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@ Pascal Hügli
2025-02-19 17:37:44
New US Treasury Secretary Scott Bessent recently said:
“𝑊𝑒'𝑟𝑒 𝑔𝑜𝑖𝑛𝑔 𝑡𝑜 𝑚𝑜𝑛𝑒𝑡𝑖𝑧𝑒 𝑡ℎ𝑒 𝑎𝑠𝑠𝑒𝑡 𝑠𝑖𝑑𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑈𝑆 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑠ℎ𝑒𝑒𝑡 𝑓𝑜𝑟 𝑡ℎ𝑒 𝐴𝑚𝑒𝑟𝑖𝑐𝑎𝑛 𝑝𝑒𝑜𝑝𝑙𝑒. 𝑊𝑒 𝑎𝑟𝑒 𝑔𝑜𝑖𝑛𝑔 𝑡𝑜 𝑝𝑢𝑡 𝑡ℎ𝑒 𝑎𝑠𝑠𝑒𝑡𝑠 𝑡𝑜 𝑤𝑜𝑟𝑘, 𝑎𝑛𝑑 𝐼 𝑡ℎ𝑖𝑛𝑘 𝑖𝑡'𝑠 𝑔𝑜𝑖𝑛𝑔 𝑡𝑜 𝑏𝑒 𝑣𝑒𝑟𝑦 𝑒𝑥𝑐𝑖𝑡𝑖𝑛𝑔.”
CT is still wondering what Bessent meant by this.
Here’s one (likely) interpretation:
𝗠𝗼𝗿𝗲 𝗔𝘀𝘀𝗲𝘁𝘀 (𝗦𝘁𝘂𝗳𝗳 𝘁𝗵𝗲 𝗚𝗼𝘃𝗲𝗿𝗻𝗺𝗲𝗻𝘁 𝗢𝘄𝗻𝘀):
The US government (US Treasury) owns a lot of gold. Think of the US Treasury like the government’s bank account.
Revaluing this gold to today’s market price would increase the US Treasury’s assets.
The US Treasury currently holds 261,498,926.241 troy ounces of gold, equivalent to approximately 8,134 tons. At today’s market price of $2,900 per troy ounce, the total value amounts to around $758 billion.
However, this gold is still recorded at a book value of $42 per troy ounce, totaling just $11 billion. This means the market value is nearly 68 times higher than the official book value.
By revaluing its gold reserves to reflect current market value, the government would instantly recognize an additional $747 billion in assets—effectively realizing a substantial increase in its wealth without selling a single ounce of gold.
𝗠𝗼𝗿𝗲 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀 (𝗪𝗵𝗮𝘁 𝘁𝗵𝗲 𝗚𝗼𝘃𝗲𝗿𝗻𝗺𝗲𝗻𝘁 𝗢𝘄𝗲𝘀):
To balance this out, the government issues "gold certificates" (fancy IOUs backed by gold) to the Federal Reserve (the US central bank).
These certificates tell the Fed: “Hey, we now officially say our gold is worth more. Here’s proof you can use to balance your books.”
𝗠𝗼𝗿𝗲 𝗔𝘀𝘀𝗲𝘁𝘀 (𝗩𝗮𝗹𝘂𝗮𝗯𝗹𝗲 𝗦𝘁𝘂𝗳𝗳 𝗼𝗻 𝘁𝗵𝗲 𝗙𝗲𝗱’𝘀 𝗕𝗮𝗹𝗮𝗻𝗰𝗲 𝗦𝗵𝗲𝗲𝘁):
The Fed receives those new gold certificates from the Treasury.
These certificates increase the Fed’s assets because they represent valuable claims backed by US gold.
𝗠𝗼𝗿𝗲 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀 (𝗠𝗼𝗻𝗲𝘆 𝗢𝘄𝗲𝗱 𝗯𝘆 𝘁𝗵𝗲 𝗙𝗲𝗱):
Here’s where it gets interesting: the Fed, in return, credits the US Treasury’s checking account (called the Treasury General Account, or TGA) with new money equal to the increased value of the gold.
The Treasury can now spend this newly credited money on public projects, debt repayment, or stimulus—without borrowing or raising taxes.
𝗛𝗼𝘄 𝗧𝗵𝗶𝘀 𝗜𝘀 𝗟𝗶𝗸𝗲 "𝗦𝗲𝗰𝗿𝗲𝘁" 𝗤𝘂𝗮𝗻𝘁𝗶𝘁𝗮𝘁𝗶𝘃𝗲 𝗘𝗮𝘀𝗶𝗻𝗴 (𝗤𝗘):
Normally, the Fed prints money (QE) by buying bonds from the market to pump cash into the economy.
But in this case, the Fed is not buying anything from the public. Instead, it’s crediting the Treasury’s account simply because the gold is now valued higher.
Result: The Treasury now has more cash to spend, similar to QE, but without the Fed purchasing assets from banks or investors.