Thursday, July 07, 2011
Should Fort Knox and Yellowstone be placed on the auction block?
The value of all gold held by the United States Government, as of June 30, 2011, according to the United States Treasury, was $11,041,058,821.09. which seems to be a "mere" eleven billion, 41 million, 58 thousand, 821 dollars and nine cents. I don't know what the value of, say, Yellowstone National Park is. I raise this with regard to Jack's invaluable posting about the precedent conditions to the President's being able to declare a sufficient "existential economic emergcy" to warrant either the invocation of Section IV of the Fourteenth Amendment or a more Schmittian declaration of Lockean prerogative power to act in an emergency to preserve the overall political order. He suggests that it must follow doing everything legally possible to enable the US to meet its debt. This means, among other things, getting money, since the basic point is that there might not be enough money in the Treasury to satisfy all creditors. Well, one way to get money, of course, is to sell assets. And the first two that came to my mind, obviously, were America's gold reserve and Yellowstone. I invite others to think of what they could imagine putting on the block. But is it really the case that the US must in fact sell down its resources in order to prevent the debt from being called into question?
I wonder how the US Treasury calculates the value of their gold assets. If you take the current spot price of a troy ounce you get something closer to $400B, not the $11B they have booked.
I'm not so certain that dumping that much gold on the market would have the depressive effect on prices that some say it would. After all, it would be happening during a time when the US government is unable to meet its financial obligations. The resulting hit to confidence in US debt would put incredible downward pressure on the value of the dollar, and likely drive even more people into commodities markets.
Why should we even consider allowing the government sell our national assets to feed its spending habit like a spendthrift who has maxed out his credit cards and pawns his possessions to maintain an unaffordable lifestyle.
There is a real simple solution to all this - STOP SPENDING MONEY YOU DO NOT HAVE.
Great idea. What would you cut first (keeping in mind that the sum total of ALL non-defense discretionary spending is less than 20% of the Federal Budget)? Also, how quickly do you think the private sector will absorb the tens of thousands of workers laid off due to the cuts you recommend?
Our yodeler must have had laryngitis during the Bush/Cheney eight (8) years leading to the 2008 Great Recession regarding its spending AND committing America to future debt in his Charlie McCarthy role without an Edgar Bergen to move his lips. Our yodeler is in the habit of using the words "simple" or "simply" with his remedies from the Bo(eh)ner/McConnell/Tea Party coloring book; alas, he still has problems staying within the lines. Perhaps the economy in CO has cut back on DUI offenses. Glenn Beck can market the Fort Knox gold but Exxon Mobil has created Yellowstone problems.
We could sell all of our elected representatives and political appointees. I'm sorry, make that "resell."
There are much simpler ways to do this. The federal government has the power of seignorage, that is to create currency. One obvious solution is for the Treasury to hand the Fed a platinum coin which it declares to be worth $1 trillion. The Fed is then legally obligated to credit that amount to the Treasury (or to print the dollars). Either way, problem solved with no violation of Constitution or statute and no risk economically except inflation (which risk is trivial under current conditions).
Balance the budget in five years by cutting spending back to the FY 2000 baseline in equal installments of about $300 billion per year. Everything is on the table including conservative sacred cows like defense.
Federal employees can accept substantial pay cuts bringing them back to FY 2000 levels plus inflation and pension reform or they can be laid off.
I would trade off a modest net tax increase in exchange for fundamental tax reform eliminating deductions and flattening the tax rates along the lines suggested by the President's budget task force that he ignored. The economic growth from lowering rates would bring in badly needed revenue.
" ... back to the FY 2000 baseline ... "
seems to recognize something about the pre-Bush/Cheney Administration that had left a surplus for Bush/Cheney that quickly disappeared with tax cuts, wars, more tax cuts, Medicare's unfunded prescription benefits, etc. Oh for the echos from our yodeler of the good old days of the Clinton Administration.
Both Bush and Obama spent like drunken Democrats. With the exception of its part in creating the subprime mortgage market, the post-1994 Clinton Administration was the second most conservative administration of my middle aged lifetime after Reagan. The FY 2000 baseline took the lowest percentage of GDP from the American people in over a generation.
In many ways, good days indeed.
Because Dems would have a problem attacking the policies of the only successful Dem President in a generation, the GOP would do well to use the FY 2000 baseline as I do.
Of course, based upon our yodeler's adulation for Bush/Cheney at this Blog during the time of their 8 years, Bush and Cheney were sober Republicans. Now, our yodeler charges them retroactively of GUI - Governing Under the Influence. But going back to the base of 2000 will not bring back those good old day as if there were a time machine. Or a De Lorean car to take us back to the Reagan days. Yet another "simple" solution.
"The economic growth from lowering rates would bring in badly needed revenue." Can we have some economically literate suggestions, please?
