Transcription
Hello fellow rubble capitals. Hope you're well.
So the government just revealed its ability, let's say, to monetize gold. And what this would do, assuming they revalue it, it would take it up to $20,000, $30,000, $40,000 an ounce. Now, why would they do this? Because it's a very clever way to solve their quote unquote debt crisis. And if you think this is some conspiracy theory or if this is just some wild crazy idea, it's not.
In fact, let's go right over to the Federal Reserve's report they just released. And I don't know, I mean, it's on the internet, so I assume it's available to the public, but it seems like it was something that was just meant for the internal operations of the Federal Reserve. Why do I say that? Because it's an actual manual. That's right. It's a Federal Reserve manual, like something you'd receive if you were just hired there. So, let's get into this and really think this through.
And I want to give a huge shout out to my buddy Luke Groman because this is something that he's been talking about for quite some time now. Luke is a real smart guy and I think when he explains his hypothesis, he does it in a way that's he does it so quickly and he uses kind of the finance lingo. Not too many people can follow him. But this is something that should be taken very, very seriously. And if the likes of Scott Bent and Donald Trump believe the United States has a debt crisis, this would be a very quick and easy solution that again would make gold most likely rip, rip, I say, higher and possibly overnight.
So let's go over to the Federal Reserve. And this is the document I'm referring to that's open to the public. It's right here on the internet, but it doesn't really seem like it's one that was meant for public consumption. Let's say the Financial Accounting Manual for Federal Reserve Banks. And look at the date, very recent. May 2025th. Now, May 2025, excuse me. Um, now let's go down. We're going to get back. They give an example balance sheet which is really fascinating. It's 200 pages here and we're going to get into that example balance sheet in a moment. But before we do, look at how this report starts right here. Section 2-10, they talk about the gold certificate account.
Now, before we get into this, let's go over to a Forbes article where they were talking about this. So, again, this isn't something that's just, you know, tinfoil hatters are talking about. This is something that it, it's mainstream. You don't hear it often, but it is definitely within the mainstream because, you know, not only are guys like Luke Groman talking about it, but it's right here in the Fed documents. But here is an article: "Is it time for the US to revalue its gold reserves?" Now, they're talking about doing it a little bit different way, just bringing it up to the market value, but as Luke points out, they could take it up to $20,000, $30,000, whatever they wanted to in order to solve this quote unquote debt crisis.
So, first off, I want to highlight the fact the US, according to them, who knows if it's really there, but they say they have 8,133 tons. Now, I did the math on that for a whiteboard video today. It's right around 260 million ounces. So, this article is a little old. I did the math on today's price roughly, call it $3,300, $3,400. And this equates to about $856 billion, I think it was, billion dollars worth of gold the United States has on their balance sheet. Okay, got it.
Now, let's go back to the accounting manual for the Federal Reserve and this 2-1. Now, listen to this very carefully, guys. The Secretary of the Treasury, Scott Bent, is authorized to issue gold certificates. Now, this is just simply kind of a claim on the gold the Treasury owns. So, they're not really selling it. I think technically it would still be on their balance sheet, but it's a claim that they would sell to the Federal Reserve, and the Federal Reserve books that as an asset on their balance sheet. And what does the Treasury get in return? Well, the Federal Reserve credits their account, which you guys know is the TGA, the Treasury General Account. That's a liability on the Fed's balance sheet. They credit it for however much the value is of the gold certificates they buy.
Let's get back to it. And what I like about this and which is kind of a headscratcher because usually they're talking in code and the Fed really doesn't want you to understand or to know what their secret operations are. But here they just come right out and say it. Listen to this: "Treasury is authorized to issue gold certificates to the Fed to the reserve banks." In other words, the Fed to monetize gold. They're, they're not beating around the bush. They're, they're literally telling you in plain English explicitly something that's they're calling it an accounting manual for the Federal Reserve banks that they can monetize gold, the gold the Treasury has on its balance sheet. So they specifically say held by the US Department of the Treasury at any time. They can do this. Treasury may reacquire the gold certificates or not.
So they talk about the accounts that the Fed has with the Treasury and the Treasury has with the Fed and kind of this is an accounting gimmick. I mean, let's be honest here. The Treasury is just saying, "Okay, we'll just make up this paper asset that the Federal Reserve will buy and that'll go ahead and credit the TGA and then we can take the money that's in the TGA now and we can go ahead and use that for whatever we want." In this case, they could use that to effectively buy down the outstanding debt.
