It took more than six months for the Department of the Treasury to answer Utah Republican Senator Orrin Hatch’s questions about how the Treasury would respond to a government shutdown or the failure of the Congress to raise the debt limit. But its response is revealing. Even in the event of a pending default, the Treasury will not be selling any of its gold reserves to pay the government’s bills:
Treasury ... considered a range of options with respect to how Treasury would operate if the U.S. had exhausted its borrowing authority.
Treasury considered asset sales ... [but] rejected the option of selling the Nation’s gold to meet payment obligations because selling gold would undercut confidence in the U.S. both here and abroad, and would be destabilizing to the world financial system.
When popular and knowledgeable journalist Brett Arends learned about this, he was astonished:
The Treasury’s position is, in a word, extraordinary. We hear all this skepticism these days about gold. Yet the Treasury itself considers U.S. gold holdings to be a key element in maintaining confidence in the country’s soundness — and the stability of the international financial system.
Why wouldn't the government just dump [its] holdings for whatever it could get?
The admission, according to Arends, is tantamount to confessing that the paper that passes for money isn't as valuable as the gold it is hoarding:
In other words, according to the official position of the U.S. Treasury, the promises and commitments of the government, and its “full faith and credit,” are actually worth less than gold.
They’d rather default than lose their bullion.
It’s reasonable for Arends to be confused. After all, when then-Representative Ron Paul (R-Texas) challenged Federal Reserve Chairman Ben Bernanke over the matter, Bernanke demurred, backpedalled, and then gave it up, protesting that no, gold isn't money, but it is considered an important part of central banks’ reserves.
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Photo of U.S. Treasury Building in Washington, D.C.