–Economist says to sell the gold in Fort Knox to pay the debt.

The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.

I often have said I don’t mind or criticize ignorance. Even the most brilliant of us is ignorant about many things. What I do mind is people who are supposed to be knowledgeable, refusing to learn, and instead of learning, continuing to spout false and harmful ideas in the face of facts. In that vein, some articles are so incredible, one doesn’t know whether to laugh or cry. This is one of them:

Washington Post, Joel Achenbach, Published: May 15, 2011

With the United States poised to slam into its debt limit Monday, conservative economists are eyeballing all that gold in Fort Knox. There’s about 147 million ounces of gold parked in the legendary vault. Gold is selling at nearly $1,500 an ounce. That’s many billions of dollars in bullion.

“It’s just sort of sitting there,” said Ron Utt, a senior fellow at the Heritage Foundation. “Given the high price it is now, and the tremendous debt problem we now have, by all means, sell at the peak.”

Uh, excuse me Mr. Utt and your Heritage Foundation fellows, but the federal debt merely is the total of outstanding T-securities, which the U.S. easily could (and should) eliminate by exchanging them for dollars. It would be a simple asset swap, which the U.S. does every day at the touch of a computer key. The creditor’s T-securities account would be debited and his checking account credited.

Oh, but wait, all is not lost. Perhaps the Obama administration has a better idea:

“But that’s cockamamie,” declares the Obama administration.

Ah, now we’re getting somewhere.

Mary J. Miller, Treasury’s assistant secretary for financial markets, said the U.S. should sell assets in an orderly, “well-telegraphed” manner, not in a “fire sale” atmosphere with a debt limit deadline accelerating the process. “It would be bad for the taxpayers. It would be bad for the markets,” Miller said.

Oh, no. She’s as ignorant of economics as is Utt. She doesn’t want to sell gold; she wants to sell other assets. Uh, excuse me Ms. Miller, but not only does the U.S. not need to sell any assets, but the federal debt does not affect, or even involve, the U.S. taxpayer. Servicing the debt does not use tax money.

O.K., maybe she’s an exceptionally ignorant example. There probably are more informed people in the White House:

Another senior administration official, not authorized to speak for attribution, described the situation more bluntly: “Selling off the gold is just one level of crazy away from selling Mount Rushmore.”

Excellent. Maybe the anonymous “senior administration official” actually knows something, although being part of the Obama administration, I can understand why he/she chose to remain anonymous.

The United States may have run up a huge debt, but it is not a poor country by any stretch of the imagination. The federal government owns roughly 650 million acres of land, close to a third of the nation’s total land mass. Plus a million buildings. Plus electrical utilities like the Tennessee Valley Authority. And an interstate highway system.

OMG, as the kids say. Now the author of this article begins to demonstrate his ignorance. Excuse me, Mr. Achenbach, but federal assets have nothing to do with servicing T-securities. If the government didn’t own a single building, a single acre or a single electrical utility, that would not affect the government’s ability to service its T-securities by even a single penny. Isn’t there anyone in government or the media who understands Monetary Sovereignty? Anyone?

Economists of a conservative or libertarian bent have long argued that the federal government needs to get out of certain businesses, unload unneeded assets, and privatize such functions as passenger rail service and air traffic control. No one advocates selling Yellowstone, but why, some economists ask, should the federal government be in the electricity business?

Economist Kevin Hassett of the American Enterprise Institute said the federal government should consider the sale of interstate highways. Motorists would have to pay tolls to the private owners, he said, but the roads would likely be in better shape. Federal, state and local governments could raise hundreds of billions of dollars through highway privatization, he said.

“Many of the world’s roads were originally built as toll roads, so it would hardly be revolutionary to return to that model,” Hassett said. “If it can work for the River Styx, why not the Beltway?”

Yet another economist who does not know what he’s talking about. The City of Chicago privatized its parking meters and a toll road. The result: Costs to users tripled and service is lousy. And wouldn’t that be just peachy for the national highway system to be converted to toll roads? Drivers would love that.

And why does a Monetarily Sovereign nation need to collect tolls, anyway? Ah Kevin, please enjoy your return to the River Styx.

The Heritage Foundation on Tuesday released a plan for balancing the budget that did not include tax increases, but did include a proposal to sell $260 billion in federal assets over 15 years. The plan does not specify the assets. It refers to “partial sales of federal properties, real estate, mineral rights, the electromagnetic spectrum, and energy-generation facilities.”

“We’re not going to say we’re going to sell off the Smithsonian and the Capitol. We would not propose that anyway. There’s no specific building that we would point to,” said Alison Fraser, head of the Economic Policy Studies department at Heritage.

The Heritage group chose not to mention the Fort Knox gold when it included asset sales in the budget plan. Fraser said the group didn’t want to be “sidetracked” into a debate with the hardy band of folks who think the country should return to the gold standard. “We just opted not to go there,” she said.

That would be something to remember: One group ignorant of economics, debating with another group, equally ignorant of economics. Lord have mercy.

But some economists want to liberate the bullion.

“Why not?” asks Chris Edwards, director of tax policy studies at the libertarian Cato Institute. “I think it shows that the government is getting serious about reforming itself.”

Another “genius” joins the conversation. Excuse me, Mr. Edwards, but what the heck are you talking about?

Oh, well, I could go on and on quoting ignorant remarks from this article, but they all essentially are based on the same idiocy, which is: The federal debt, composed of T-bills created from thin air, somehow is a difficult burden to a government that also creates dollars from thin air.

So tell me, should I laugh or cry? This controversy deserves at least 3 dunce caps for major ignorance. Note that though I am running a dunce cap deficit, I will have no difficulty creating as many as I wish. I am dunce cap sovereign, just as the U.S. government is dollar sovereign. It can create as many as it wishes:

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”


14 thoughts on “–Economist says to sell the gold in Fort Knox to pay the debt.