So what they would do in practice is they would take the money that they now have, they, the Treasury, and they would wait for the Treasury existing treasuries to mature and they would just pay those treasuries off, the principal or interest, whatever was owed, with the existing balance in the TGA that the credit that the Fed credited to them by purchasing these gold certificates that the Treasury just printed, for lack of a better word, out of thin air that represents a claim on the gold that's probably still an asset on the Treasury's balance sheet. The gold that's in Fort Knox, as an example. And so then what happens is they pay off the existing Treasury holders with new money that didn't exist before. And therefore, they don't have to, those treasury or they wouldn't have to have further buyers for, uh, treasury. So they wouldn't have to issue more debt. In other words, to pay off the existing debt, they wouldn't have to roll it over. And that would reduce the outstanding debt of the United States by however many gold certificates the Fed purchased.
See, let's get back to the report here. The gold certificates account, uh, serves as a medium. Okay, this is where they're talking about the reserve banks. I think this is kind of how the Fed justifies this as this accounting gimmick as an asset where if I'm reading this correctly, they're saying, well, the, the local Federal Reserve banks around the United States could use this as some sort of settlement vehicle, something like that. Okay, sure. Right. And then here they, the very next 2.2, they talk about the Special Drawing Rights, SDRs. I'm sure you guys have heard about those.
But now let's go up. So here it is, plain English. This is not the tinfoil hatter economic theory. This isn't something that, oh, those stupid people on Zero Hedge. Let's get them. You know, they're just making up these theories that have no chance of coming true. No, no, no. It's, it's right here. The, the Fed is telling you this is what they could very easily do.
Now, let's go back to the balance sheet, which I thought was interesting. You guys know that when, and this is an example balance sheet that the Fed uses obviously for internal operations, and it's no surprise that as an example, the assets would be US Treasuries. Hello, we all know that. Mortgage-backed securities, which are, uh, somewhere in here. Where do they go? There they are. Mortgage-backed securities, US Treasuries. And this is how the Fed's balance sheet goes from $800 billion and then they do QE. They buy those Treasuries. They buy those mortgage-backed securities and they monetize the Treasuries. That's what they're doing. That's where the word, that's where the phrase "monetize the debt" comes from. And that's what takes their balance sheet from $800 billion all the way to a peak here in 2022 of almost $9 trillion. Almost $9 trillion. Okay.
But what's, and this is the main asset that's on their balance sheet. But look at this example balance sheet. Those bonds or those Treasuries, excuse me, are listed right here. Mortgage-backed securities right here. But the very first thing, the very first thing that is, or the very first line item, let's say, on this example ass, on this example balance sheet is not US Treasuries. It's right here, gold certificate. The very first thing. And oddly enough, the second one is Special Drawing Rights, SDRs. This comes before US Treasuries and before mortgage-backed securities.
So the, the punchline here is buying these gold certificates and monetizing the gold the Treasury has on its balance sheet is as legal, uh, as doing quantitative easing. I mean, it's, it's just, it's right here. It would be very, very simple for them to do this. It, it's not some complex equation or it's financial engineering for sure, but it's not complex financial engineering. It's not like we're talking about derivatives or interest rate swaps or any of those things. It's just simply the Treasury selling an asset, a gold-backed asset to the Federal Reserve and them crediting their account and then the Treasury using that, uh, those bank reserves to go ahead and reduce their overall debt.
Now, let's think about how this would impact gold because what I should have done here is I should add a chart. Let's see. Let's do debt to GDP because now I have different views than Luke on, you know, kind of this. I don't have any different views on the doability or the government's incentive. Uh, or maybe that's not the right way to say it. I, I definitely agree with him as far as the process and how this could be done. I mean, there, there's no disputing it. It's right here in the Fed documents. But, um, I, I don't know the necessity, but that's really not the point. I mean, that's a topic for a completely separate video.
What we have to do is we have to look at this through the eyes of Scott Bent and Donald Trump, who we know are very, very concerned about the debt. They, and whether I agree with it or not, who cares? It, this is not what we're talking about. They believe that especially the debt to GDP is at an unsustainable level and it's only going to get worse, especially if we have higher interest rates or interest rates stay the same because the interest payment on the debt is going to go higher and higher and higher. That means they have to issue more and more Treasuries, more supply of Treasuries with possibly less demand. That means that interest rates go up, which makes the interest payment on the debt even higher, and you go into this doom loop where then the only option in their eyes is for the Fed to come in and not just monetize gold, uh, but monetize the debt and to keep interest rates down and therefore you could have inflation, you know, that leads to a lot of bad things potentially. So this is the argument.
So, what, uh, guys like Luke will say, and rightfully so, is that if we could just get this debt to GDP down to, let's say, 60% or 70%, then it buys the United States a lot of time. It gives them a lot of runway that they otherwise wouldn't have in the sense that historically speaking, for not just the United States, but other countries, this is when you're in the safety zone. This is when you don't really have to worry about foreigners wanting to buy your debt because they see the supply being an issue. This is when the debt is quote unquote sustainable. Right now, again, I, I don't really agree with the premise here because we're assuming that supply really drives interest rates. And as you guys know from watching my videos, I don't see any historical precedence for that in the United States. I think it's more so about, uh, growth and inflation expectations. Even if the debt to GDP is at 120% or 140%, I, I still think it's about growth and inflation due to the way the monetary system is set up. But like I said, that's a topic for a separate video.
