a tie between gold and the US dollar and we were on the gold standard. I won't go into the reasoning behind our exit from the gold standard other than to mention that the federal government had to adhere to sound economic principles concerning printing more money and having more debt than the value of the gold in the vaults at Ft. Knox. It was more complex than that but I won't belabor the points here. The basic principle was having a "live within your means" federal government.
If these little grains of information don't point out the sheer gravity of the national debt that we are in to the "spend and tax" crowd then I'm not sure what will. You see, we have all that gold sitting in vaults and even if we sold it, not much of a dent would be made in the growing national debt that some seem intent on saddling our future generations with.
There's an outfit called the World Gold Council. You can find them @ http://www.gold.org/government_affairs/gold_reserves/ which is a fine source of information on gold. According to their estimates, the United States has 8,133.5 tonnes (metric tons) of the shiny metal of which approximately 4,600 tonnes are snuggled away in the Gold Depository at Ft. Knox. Now I have to admit that the word "approximately" causes me a bit of angst. We should know exactly how much of that precious metal we, the US tax payers, own.
The World Gold Council estimates that 165,000 tonnes is the total amount of gold ever yielded by the planet Earth in their latest report. But thar is more gold in them hills ya know? If you care to give a try at extracting it.
So now a little math is in order. I know, I know I don't care for it either, but we need to crunch some rather simple numbers to illustrate my point.
The Congressional Budget Office (CBO) is projecting a $1.5 trillion deficit for FY 2011. Thanks Obama and Congress, that's all we need. That's plus or minus billions upon billions of dollars because it is the CBO's estimate which aren't always that accurate.
Then factor in the national debt that stands at 14.3 trillion dollars depending on which second you look at the National Debt Clock. It's a moving target too.
The current value of gold is $1,500 an ounce, give or take a few dollars here and there, based upon world currency markets primarily. When gold goes up, the dollar goes down even though we aren't on the gold standard. If we were, rising gold would mean what? Lets use $1,500 as it is a nice round number.
Plugging in those numbers, you discover that if the country sold ALL of its present gold reserves only 29% of THIS YEAR'S federal deficit would be covered. You see exactly where we are presently in this economic debate about not reducing spending and upping the taxes? If you don't, I can't make it much clearer, but then again maybe I can.
A few conversions are in order to do the math and here they are:
1 metric ton = 35,273.96 ounces @ $1,500 an ounce that equals 52,910,943 per tonne. Don't you just wish you owned a tonne of the stuff right now. If you do, hang onto it as it will increase further in value as our out of control Spender-In-Chief continues his Voodoo economic act. . The dollar will continue to erode if something isn't done soon to decrease spending. The world is concerned about our excessive spending. The tax and spend crowd is concerned about raising our taxes so they can continue on their spending binge.
Lets extrapolate and play pretend like they do in Washington DC. Lets pretend that we owned all the gold in the world. The Democratic Party likes to play pretend a lot these days so lets give it a whirl ourselves. We now own the 165,000 metric tonnes in existence today. Don't ask me how we got it all because that isn't important. We just own it now.
The chart below, in LalaLand, illustrates what it would look like if we owned it all, flooded the world market with it, the proceeds from the sale and the percentage of the national debt that we could then pay off. That would be if, and only if, those professional pick pockets we call politicians could keep their cotton pickin' mitts off the proceeds until we could high tail it to the bank to pay off our astronomical debt they have created by trying to be everything to everybody.
This is broken down as illustrated by Tonnes/Value /% of Deficit/ % of Debt. The total mined gold relates to percentage of the national debt we could pay off in LalaLand. The Ft. Knox and US Holdings percentages relate to our current budget deficit.
Total Mined Gold 165,000 / $8,730,305,570,250 60 / 84%
Fort Knox 4,600 / $243,390,337,110 / 16.23%
Total US Holdings 8133.5 / $430,351,153,670 / 28.69%
Therein lies the gravity of the situation in easy to understand terms. There isn't enough gold in Ft. Knox, private individual's hands or the entire amount in existence to undo what the idiots in Washington DC have been ALLOWED to do to this nation of ours.
Is it time to really make some "changes" now? I believe it is past time, and I don't mean just change the rhetoric. There is talk here and there of returning to the gold standard. That might be a fine idea but selling all the gold reserves that belong to the US tax payer isn't a sound idea at all. Nice try Ron Paul but no cigar from this frog.
I've had my say and what say you?
Have A Great Memorial Day.
The Frog Prince