  1. To answer your question, NO, there is no one in government or the media who understands monetary sovereignty. They all hold it as a religious dogma that the US government must get its money from someone else, such as taxpayers or the Chinese. They are totally unable to grasp the lunacy of selling off assets to get money that the US government can create all on its own.


  2. Sell US assets; what a novel idea, except why sell them at all?

    There is a debate that goes something like this: if the US Government ran its finances like a corporation it would be bankrupt. Then why not value US Government assets just like a corporation does. Corporations also use accounting entities such as intangible assets (trademarks, brand names, etc.) and goodwill. How about Full Faith as its equivalent?

    So: I think the value of Mount Rushmore, throwing in the Washington Monument for good measure is worth 14 trillion dollars. Bingo! The books are balanced and there is no national debt.

    The next time this silly discussion comes up, the US has many more assets it doesn’t have to or needs to sell to balance its books. Of course, if the usual suspects understood Monetary Sovereignty, we wouldn’t be having this useless argument.


  3. Rodger wrote, “So tell me, should I laugh or cry?”

    Well, there might actually be hope.

    Robert Rubin’s (former Secretary of the Treasury) statement in the Washington Post almost knocked me off my chair. Robert Rubin: The risk is greater today than it was in 1995 by Ezra Klein

    Of course, most of it is junk economics, but get a load of this:

    Ezra Klein: “Do you think we should have a debt ceiling at all?
    Robert Rubin: “ No, it’s an anachronism.”

    Will wonders ever cease?

    There is an article on Slate, which gives a little historical prospective to the reason we have a debt ceiling in the first place by Annie Lowrey, coincidently, Mr. Klein’s fiancée.

    Abolish the Debt Ceiling! It’s a pointless, dangerous historical relic.

    “The debt ceiling is a historical relic, the budgetary equivalent of the appendix. Before 1917, Congress needed to approve each and every debt issuance. But when World War I hit, the legislature decided to make the process easier, setting an overall debt limit and letting Treasury issue as many bonds as it needed to stay within it. A century ago, the ceiling made more sense. The government was smaller, with discretionary spending a bigger portion of the federal budget. Having the additional check helped to keep appropriations under control.”

    And as usual, Ms. Lowrey gets every thing else wrong.

    Ms. Lowrey references this document from Congressional Research Service. “The Debt Limit: History and Recent Increases”

    Click to access RL31967_20100128.pdf

    Roger, hope the I used the HTML tags correctly. You might need to clean them up.


  4. Vincent,

    Not only is the debt ceiling a relic, but so is the debt itself. There is no need for a Monetarily Sovereign nation to borrow its own sovereign currency. Eliminate the law requiring the Treasury to issue T-securities in the same amount as the deficit, and poof, the debt is gone.

    What not one person in 1,000 realizes is, deficits and debt are two separate things. Deficits are the difference between taxes and spending. Debt is the total to T-securities.

    We can issue T-securities (debt) without deficits, and we can have deficits without issuing T-securities.

    The whole T-security process is an anachronism.

    Rodger Malcolm Mitchell


    1. Or a Rube Goldberg version of the Gordian Knot.

      Looking at the process we observe the following:
      1.Treasury auctions T-securities for US dollars
      2.Treasury promises to pay by electronic credits – immediately converted to dollars – periodic interest determined at auction
      3.Treasury promises to pay by electronic credits – immediately converted to dollars – the face amount of the bill, note, or bond

      Furthermore, post gold standard:
      1.T-securities are financial instruments backed and guaranteed by the Full Faith and Credit of the United States Government
      2.US dollars are financial instruments backed and guaranteed by the Full Faith and Credit of the United States Government
      3.Treasury issued electronic credits are financial instruments backed and guaranteed by the Full Faith and Credit of the United States Government

      Is it fair to conclude since all elements have the common Full Faith and Credit guarantee therefore rendering this convoluted process nothing more than asset swapping? Or the geometric axiom equivalent: if A=B=C then A=C.

      At any rate, this is my layman’s attempt to prove your statement true, “The whole T-security process is an anachronism.”


  5. Yes Vincent,

    T-securities and dollars both are forms of U.S. money. The difference: T-securities pay interest and have an expiration date.

    Creating T-securities = creating dollars. So why create T-securities, when we simply can create dollars?

    Rodger Malcolm Mitchell


  6. What is the purpose of the US holding gold reserves and what would the ramifications be of selling them off?
    Is it akin to owning a propane grill, but having a bag of charcoal briquettes in the shed?


    1. There is no purpose. Oil reserves are much more meaningful.

      If the government sold its gold reserves, the price of gold would decline and the total supply of dollars would decline (all money sent to the government is destroyed), which would increase the value of dollars (i.e., a deflation) probably leading to a recession or a depression.

      Rodger Malcolm Mitchell


  7. This kind of talk is a thinly disguised attack on the literal sovereignty of the US. By “globalists”.

    This process has been attempted in a few other countries. Get the people to sell off their own country (hard assets) to outside parties. Wonderful.

    If fully successful, it would literally hand control of the US to someone else.

    More than creepy, it’s traitorous. Maybe the “Tea Party” should oppose something real for a change.


  8. Rodger,

    As a relative newbie to the concept of Monetary Sovereignty, thank goodness I have become aware, could you explain to me what taxes actually do? What is their purpose? Also, you say the monies paid to the Federal Government via taxes is ultimately destroyed. Can you elaborate a bit?


  9. Rodger,

    Upon further investigation of your sites contents I have found the answers to my own questions? Thanks.


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