by Joe Shea
American Reporter Correspondent
April 11, 2011
HOW TO SAVE THE ECONOMY
BRADENTON, Fla., April 11, 2011 -- I believe in government, and I believe government ought to do all it reasonably can to make its citizens prosperous.
Right now, we have an economy that is trillions in debt, and while it may be improving slowly, it is far from healthy, and the American people - excluding corporations, which are enjoying record profits and record reserves - are anything but prosperous. I am going to show you how government can change this over the next decade.
For clarity, I am talking about a three-month sale of 100 million ounces of gold at a 10 percent discount to the American people at a limit of 10 ounces per qualified person. Those who can produce a Social Security card and a U.S. passport, U.S. driver's license or U.S. voter registration card, and are not agents for or working as commodities professionals, can buy the gold at any national bank.
They would buy it at banks with permission to sell it at their cost, which would include nominal extra shipping and security expenses - covered by the U.S. Mint (as now) so as to leave the buyers' discount untouched.
In 2010, the market appreciation of gold increased the value of U.S. bullion holdings in "deep storage" by $76 billion, as gold was valued in 1009 at at $995.75 an ounce and in 2010 at $1,307 an ounce. Our actual holdings of "deep storage" gold did not change.
On Tuesday, with gold at $1,459 an ounce, the value of our 2010 bullion holdings of 245 million ounces had increased by $37,279,960,344 since Sept. 2010; in 2001, when gold was $290 an ounce, we had the exact same amount of gold but it was worth just $71 billion altogether. It's now valued at about $357 billion, a 500 percent increase.
America's gold increased more than $115 billion in market value since 2009, according to the data on p. 59 of the U.S. Mint's financial statement.
To sell 100 million ounces at a 10 percent discount to the spot price on the day of sale would reduce America's deep storage holdings, which have always been sacrosanct, by about 40 percent. That would leave us with just 145 million ounces.
We'd have that $357 billion in deep gold reserves against any emergency, such as a catastrophic California earthquake, and without reducing "working stock" - i.e., the 2.7 million ounces of gold used to mint and sell American Eagle and American Buffalo gold coins (about $3.6 billion worth). Our working stock of gold is usually just about 2 percent of the gold in deep storage. By the way, the U.S. Mint, in making and selling coins to the public (it costs 9 cents to make a quarter, for instance) made $84 million in 2010.
But how would we save the economy? Well, again, we'd sell the raw, unrefined gold (no coins) only to Americans at a 10 percent discount from the spot price the day they buy it, any time within a three-month window. Each could buy up to 10 ounces.
That would mean that about 10 million people could buy 10 ounces worth for $1,314 each, a savings of about $1,450 on 10 ounces. They could turn around and sell it the same day, if they wanted, and put $1,450 in their pockets; most would not sell if they perceive its value as rising. They would be unable to make a second purchase from the Treasury at that special price.
Brokers, dealers and professional traders and speculators would stop selling gold, of course, because as they sold it at lower prices to match the discount, the spot price of gold would fall and regular Americans would still get it at 10 percent less. If it fell to $600 an ounce, regular Americans would get it for $60 less, or $540, all the way down to 10 percent above the statutory price of gold, which is $42 an ounce (and that's the multiple at which the U.S. Treasury values it). There the discount would end. When the window closed and the markets resumed selling fold, it would fall back to the $1,350 or so the regular Americans had paid. It would be foolish of them to sell it for that, so the price would again start to rise - probably after a couple of years.
Many of the regular American buyers would hold on to the gold as an investment, and after four or five years, it would again be worth much more than they paid for it, or about $2,000 an ounce. The 10 ounces they bought for $14,590 would be worth about $20,000, a modest but helpful gain of around 37 percent.
Selling that gold over three months would reap the United States Treasury some $131 billion to spend on whatever it pleased, including paying down interest on the national debt. That would give our economy time to take a breath and reassess ourselves.
Those Americans who sold the same day would put a very helpful bonus in their pockets. But the Americans who hung onto their gold as the years went by and prices continued to rise - as they likely will - would also increase the value of the "deep storage" gold by about $541 for every ounce we have, or $78 billion.
If the market is foolish enough to keep dropping the spot price, the Treasury can repurchase the original deep storage gold it sold at a lower price using some of its sales revenue, making a handsome profit. Up or down, the country would win; the 10 million who bought the gold would lose, but they are the very low percentage of American people who can afford to lose a few thousand dollars and take those risks in the stock market all the time.
In effect, as the Republicans so often say they'd prefer, we'd be running the country like a business.
Joe Shea is a founder of the American Reporter. He does not have, buy or sell gold.