I was tooling about the intertubes last night when I came upon one of those libertarian memes I love to debunk so much: we must do away with the Fed and return America to the gold standard! As I’m always curious about the feasibility of such oddball ideas, I decided to do a little fact-checking today.
The first thing you need to know is that, even by the most liberal of estimates, all the gold produced worldwide in one year would form a cube that fits in the average living room. All the gold ever refined would make a cube about 82 feet on a side and be worth about $11,190,000,000,000 at today’s record-high prices, while the US GDP stood at $14,440,000,000,000 for the year 2008.
So even with all the gold in the world, you could not replace the Fed to back the dollar. Not even close. The Washington Post reported last week that current US gold reserves might be worth $288 billion, but only as long as they remain unsold; spot markets would crash in response to a sell order. This is after two decades in which gold prices were depressed by central banks’ selling off their gold and floating currencies.
Another meme withers in the face of reality. Instead of deconstructing the Fed, it’s time to reign it in with an audit. On that much, I can agree with Ron Paul.