So, let's think about this. What Luke is saying is absolutely true. If the United States revalued their gold holdings to let's say $20,000 an ounce, now all of a sudden it changes the game because then the gold that they have on their balance sheet goes from a value of let's say $850 billion to let's say $5 trillion. Now, it is true that the current debt is $37 trillion. So this would take it down to $32 trillion. But what we're not including in that are the knock-on effects that could happen. And this is Luke's base case. So what, let's see, how would I explain this? Um, basically you've got two groups of people. You have, uh, whose purchasing power would increase massively. Number one, let's say they revalue at $5 trillion and all of those gold certificates, $5 trillion worth, go onto the Fed's balance sheet. The Treasury in the TGA now has an extra $5 trillion that they use to pay down the debt, right? Well, those debt holders allow that to mature. They're not rolling it over on aggregate. Now, it's not the same people, but on net balance, uh, you're reducing the amount of Treasuries that are floating around and you're replacing that with cash. That's what you're doing. So, you have $5 trillion of additional cash that's circulating in the actual economy chasing goods and services potentially, or maybe assets, right? But what this likely would do is increase the inflation rate.
Now you guys know that nominal GDP is simply, uh, it's basically growth in inflation. Set another way, it's real GDP plus the inflation rate. That's nominal GDP. So if you get the inflation rate up, what you're likely to see is nominal GDP skyrocket. Okay? So if nominal GDP skyrockets to $40 trillion, even though it's almost all a result of inflation, just prices going up. And if we're able to buy down the debt to $32 trillion, that's how you could get us in this range of, let's just say, well, this is 100%, but this range of where we were prior to the GFC at 60% or 70%, which would be quote unquote sustainable. But you see, that would just, to get $5 trillion would require a $20,000 gold price. That's why I say, I mean, maybe they don't want to wait for the inflation. Maybe they don't think inflation would happen. Maybe they don't want to wait for these knock-on effects. So if you're going to go ahead and pull the trigger, why take it to $20,000? Why not take it to $30 or $40?
Now the question I'm sure becomes, well, George, how on earth would they do this? And this is actually the easy part because what they do is simply say, "We're going to put in a bid. We, the government, we're going to put in a bid for $20,000." So if you're someone that is holding gold and you want to sell it, why would you sell it for less than $20,000 an ounce? The answer is you wouldn't because you could just sell it to the, the government and they'll give you $20,000 an ounce. And you say, "Well, George, where is the government going to get it? They're just going to sell Treasuries." And you say, "Whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa. Isn't that going to increase the debt?" Not really. Uh, in a way, it's going to increase their liabilities, but it's also going to increase their assets, right? Because they're, they're taking on the gold. So, that's an offsetting asset to that new liability. So, it's, it's not just like selling a Treasury where you're just taking, you're just increasing the liabilities. You see.
And I would also point out that they probably wouldn't have to buy much because let's remember, see, I pulled this up. This goes back to the surveys sickness. Remember this, guys? Remember when the Fed stepped in and started buying corporate debt, uh, because they, you know, the liquidity froze up and interest rates were blowing out? In fact, I've got the interest rate spreads right here. So, spreads started blowing out and the Fed steps in and they didn't buy much. I think they bought maybe, I don't know, $10 billion, something like that, worth of corporate debt, but that's all they needed to do. And then the market came in and did the rest because basically the Fed comes out and sets a bid at X price and the market's like, "Okay, they're going to, they're just going to keep buying." So once it gets up to that price, we're confident, uh, that it's not going to go any higher or, uh, yeah, the price isn't going to go any higher. So we're willing to step in and buy at this price because we've basically got a ceiling and we know that if the price goes above that, the, the Fed is going to step in and buy. So we've got an automatic hedge. It's, it's the risk-reward makes all the sense in the world. So then the market comes in and buys because of that bid that's put in or that ceiling on the, on the, uh, that, uh, I guess it's not a ceiling on the price. I guess it would be a floor on the price. I'm sorry, doing this live. So it would be a floor on the price. So if the price goes too low, then the Fed's going to step in and buy. And so if you know, if the price gets to here, the Fed's going to step in and buy. Once it gets right here, why are you not buying? Because all you have is upside. That's what I was basically trying to say. That's the problem with going live. It's very authentic. That's for sure. But, uh, you do make mistakes. But, you guys get the point is the Fed didn't have to buy that much in order to get the price to the level they wanted. And therefore, I think it would be the exact same with, uh, the price of gold is they wouldn't have to, well, this is the Fed, but the Treasury wouldn't have to buy that much in order to get that price they want. And then what they do is the Fed, it's basically like doing QE where the Fed would then buy the gold. Their balance sheet would increase, their assets would increase with those gold certificates, and then they would put the money in the TGA, and you guys know the rest of the story.
