Trump Revalues Gold It s a 65 Chance James Rickards Explains the Real Implications

There has been some speculation amongst the gold circle that we could see gold revaluation and that it could happen under the Trump administration more likely than any other administration. And as a background for our viewers, the U.S. Treasury still values its reported 261 million ounces of gold at $42.22 per ounce. That was a number set back in 1973, three details that, of course, you provide in many of your other books. But the idea of a possible gold revaluation is getting some buzz. The Federal Reserve last year released a research paper which analyzed how other countries have revalued their gold. They didn't explicitly recommend that the U.S. revalue its gold, but it did lay out in detail how five other countries have done it. Then there have been a lot of people in the president's inner circle talking about it. And I like to point out that there's Donald Trump Jr., the president's son, who has explicitly stated that his father's administration is exploring a powerful economic tool under the Gold Reserve Act to reprice America's gold. And if we have that ad, I'd like to pull it up now. There it is. He is now granted speaking as the capacity for a gold company. But he says, do you know the U.S. government has the legal power to change the price of gold with the of a pen? And then he goes on to say, my father's administration is exploring a powerful economic tool. The Gold Reserve Act gives the Treasury the authority to revalue America's gold reserves on the national balance sheet from their outdated book value of forty two dollars to current market prices. He goes on and on saying that this would signal gold's renewed importance in our monetary system, prepare America for a new era of sound money principles. Treasury Secretary Scott Bestent, a well-known gold bug, has also floated, but then somewhat retracted the idea of a gold revaluation and monetizing the asset side of the business, of the balance sheet rather. Jim, in terms of a catalyst for gold price surge, how realistic is a gold revaluation, in your opinion? What what percentage or chance do you think that has happening under the Trump administration? There's a reasonable chance that that will happen. Your description is exactly right, Michelle, and they have been talking about it. And, you know, Trump is full of surprises. So it wouldn't it wouldn't surprise me to see them do that. But I think it's helpful for the viewers to understand a little bit of the background, what it means and what it doesn't mean before people get kind of too spun up about it. So for this, you have to go all the way back to 1933. At that time, the Federal Reserve actually held most of the gold. It was owned by the Federal Reserve System, which is, of course, privately owned by the banks. FDR took the gold from the Fed and gave it to the U.S. Treasury. And you're right, today that 8,133 metric tons U.S. Gold Reserve is owned by the U.S. Treasury, although I point out that people think it's all in Fort Knox. About half of it's in Fort Knox. The other half is in West Point. They're both Army forts. So I say, well, actually, the Army has the gold, but it's on their property. But but you're right. It's owned by the U.S. Treasury. Now, the Fifth Amendment of the Constitution, U.S. Constitution, says that the government may not take private property for public use without providing proper compensation or just compensation. OK, so when when FDR took the gold from the Fed and gave it to the Treasury, that's from private to public. What did they give the Fed in the form of compensation? The answer is they gave them a gold certificate. And it's still on the balance sheet of the Federal Reserve. It's a public record. You can go to the Fed website, hunt around a little bit, find the balance sheet. And on the asset side, the first item is gold certificate. It's not gold. It's a piece of paper supposedly backed by gold. But it's what the Fed got in exchange for handing over the physical gold. And that is valued at $42.22 an ounce, which is as you described. And of course, the Treasury carries the gold on their books at the same price. Now, could the Treasury revalue the price of gold to the current market, roughly $5,000 an ounce or any value in between? The answer is they could. And it's been done before. This was actually done in the Eisenhower administration. Again, that's a little historical footnote, but not that many people know about it. But it's really just an accounting entry. What would happen is the Treasury would call the Fed and say, hey, Fed, you know that gold certificate you got? Mark it up to the current market, so from roughly $42 an ounce to $5,000 an ounce. And now you've increased the balance sheet of the Fed. You've increased the value of their asset. Well, Accounting 101, something has to happen on the liability side if the asset goes up, either the liability or the capital goes up. Well, the answer is the Treasury has an account at the Fed. It's called the Treasury General Account. It's no different. You and I have bank accounts, and we put money in our bank accounts. Well, the Treasury has a bank account at the Fed, this Treasury General Account. So when the Fed revalues the gold, the Fed would also have to credit the Treasury's account. All that money, that mark-to-market profit, would go into the Treasury's account. At today's prices, it's about $1 trillion. That's the amount of money that would just appear out of