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BULLION BLURB - U.S. Considering Move Back to Gold Standard

Have you heard about this? Rep. Alex Mooney of West Virginia presented H.R. 5404 to the House on Thursday, March 22nd.

This bill, if enacted, would revert the U.S. economy back to the gold standard. The gold standard is defined as “the system by which the value of currency was defined in terms of gold, for which the currency could be exchanged. The gold standard was generally abandoned in the depression of the 1930’s.” However, this wasn’t made official until 1971.

So, what could this mean?

Our position at HCC is a simple one, it’s an interesting thought, but probably impossible to implement. In the simplest terms, the U.S. won’t have enough gold to back the currency without severe devaluation of the dollar or extreme inflation of the price of gold.

The Motley Fool just conducted a study to find out what country has the world’s largest gold reserve…any guesses? Ding ding…the United States.

In fact, the Federal Reserve is currently holding a little over 8,133 tons of gold, which puts the gold reserve somewhere in the $350 billion range. That’s a little short of the country’s $18+ trillion GDP we are working with.

It’s not difficult to understand how reverting back to the gold standard just doesn’t make dollars and cents…or any sense at all.

That’s all for now. Stay tuned for HCC’s next Bullion Blurb.

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