Interesting Thoughts On Gold

“Aside from a few Spanish galleons at the bottom of the sea and dentures returned to the earth after a lifetime of use,” Doug Casey muses in the latest issue of Whiskey & Gunpowder, “pretty much all of the gold ever mined and refined is still sitting on the surface of the earth somewhere. Nobody really knows how much that is, but the most reasonable estimates I’ve seen are something like 6 to 8 billion ounces. That happens to work out to about one ounce of gold for every human being on the planet at this time.

“Out of this, the U.S. government reports that it has 265 million ounces of gold in its Treasury. If we divide the money supply by the number of ounces the U.S. could back its paper with -- and here we’d have to decide what measure of money supply we want to use. Nobody, including the Federal Reserve, actually knows how much money it has floating around out there. It would seem that there are about 6 trillion dollars outside the United States alone. Let’s estimate that M0 in the U.S., the narrowest measure of money supply that consists of just notes and coins, amounts to 1 trillion. So, 265 million into 7 trillion gives you about $26,415 per ounce of gold.

“Now, if we add in the total obligations of the U.S. government, which it will either need to print more money to meet, or it will have to default on -- that’s about 100 trillion. If those dollars are printed, that would give us $377,358 per ounce. The same ratio for M1 would give you about $6,226 per ounce, and M2 would give you $31,320 per ounce.