No, Bart, from 2001-2006 GW & his bunch spent like drunken Republicans. Obama (no fan) & his bunch have spent a fair amount, true, but they did not initiate the Bush tax cuts or the Afghani or Iraqi wars nor were they the ones to initially bailout the investment banks, those honors go to your boy GW. BTW, why are you still here commenting? Have you changed any minds? Or do you continue to post in hopes of discouraging other commenters to leave? It didn't work for me, I don't have much to say except I know to skip your comments when I see 'em, at least for the most part.
BTW, why are you still here commenting?
Have you ever heard this one?
A man goes hunting for grizzly bear with a shiny new gun. After fastidious preparations and patient stalking he finally gets an enormous prize grizzly in his sites. He squeezes the trigger and his gun emits an outlandish boom and cloud of smoke. When the smoke clears the bear is nowhere to be seen, but the man feels a tap on his shoulder. He turns around to find the 10-foot beast standing behind him.
The bear says to the man, "I'll give you a choice. I kill you and eat you, or I sodomize you. Take your pick." Humbly, and with an eye towards tomorrow, the man chooses the latter.
Several weeks later, vowing revenge, the man returns to the scene with a bigger, shinier gun. Sadly, for the man that is, the above scenario is repeated almost exactly. After another period of shame & repentance, the man buys a bigger yet weapon and returns, hoping to settle the score with this troublesome beast once and for all.
This time, when the smoke clears, and the man feels the familiar tap on his shoulder, the grizzly bear says to him, "You're not here for the hunting, are you?"
With the exception of its part in creating the subprime mortgage market, the post-1994 Clinton Administration was the second most conservative administration of my middle aged lifetime after Reagan.
Yes, Bart, when Reagan tripled the national debt we were impressed with how very conservative an administration he ran.
"But is it really the case that the US must in fact sell down its resources in order to prevent the debt from being called into question?"
If it comes to it, yes. Section 4 doesn't have an "Unless selling assets would be necessary, in which case repudiate away!" clause.
But, we're nowhere near that point now, with revenues well in excess of debt service. We might want to anyway, though, as we've run up so much debt over the last few years that a return to historically normal interest rates would ruin us. Best to get that debt paid down while we're still enjoying the teaser rate.
Yes, the "bear" facts can get you in the end. [I took a careful look at our yodeler's photo to see if a bear was lurking in the background and thought of the joys of photoshopping.]
BTW, why are you still here commenting? Have you changed any minds?
I have this perhaps naive belief that all people can be freed from their dogmas and superstitions by being provided with the facts - even progressives.
Our yodeler proclaims his role is to convince "even progressives":
" ... by being provided with the facts ..."
but what remains in dispute are the "facts" he provides, whether bare or bear. [Note: our yodeler misspelled "knave" in his self-described belief.]
I have this perhaps naive belief that all people can be freed from their dogmas and superstitions by being provided with the facts [by me, the objective, evenhanded, humble Bart DePalma]- even progressives.
Bart, you've haunted this blog for years. Years. Aside from my sense that you aren't terribly familiar with 'facts' which don't support your skewed worldview, I would ask you: Based on your experience at Balkinization, do you have any reason to believe this to be true?
In other news, as we all know, only marxists would see an urgent need for fiscal stimulus.
In other news, as we all know, only marxists would see an urgent need for fiscal stimulus.
Progressives and socialists (a group which includes Marx and his followers). There is almost no one on the modern left which does not share a nearly complete faith in the ability of the government to repeal the business cycle.
From a letter dated May 5, 2011 by Mary J. Miller, Assistant Secretary of the Treasury for Financial Markets:Post a Comment
There are serious problems with selling the assets of the United States in order to raise short-term cash:
A “fire sale” of the Nation’s gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system.
Treasury Secretaries from both parties have made it clear that they would not sell gold in order to buy time in a debt limit impasse. As then-Treasury Secretary James A. Baker said: “President [Reagan] and I are not prepared to take that step because it would undercut confidence here and abroad based on the widespread belief that the gold reserve is the foundation of our financial system, and because the Congress clearly has the power to prevent a default by assuming its responsibility with respect to the debt limit.” When President Reagan was asked whether he would consider selling gold, he told his Budget Director, James Miller, “absolutely not.” Similarly, Treasury Secretary Robert E. Rubin said, “We will not sell the nation's gold supply.”
She is wrong.
Ms Miller is in charge of the actual selling of bonds, notes and bills that are involved with rolling over our 13 trillion dollar debt. She is an experienced and savey trader who should be able to pawn our gold, no, I mean execute some gold backed repos with less than half a dozen phone calls, and put on a short derivative play to profit from the crash when the trade becomes public. This should get the attention the President needs from the House Republicans.