2011年3月3日 星期四

America’s Secret $365 Billion Asset

finance.yahoo.com

With the U.S. facing large, structural deficits, analysts of all stripes are taking an inventory of the nation's assets and liabilities. Mary Meeker, famed for her coverage of Internet stocks, has produced a long presentation on the nation's balance sheet, as if it were a private-sector company. Historian Niall Ferguson suggests in Newsweek that the U.S. start selling off some of its assets. "The U.S. government currently has $233 billion worth of non-defense 'property, plant and equipment'," he noted. Plus there's land, power-generating assets and roads. (As if somebody would buy I-95).

On Tuesday, word came that President Obama is set to propose setting up a board to look at whether the U.S. can sell off some of its real estate holdings, a move that might raise some $15 billion.

But they're missing a big source. To quote the Seinfeld character Kenny Bania: "That's gold, Jerry. Gold!"

For a good chunk of its modern history, the U.S. was on the gold standard. That meant the Treasury and central bank had to keep a ready supply of the metal on hand in case anybody wanted to turn in paper money for bullion. While the U.S. left the gold standard for good in 1973, it has held on to its stash of what economist John Maynard Keynes called a "barbarous relic." And so there's lots of it lying around, in Fort Knox in the fortress-like Federal Reserve Bank of New York, in various U.S. Mint operations. Some of it is used to make gold coins. But most of it is in bullion. Tons of it.

As of January 31, the government had 2.9 million troy ounces of gold coins and nearly 259 million troy ounces of gold bullion, for a total of 261.5 million troy ounces. (There are 14.583 troy ounces in a pound).

The government's reports on gold holdings can be seen here.

The gold stash represents an enormous storehouse of value. That's because the government carries gold on its balance sheet at a book value of just $42.2222 per troy ounce, which was the price of gold in 1973 when Richard Nixon decoupled it from the U.S. currency. But gold trades today at about $1,433 per troy ounce. The upshot: Although it is loath to admit it, the U.S. has about $375 billion worth of gold.

The Red, White and Yellow Metal

So what should be done with this asset? At the very least, the U.S. should consider marking its position to the market, rather than to the 1973 price of gold. If the Fed and the Treasury were to write up the value of their gold holdings, it would certainly improve the ratio between national assets and national liabilities. (Meeker's dire analysis, for example, doesn't seem to account for the present-day value of the nation's gold.)

Other countries may already be moving in that direction. The Financial Times reported on Tuesday that Italian banks are pressuring the Italian central bank to do just that with its reserve gold. The reasoning: Italy's banks hold shares in the central bank. Having those shares reflect the market value of the assets held by the central bank might spare private banks from having to raise fresh capital.

(While we're at it, here's another asset the taxpayers have that frequently goes uncounted: The Strategic Petroleum Reserve currently has 726.5 million barrels, divided between 292.5 million barrels of sweet crude and 434 million barrels of sour crude. With oil at $100 per barrel, that's worth $72.65 billion.)

For obvious reasons, the U.S. needs to hold on to its emergency supply of oil. But why not consider selling at least some of the gold? The International Monetary Fund in 2009 authorized the sale of about 13.7 million ounces, or about 12 percent of its holdings. It has since sold a large chunk of its holdings (200 metric tons) to India's central bank, and in February 2010 began to sell gold into the market. Those sales haven't hampered the ability of the IMF to perform its role, and they haven't sandbagged the gold market.

The U.S. isn't going back to the gold standard anytime soon (sorry, Ron Paul & Co.) and it costs money to secure the heavy metal. We need the money badly, and we'd be selling into a very hot market. Critics (including Rep. Paul) have charged that policies of the Federal Reserve have hurt consumers and taxpayers by boosting the money supply and contributing to the rise in price of hard assets like gold. But America's taxpayers collectively own nearly 9,000 tons of the precious metal. If the government simply marked this asset to current market values, taxpayers would become among the biggest beneficiaries of the rise in gold.

Of course, there are plenty of good reasons not to sell off our national treasure. Asset sales are a classic one-shot technique — they improve the current year fiscal situation while papering over recurring structural problems. Plus, even if the U.S. were to dump all its gold tomorrow at the current price, the revenues would only cover a small chunk of this year's deficit. And while currencies come and go, gold has been the agreed-upon storehouse of value for millennium. Ultimately, it's a bad idea to hold a clearance sale on the nation's gold for the same reason it would be to sell off Yellowstone Park or the Tennessee Valley Authority. All represent valuable assets that were intended to be held in trust for future generations.

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