Can the USA Sell the 8,134 Tons of Gold in its Reserve and Buy Bitcoin? Economist Answered

United States government Bitcoin’e The idea of ​​investing started to gain attention when two proposals announced at the Bitcoin 2024 Conference in Nashville sparked discussions.

Both plans, introduced in July, suggest that Bitcoin could complement or even rival gold as a major asset in the U.S. Treasury’s reserves.

Former President Donald Trump and Senator Cynthia Lummis offered differing views on Bitcoin’s role in America’s financial future.

Trump suggests that the US stop selling the Bitcoin it already owns. The government currently holds approximately 198,000 BTC worth approximately $19 billion seized from criminal activities and often sold to fund law enforcement or compensate victims. Trump argues that holding this stock of Bitcoin would provide a valuable national asset at no additional cost.

Senator Lummis proposes a more ambitious plan: for the US Treasury to purchase one million BTC, worth about $100 billion at current prices, and hold them for at least 20 years. Lummis believes that Bitcoin could support the US financial system, supplement gold reserves, and even help reduce the national debt by selling Bitcoin in the future if necessary.

Lummis’ plan is based on a revaluation of US gold reserves, currently recorded at $42 per ounce, well below the market rate of over $2,500 per ounce. Lummis argues that by updating this valuation, the Treasury can issue new certificates to the FED, thus unlocking funds to purchase Bitcoin.

The United States currently holds 8,134 tons of gold from the gold standard era, but this gold no longer serves any official purpose in the financial system.

Economists and skeptics have expressed concerns about both proposals. George Selgin, an economist at the Cato Institute, argues that neither plan would significantly benefit taxpayers or strengthen the dollar’s dominance.

Selgin rejects Lummis’s debt reduction argument, pointing out that the United States has not yet sold its gold reserves to pay off debt, likely due to resistance from gold investors and miners. He predicts that Bitcoin investors would show similar opposition if the government attempted to liquidate its holdings.

Selgin also criticizes the financing mechanism of Lummis’ plan. Revaluing gold reserves to print new money may seem costless, but Selgin warns that it will ultimately create liabilities for the Fed as it will pay interest on the newly printed money.

“You look like you’re getting something for free, but you’re not actually getting it,” Selgin said.

*This is not investment advice.