We don't hear that much these days from Sanford Weill, the architect and former CEO of the first of the financial mega-firms, Citigroup. But he recently spoke and took questions about the state of the financial world during a reunion weekend at his alma mater Cornell University. As you might expect, few of the questions were particularly pointed, but for one he had a very interesting response. Weill isn't a very big fan of gold.
One audience member asked a mostly incomprehensible question which ended:
How do you feel about large banks using options to suppress the true value of gold in the marketplace?
It's not clear precisely what this gentleman is talking about, but here was Weill's reply:
I think the United States should sell its gold. I think that for gold to have any kind of monetary value, and I haven't figured it out, but it has to sell in the millions of dollars an ounce or billions of dollars an ounce, because gold had a monetary value when the amount of paper currency was very small, and we went off that system a long, long time ago. But when you think about how the world economies have grown over the last 50 years, we don't have that amount of gold.
The government accounting is done in a strange way, but any time they make an investment in something, it's written down to zero as an expense, so our gold is carried at zero on the balance sheet of the federal government. . .
This is an interesting view, and it sort of makes sense. Why should the U.S. have gold reserves anyway? It's not like there's any chance the U.S. will ever go back on the gold standard. These reserves are useless assets that just sit locked up in giant vaults. Looking at a recent Treasury audit from 2009 (.pdf), the federal government has about 7700 tons of gold in "deep storage." Using current market value that amounts to around $300 billion.
In the grand scheme of federal debt and deficits, $300 billion isn't that much. But perhaps this raises a broader point. Maybe one debt pay down approach should be for the U.S. to begin selling all of its unused assets. Surely, the U.S. owns other precious metals, land, buildings, commodities, etc. that it isn't using or doesn't have any plans to use. Why not get rid of it all?
Here's the full video. The question from above begins at 44:30.