A trendy idea that’s been going around is that the government should sell its gold to raise cash.
The latest to weigh in is James Picerno at The Atlantic who wonders: “In lean times, why is $300 billion worth of government treasure simply sitting in vaults?”
Here’s one reason: There’s just no reason to turn that into cash.
If you’re Uncle Sam, you already have a great way of raising money — you can raise it at a measly 2.5%.
Or you can print it (which, as it turns out, will make the gold in your vault rise to even higher levels!).
The bottom line though is that there’s just no evidence that the government is experiencing some cash crunch that would warrant a gold liquidation.
Under current law, income from the sale of gold must be used to reduce the national debt. But nothing would stop Congress from rewriting the regulation to permit other uses. By Washington’s corpulent spending standards, $300 billion may seem modest, but it’s hardly trivial: it could, for example, reduce our $1.3 trillion budget deficit by more than 20 per cent; finance Social Security for nearly six months; or fund unemployment benefits for several years—in effect, create a stimulus package without pushing us further into debt.
Well, yes, but… lack of cash just isn’t the issue right now. The US isn’t spending constrained, except by politics.
Later he goes onto note that European governments are dumping gold, but as he acknowledged, individual EU countries lack the ability to print money like the US does, so the comparison isn’t particularly valid.
If there were stimulus measures that everyone wanted to take, and somehow the gold sitting in our vaults were preventing that, then you could make the case, but as it is, it just doesn’t make much of a difference one way or another.