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Tuesday, March 19, 2013

Gold

There was a scene in a movie, I think it was with Matt Damon in The Rainmaker, where he asks his client if they had been saving for a rainy day. They reply in the affirmative and ask why, whereupon Matt tells them that "it's raining", meaning that the situation is bad and is going to get worse and having a rainy day fund may enable them to weather the coming storm.
    I wonder what we are doing with all the gold in Fort Knox. I mean gold is valuable at least partly because it is so useful, and if it's so useful, why don't we use it instead of keeping it locked up in a vault where nobody even gets to see it, much less touch it? Then I realized that this is our rainy day fund. If things ever get really bad, we can always fall back on the gold in Fort Knox. Or if we ever decide to go wild and forsake all sense, we could use it to buy everyone a new Rolex, which would be really cool, wouldn't it?

From the Wikipedia article on Fort Knox:
The United States Bullion Depository holds 4,578 metric tons (5,046.3 short tons) of gold bullion (147.2 million oz. troy). This is roughly 3 percent of all the gold ever refined throughout human history. Even so, the depository is second in the United States to the Federal Reserve Bank of New York's underground vault in Manhattan, which holds 7,000 metric tons (7,716 tons) of gold bullion (225.1 million oz. troy), some of it in trust for foreign nations, central banks and official international organizations.

Let's leave out the New York gold for now. I mean "some" of the gold belongs to other people, and "some" is one of those weasel words that could mean anything from almost none to almost all. So let's just leave it out and just work with the gold in Fort Knox. 5,000 tons translates to 10 million pounds, which is 160 million ounces. At $2,000 per ounce that comes to $320 billion, which is about $1,000 per person in the USA. You'd be hard pressed to get a used Rolex for that.

Annual worldwide gold production is something over 2,000 tons ($125 billion), or something less than half of what's in Fort Knox. To put it another way, Fort Knox holds enough gold to keep the world happy for two years.


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