So Luke thinks this would likely create massive inflation because you're increasing the purchasing power of the individuals that had the Treasuries because now they have cash, number one. And number two, you're massively increasing the purchasing power of those people who own gold. Right now, they're like Scrooge McDuck where they're like swimming around in their coins of gold. Woohoo. Yeah. All right. And, uh, what are they going to do? Well, many of them will likely go out and buy other things and therefore you have more purchasing power, more demand chasing the same amount of goods and services. Prices go up. That's kind of the punch line. That's the release valve, right? Because there is no free lunch. Would this reduce the debt to GDP? Probably. Is it very, very easy to do? Is it legal? Absolutely, 100%. Um, it's just the release valve is right likely going to be that prices are going to go up in a way that was very consistent with what we saw in 2021 and 2022 when you increased aggregate demand massively, but the amount of stuff stayed the same or in the case of the surveys sickness actually went down.
Main takeaway, guys, this is not pie in the sky stuff. This is reality. If you want to fact check me, you can go and just Google Fed accounting manual for Federal Reserve Banks or Financial Accounting Manual for Federal Reserve Banks, May 2025. Look it up for yourself. Look up 2-10. Look at their example balance sheet. Look at the gold reserves, the, the, the words they use, actually monetizing the Treasury's gold and just simply connect the dots. This would literally be as easy or as straightforward and as legal as the Fed doing quantitative easing or, I, I guess if you really want to get technical about it, buying the, uh, corporate debt or something like that because there really not, uh, or, or buying stocks. Remember they did this as well. So this is something I think needs to be on your radar.
And if the Treasury, if Bent was really worried about the debt, if Donald Trump was also worried about the debt, and by the way, let's not forget there's a strong probability that Bent is the next Fed chair. So if Bent is the next Fed chair, you know, Trump is going to have just a yes man as the Treasury or vice versa. And then why would they not do this if it is true that they're that worried about the debt? Why, why would they not do this? And maybe they don't revalue the gold back up to, or they don't revalue the gold up to $20,000. Maybe they do it at a different number. But why would they not do this? Especially considering that right now the gold is valued at like $40 an ounce. Very least they would take it up to the current price. But then if you're going to do that, then you've got to take it up much, much higher to really make a dent in the overall debt load.
So I just wanted to bring that to your guys' attention. Very interesting back and forth I had with Luke Groman. I know he's done a few podcasts on this, but Luke is such a smart guy. And he talks very quickly and he uses all this financial lingo that I think a lot of times just the retail investor that's listening to him or the average Joe and Jane doesn't exactly follow what he's saying and hopefully this video paints a clearer picture. And if not, I did a whiteboard video on it today, uh, that should be out tomorrow.
So what's the problem for this for gold investors? Because it's not a free lunch for them either. Let's remember that most gold investors have to store their gold. So, they're not paying to store the gold based on how many ounces they are storing, but the value of those ounces. And this is what I talked about yesterday. I've been talking about it for a couple months here. It brings me to the sponsor that we've had. And I set up an account with them, uh, for this reason. This is one of the reasons. So, I, I, I saw that the value of my gold was going up. I saw the fact that I'd likely have to pay higher storage fees, and I saw them offering the service that they would actually pay you to store your gold with them. And they pay you in gold, uh, an interest rate of maybe 3% to 4%. And so this completely solves that problem where now if you've got your gold in storage, if the price of gold goes to $20,000 overnight, in a way you've got a big problem because it's not paying you an interest rate. It's not paying you to own it and therefore where do you come up with the additional money to store the gold? So then you're almost forced to sell it and you probably don't want to do that because then you take a capital gain. So, this is a very, I think a very solid solution. It's worked very well for me. And if you guys want to find more, find out more about it, just go to monetary-metals.com/gamon. That's it.
And the way they do this with their business model is they basically lease the gold to jewelers around the world. And it's, it's not rocket science. It's pretty straightforward. If you want an explainer video, you can check it out in the description. Uh, Josh will put it in there. And if you have any further questions, don't hesitate to give them a call. Tell them George sent you. They're very, very nice and they'll be happy to answer any questions that you have and see if this is potentially a good fit. It's definitely a solution for people that are worried about the cost of storing gold, if gold is revalued to $20,000 an ounce, if not more, to get the government out of their perceived quote unquote debt crisis.
So, on that bombshell, guys, enjoy the rest of your afternoon. As always, make sure you're standing up for freedom, liberty, free market, capitalism, and we'll see you on the next video.