nowhere, but of course, that's what the Fed does. Now, when it was used before, when there's been some talk about using it again, it's when the U.S. hits these debt ceilings. Now, separate law puts a cap on the amount of Treasury securities that the Treasury can issue. You can issue up to this level, but no more. Well, Congress always raises it, and they just keep increasing the debt level. But every now and then, Congress wants to fight about it, and they don't raise the debt ceiling. And the Treasury hits it, and you can't issue any more debt. And then the theory is, well, now the Treasury can't pay their bills, you know, because they can't issue any more debt. But technically true, there's some workarounds, but that's basically what happens. Well, without raising the debt ceiling, without issuing any more debt, if you did this accounting entry I just described, a trillion dollars would appear out of nowhere in the Treasury's account, and they could spend a trillion dollars. That would actually fund the government for, I don't know, four or five months at the current rate of expenditure without issuing new debt, and that's the point. And that's what happened in the Eisenhower administration in the 1950s. It was a little less dramatic. The Congress actually went home, and the Treasury Secretary forgot to get the debt increase before they went home. It was kind of an oversight. But they did exactly what we're talking about. The Treasury called the Fed and said, increase our gold account and put the money in, and we'll spend it until the Congress gets back. So the answer is, it's completely legal. It's not difficult to do. It has been done before, and money would come out of thin air and be available to the Treasury. And if we did to the current market price, it would be about a trillion dollars. But here's the point. I think this is important for the viewers. That doesn't do anything to the price of gold. Gold is a world commodity. It's traded on world markets. You have Shanghai, you have COMEX, you have the London Metals Exchange, London Bullion Market Association, ETFs. Gold is roughly $5,100 an ounce. It's been bouncing around a little bit, but let's just say over $5,000 an ounce. That's the price of gold. Having the Treasury and the Fed make some accounting entries would not change that price. It would still be about $5,000. So again, we're back to the psychology. And I think this is what you were referring to, Michelle. If the Treasury did that, if the Treasury and the Fed did what we've just been talking about, would it change the psychology? Would everyday Americans go, oh, wait a second. The price of gold just went up a hundred times. It might. Again, it's an accounting entry. It doesn't change the world market. It doesn't change the supply and demand. It doesn't change anything fundamental. But could there be a psychological spark that would say, hey, wait a second. The US government all of a sudden is paying attention to gold. The US government is treating gold as a monetary asset. I've told the Treasury for years, you know, you ought to buy gold. The Treasury is issuing all this debt, and they're spending the money on who knows what, a lot of waste, obviously. Why doesn't the Treasury just issue debt and buy gold? Then you get to keep the gold. So I think that, again, legally it's possible. Politically, it wouldn't surprise me to see the Trump administration do it. It's just an accounting entry. It would put a lot of money in the Treasury's bank account. Those are all important things by itself. It doesn't change the fundamentals in the world price of gold, but it could have a psychological effect. Well, I want to unpack a couple of things there. Firstly, would they have to market to current market prices, or could you value it higher? Well, higher is interesting. You could definitely value it lower. You could value it $1,000 or $2,000 or anywhere in between. Could you value it higher? The accountants might object. The thing is, if you market to market, you can't object and say, hey, that is the price of gold. Now, you could do it multiple times, and this kind of gets to your point. If you did it, let's just say $5,000 an ounce today, and then a year from now gold is $10,000 an ounce, which is what we've been talking about, what I've been projecting, could you do it again for another $5,000? The answer to that is yes. So there's not necessarily a cap, but it's not clear that... I'm not sure the accountants would let the Fed market above the market, but if you say, could you do it two or three times and follow the market, the answer is yes. Okay. So you market to market, that sends a signal to Americans, maybe not a positive signal, maybe it's a signal that there's a reason that this is happening, and keeping in mind that an increase of a trillion dollars is basically just a year's interest of the debt that's already owed, given now we have $39 trillion in debt. But what signal does this send to other countries if this were to happen, particularly countries like China, which we know have been accumulating gold at record levels, and have probably been accumulating a lot more gold than they say officially. If this were to happen, and you're saying that it would not surprise you if the Trump administration does that, let me put you on the spot here, what would be the percentage chance that you would give to this happening under this Trump administration? Oh, probably over 50%, not 90, but 60, 65%. Yeah, I mean, they're taking it seriously. Scott