BBO Discussion Forums: The budget battles - BBO Discussion Forums

Here's one amusing possibility:

The US has about 400 billion in gold in Fort Knox.
We could sell this off and use it for short term stimulus programs without impacting the long term debt....

Is that the price it was bought at, or at current market prices?

Current market value (as of three monthes ago).
Its definitely up since then.

At the same time, it would be necessary to trickle this out onto the market and even so, this would probably depress prices.

I was very surprised to hear an estimate that all of the gold ever mined would (probably) fit into three Olympic sized swimming pools. Another estimation I heard was a cube that was (roughly) 67 feet on a side.

Current market value (as of three monthes ago).
Its definitely up since then.

At the same time, it would be necessary to trickle this out onto the market and even so, this would probably depress prices.

I was very surprised to hear an estimate that all of the gold ever mined would (probably) fit into three Olympic sized swimming pools. Another estimation I heard was a cube that was (roughly) 67 feet on a side.

I have always wondered why governments do not use gold as a store of value over the economic cycle, given that demand for it generally goes up during a recession and down during a boom. Seems at least as attractive as government debt. Perhaps governments are just too big compared to the market in gold. If I were the Uk government I would definitely start selling a bit at current market prices.

Let's see if I have this right. Fort Knox has about 8,000 tonnes, worth about $450 billion. All the gold ever mined comes to around 165,000 tonnes. That's maybe $9.5 trillion (assuming that 8,000 tonnes is worth $450 billion). So our current national debt is considerably in excess of the value of all the gold that has ever been mined?

I doubt this line of thought leads anywhere, but it has a certain shock value.

If I were the Uk government I would definitely start selling a bit at current market prices.

Unfortunately Gordon Brown decided to sell off almost all of the UK gold reserves when the gold price was almost at its lowest. As you mention they might be quite useful just about now...

A bit off topic hrothgar, but what is the stock market doing?

I cannot understand it. Its completely bizarre. All my usual rules of thumb for stocks (basically based on price to earnings ratios) indicate this is a market to buy in. However, the market is still falling. It must be pricing in the risk of a another deep recession, and yet companies keep posting above expectation profits. Also, where are investors going if not into equity. Low interest rates, and moderate inflation in the eurozone make cash unattractive. Bonds are becoming increasingly unattractive. All this suggest that one should be buying equity. However, the stock market is still falling.

I think only about 5000 tonnes of it is in fort knox. Not sure where the other 3000 tonnes are, but there we go.

New York Fed

A bit off topic hrothgar, but what is the stock market doing?

I cannot understand it. Its completely bizarre. All my usual rules of thumb for stocks (basically based on price to earnings ratios) indicate this is a market to buy in. However, the market is still falling. It must be pricing in the risk of a another deep recession, and yet companies keep posting above expectation profits. Also, where are investors going if not into equity. Low interest rates, and moderate inflation in the eurozone make cash unattractive. Bonds are becoming increasingly unattractive. All this suggest that one should be buying equity. However, the stock market is still falling.

We have lowered our growth forecast further and now expect real GDP to increase just 2%-2½% (annualized) through the end of 2012. Since this pace is slightly below the US economy’s potential, we now expect the unemployment rate to be at 9¼% by the end of 2012, slightly above the current level.

We now see a one-in-three risk of renewed recession, for three main reasons. First, a worsening of the European financial crisis would hurt the economic outlook globally. Second, our forecast assumes that the payroll tax cut is extended for another year; if that failed to happen the fiscal drag in early 2012 would rise significantly. Third, the unemployment rate has increased in recent months, and such increases have historically had a tendency to feed on themselves.

Our inflation forecasts have not changed much, but our conviction has increased that the large—and now growing—output gap will result in significant renewed disinflation. Nominal wages are growing at a 2% rate, unit labor costs are roughly flat, and the temporary inflation impulse from higher commodity prices and the supply chain disruptions in the auto sector is waning. We expect the year-on-year rate of core inflation to fall from a peak of around 2% in late 2011 to 1¼% in late 2012.

It's almost pathetic to watch you try to spin this so the Democrats share the blame.

it's almost pathetic, but not surprising, that you're about the only one who thinks the dems *don't* share in the blame

Raise your hands if you think that the Republican's deserve any significant portion of blame for the downgrade...

(Just to make sure, if folks have a strong belief that the Democrats and Republicans are equally blame for the cluster *****, that would also be interesting)

it's almost pathetic, but not surprising, that you're about the only one who thinks the dems *don't* share in the blame

BTW what S&P said was that in their opinion USA Treasuries are riskier and have a bit higher chance of default.
At this point the markets disagree and prices are up as people are buying.