According to the World Gold Council the government of the United States of America holds gold reserves in the amount of 8,133.5 tonnes. One metric tonne is equal to 32,150 troy ounces. So the United States currently owns around 262 million troy ounces of gold.
At the current gold price of roughly $680 per troy ounce that means the United States owns $178 billion dollars worth of gold.
There are roughly 300 million people in the United States, meaning that the government holds roughly $600 worth of gold per citizen. There are roughly 6 billion people in the world so the US government holds gold reserves worth about $30 per person in the world.
Why does the United States government have such huge reserves of gold sitting in storage?
Prior to 1973 the US was on a gold standard. What that means is that prior to 1973 you could have taken your money and traded it in for a certain amount of gold from the government at a fixed price. In theory, a gold standard helps to prevent inflation because if an economy is on a gold standard and the government in that economy inflates the money supply and causes the value of money to decline individuals can trade their money in for gold. The gold standard provides a floor for how far money can decline in value. If money declines too far in value everyone can trade in their money for gold, thus providing a great incentive for a government not to inflate a money supply.
Any government on a gold standard that rapidly inflates a money supply will soon have everyone in that economy trading in their money for something that is not losing value everyday, gold. So the United States has such huge gold reserves because the government built them up as a reserve to honor the gold standard that was in place until 1973.
Since the gold standard is no longer in place in the US why do we need the gold reserves? The answer is we do not. The gold reserves serve no real purpose anymore. The United States government should sell off the gold reserves and use the proceeds in a more constructive and economically sound way.
For anyone who would argue that the gold reserves are a sign of wealth and strength for the US, I will simply point out what Adam Smith said in his monumental book, "The Wealth of Nations." Smith argued in his book that the wealth of nations is not dependent upon how much precious metals a government has in storage but upon how much commerce takes place in any given nation. The more commerce or business transactions taking place the greater the wealth of that economy.
So the US government should sell off the gold reserves and use the proceeds to benefit the commerce in our economy. Some great uses of the money would be to help rebuild the infrastructure in our country. The recent bridge collapse in Minnesota was a stark reminder that we cannot ignore the infrastructure that supports our economy and commerce.
Some of the proceeds from the gold reserve sales could also be used as incentives for finding better and cleaner ways to power our economy. As an example, monetary incentives could be set up that would pay anyone who figured out how to make a car run without using fossil fuels and did not pollute the atmosphere. Five million dollar awards to anyone who can build such a car and meet all the set requirements. You would be surprised how many people would take a crack at such an award and who knows what someone out there would figure out with such a large carrot sitting there waiting as incentive.
We can all think of ways the government could spend the enormous proceeds that are available from the sale of the gold supply reserves. Since we are no longer on a gold standard and the reserves are not needed anymore and serve no real purpose sitting in storage the time has come for the government to sell off the gold reserves and use the proceeds in a far more beneficial manner.