Bestin, our treasurer secretary, is the very seasoned hedge fund trader, used to other hedge funds. I'm pretty sure Jay Powell would not do it, but Kevin Walsh might. Kevin Walsh seems more of a pragmatist. I'm not saying he would be banging the table, but he would certainly go along with it. He wouldn't really have much choice but to go along with it, because the Treasury does own the gold, the Treasury does have that account, and it's been done before, and it was at the initiative of the Treasury. So I think if the Treasury made that phone call, the Fed would have no choice but to go along. And yeah, I would say well over 50%. Well over 50% that the U.S. revalues its gold to market under the Trump administration. What signal does that send to the rest of the world? What do you expect from China under that scenario, which we know has been accumulating gold and has recently made its intentions known that it wants the yuan to become a global reserve currency? What would you expect then? Well, first of all, and you alluded to this, Michelle, it's important to understand most of the world already does this. I mean, the United States is the only one saying gold is $42 an ounce. As I say, it's historic cost accounting if you want to be technical. But most countries, when they buy new gold, they put it in their reserves at either the price they paid, or they market to market, or they do both. So this is not a shocker to the rest of the world, because it's what they already do. It's sort of common sense. So in a sense, the U.S. would just be catching up. But of course, the U.S. is the largest single holder of gold. If you ask me what the effect is, kind of psychologically, in terms of the popular media, again, it's just an accounting entry. It does put money in the treasury's account. But what it does, it sends a signal to the American people and to the world that the U.S. cares about gold. And years ago, Ben Bernanke was asked in an interview about gold. If gold's unimportant, why does the U.S. have 8,000-plus metric tons? And his answer was, he said it's a tradition. He dismissed it. Now, Bernanke's smarter than that. He knows there's a lot more to it, of course. But he was sort of blowing off the question, it's just a tradition, just sitting around. And a lot of public officials have more or less said the same thing. There are very few people who take gold seriously as a monetary asset in the United States, even though the rest of the world does. And that's increasing as the U.S. has weaponized the dollar. I mean, I teach financial warfare at the U.S. Army War College, and we talk about this all the time, how you can use financial systems, payment rails, and other techniques to fight wars, and kicking Russia out of SWIFT, which you referred to, freezing the Russian assets, which are in Belgium, by the way, they're at a custodian called Euroclear in Belgium, over $200 billion worth of Treasury securities. Most of this is mature, by the way, so it's actually sitting in cash at this stage. But once you freeze that, and the U.S. and Europe have been thinking of stealing it, we freeze stuff all the time, that's one thing. It just means you can't get it, but it's still yours. Stealing it is different, and that is what they're talking about. But the rest of the world, you know, China, Saudi Arabia, Taiwan, Japan, India, they're watching this. They're like, hey, what if I do something the United States doesn't like? What if the United States doesn't like what I'm doing? Are they going to freeze my Treasury securities? Well, it's five, six years ago, that might have been unthinkable, but we actually did in the case of Russia, so the answer is we might. And if you were that central bank, or that finance ministry, you're probably looking at buying more gold, because if you have physical gold in your possession, the U.S. can't touch it, unless they invade or something extreme like that. So that's one of the reasons they're buying gold, is because the U.S. can't freeze it, and that is going to accelerate. So now we're getting into a world, Michelle, where gold is all of a sudden being taken seriously as a monetary asset. You know, I have a graduate degree in international economics, and I received it in 1974. 1974, I was the last class where gold was still taught as a monetary asset. You know, people know Nixon closed the gold window in 1971, but he said it was temporary. He said we were temporarily suspending the redemption of U.S. dollars for gold. They thought they would get back to a gold standard, and they tried it. The Washington, the Smithsonian Accord in December 1971. I talked to two of the people who were at Camp David on August 15, 1971, when Nixon closed the gold window. I spoke to Paul Volcker and Ken Dam, who was the lawyer, and they told me, they said, yeah, we thought we were going to get back to a gold standard, but they never did. But it really took until 1974, until the IMF demonetized gold and no longer required gold deposits to join the IMF and all that. But I studied gold as a monetary asset. Since then, we have three generations of scholars. If you know anything about gold today, you're either self-taught or you went to mining college because they don't teach it academically. But all of a sudden, I think this thing of revaluing it by the U.S. is a big deal. Even though I've said it's just an accounting entry, it's a big deal psychologically because it says, wait a second, the U.S. actually cares about gold. Maybe we should get some too.