No Golden Fleece & No Silver Bullet

March 4, 2010
"We have met the enemy and he is us." - Walt Kelly

The U.S. is no doubt still a very powerful nation. At the same time however it is facing a challenging set of economic headwinds which threaten to lead to a chaotic unwinding of the financial system not only within the nation but also worldwide. There are many angles from which to examine this erosion. In this brief essay it is my intention to briefly focus on the demise of the U.S.'s financial position by comparing the gold and silver holdings of the USA between 1940 and 2010. The comparisons are startling as they are devastating.

In 1940 the United States Treasury held 19,543 tonnes of gold in its Treasury, 183,514 tonnes of silver (1942) in its strategic stockpile and had a population of 132,164,569 people. It had therefore 4.753oz of gold and 44.641oz of silver per person.

In 2010 the United States Treasury now has only 8135 tonnes of gold, virtually no silver and a population of approximately 307,212,123 people. This equates to only 0.8513 oz of gold per US inhabitant.

Let us examine what the US Treasury would have held in its Treasury and strategic stockpile had it maintained the same physical holdings of precious metals per person in 2010 as it did in 1940.

HYPOTHETICAL POSITION

Current estimated population:       307,212,123

Gold holdings at 4.753oz per person       45,417 tonnes       =$1.663 trillion @$1139/oz

Silver holdings at 44.641 oz per person       426,572 tonnes       =$ 235.3 billion @$16.17/oz

TOTAL HYPOTHETICAL VALUE                     =$1.8983 trillion (1)

ACTUAL POSITION

Gold holdings                      8,135 tonnes = $297.89 billion

Silver holdings                      NIL

TOTAL ACTUAL VALUE                      =$297.89 billion (2)

(1) - (2)                      = $1.6 trillion

The math is simple for everyone to see. Had the United States continued to top up its gold and silver holdings so as to maintain the 1940 holdings per person, it would not only be sitting on much larger holdings of precious metals, but would also have additional wealth of $1.6 trillion on its balance sheet.

This is the result of investing in paper promises instead of a true store of value. Is anyone still in any doubt what the outcome would be if the government is allowed to "baby-sit" your 401(k)'s and IRAs?
 

This $1.6 trillion figure is in fact a gross underestimation of what the current figure would have been for several reasons. Some of these include:

  • The tremendous run-down in central bank gold stocks by feeding them into the market has had a dampening effect on price.
  • The deleterious effect of hedging over many years.
  • The unknown quantities of gold leased by central banks which have subsequently also been sold into the market.
  • The unknown effect of ETF's if they do not in fact hold the gold they profess to hold.
  • The possibility of widespread fraud by the introduction of tungsten-filled gold plated bars into the market.
  • The possibility of some sort of foul play through the COMEX. To this end I commend EVERYONE to read the excellent article by Adrian Douglas titled, COMEX Gold and Silver Inventory Data Reveal an ALARMING Trend".
  • The increasing purchases by the USA would have put serious upward pressure on the price.

By diverting social security contributions to purchases of additional gold and silver the USA would not only have augmented its wealth by a substantial amount, it would also have a Social Security Trust Fund that is based on the reality of a hard asset rather than Treasury Notes of dubious value. Rather than follow this strategy it instead chose the course of siphoning off these contributions to use them predominantly for the conduct of wars and providing pork for politicians to distribute in their electorates. These wars gave the USA very little and instead made the military-industrial complex grow hungrier and more powerful thus requiring an ever increasing number of dollars to be satisfied.

Anyone who doubts the power and influence of the industrial-military complex only has to remember that the President wants to freeze only non-security federal discretionary spending for the next three years.

Furthermore, the figure of $1.9 trillion would have been more than enough to remove the economic threat that the Chinese have hanging over the American nation. In fact the existence of a $1.9 trillion stockpile of gold and silver would have been so daunting to China that it would not even think of making noises against the US government.
 

The end result is that over-investment in guns and war instead of gold and silver, have left the nation sitting on a financial precipice, exposed to the fiery breath of an emboldened Chinese Dragon, and with an unsustainable fiscal policy at home.

The vast majority of the people in the USA have been diddled as they now have only a remnant of their original gold holdings (assuming that it also has not been sold), a Social Security Trust Fund full of worthless IOU's and an investment in military adventurism that has paid very little if anything in dividends. One wonders then what the purpose of this strategy has been. Perhaps it has something to do with amassing tremendous wealth at the expense of the nation and its people. The increasing concentration of wealth into fewer and fewer hands seems to support this contention.

The detail of the financial motivations behind the invasion of Iraq and Afghanistan are still largely hidden from the public's view. The role of banks in whittling away the gold and silver stockpile is also hidden from site in the absence of an audit of the nation's stockpile. What is known to a far greater degree is the extent of corporate America's involvement in, support and supply of Hitler's regime as well as the Government turning a blind eye to such activity at the time. In other words, the pursuit of tremendous wealth has more often than not no qualms of conscience.

The bottom line is that America finds itself with no golden fleece with which to clothe itself from the cold gusts of the global financial crisis and no silver bullets in the form of coinage with which it could underwrite continued economic activity within its borders under all conditions.

The leaders of the United States must remember that the United States is not just a geographical, political and economic entity. More importantly it is an idea in much the same way that Ancient Greece was an idea in its own time and even beyond its time. The distortion of this idea has led to economic, moral and political erosion whilst it seems to have amassed only enemies, debt, empty factories and corrosive unemployment. This is a dangerous development that must be stopped and reversed otherwise the world is in danger of capsizing into a sea of red ink and blood.

A return to honest money is an inescapable part of the reversal and the longer it is avoided the less chance the American nation has of reclaiming the high ground. The coinages and power of Ancient Athens and the Byzantine Empire lasted for over 8 centuries in total. It is perhaps no coincidence that they had gold and silver coinage recognised and valued by friend and foe alike.

Sydney Australia

USA has the world’s largest holdings of gold: 8,134 - representing 77% of its Total Foreign Reserves.

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