The Treasury has been weighing its options in the wake of the ongoing financial crisis with a trillion-dollar coin being in the cards. However, that move has not been welcomed by many as some nations are moving away from the US dollar which could lead to de-dollarisation and stripping off of its stature as the world reserve currency.

However, economists have presented a trillion-dollar gold solution to curb the US debt crisis. This creative alternative has popped up as all hands in the economic space suggest various remedies to the looming economic fiasco.

Re-monetization and revaluation of the US gold reserves could accumulate trillions

In less than 30 days from now, the treasury could run out of money, thus defaulting its debt and plunging the country into an unimaginable economic implosion. This possibility is most likely to occur if the ongoing standoff between the Republicans and the Democrats regarding raising the debt ceiling goes unresolved. As a result, economists have proposed re-monetizing the gold reserves as yet another creative remedy to curb the looming catastrophe.

Currently, the treasury has about 261 million ounces of gold in its reserves which it values at $42.22. This rate dates back to the 70s when the US went off the gold standard. Therefore, it is almost 50 times less than the current market price of $2035. Economists have pointed out that the Fed Reserve bank manual instructs that the treasury can mandate the Fed to re-monetize and revalue its gold reserves. 

As such, they have proposed a revaluation of up to $20,000 per ounce, summing up to a trillion-dollar gold remedy. If the market accepts the rate, it will provide up to $5 trillion in gold, an annual federal budget. This amount will offset the cataclysmic crisis by buying back USTs and reducing the debt by 50%.

The proposal draws a tsunami of negative reactions from the Twitter financial community

The trillion-dollar gold has attracted much negative attention from Twitter financial pundits. Fort Knox has not been audited for more than 60 years now, and some users were skeptical of the existence of the said gold reserves. The Republican representative for West Virginia’s 2nd district, Alex Mooney, introduced a bill in 2021 seeking to audit the US gold reserves, but it has been stalled to date. The US treasury cannot allow auditors into the maximum security storage, raising questions about the mere existence of the reserves.

In addition, the revaluation might deeply enrich its geopolitical rivals like China and Russia, who have been accumulating gold over the past decade. The BRICS New Development Bank (NDB) is set to release a gold-backed currency later this year. Such revaluation could empower the currency to the dollar’s detriment as the global reserve currency.

Even so, the pro-gold economist Peter Schiff has explained that the underlying problem is the debt, not the debt ceiling. In his tweet, Schiff emphasized that the US sovereign debt and dollar crisis will occur not because of the failure of Congress to raise the debt ceiling but by its success.