Gold Deficits, Fort Knox, and a Reset

Everyone knows that government expenses and deficits are out of control.  Think U.S., Europe, the U.K., Japan, and others.  So what?

  • Borrowing today supposedly brings spending forward from the future, so future spending should be curtailed. It hasn’t happened so far.
  • But no government will reduce spending so they must either borrow more or devalue their currency via “money printing,” various forms of QE – bond monetization, or increasing taxes. Not sustainable!
  • Global debt exceeds $200 Trillion – a number so large it is essentially incomprehensible. S. official debt is about $19 Trillion with unfunded liabilities in the $100 – $200 Trillion range.  Again – incomprehensible.
  • All of the above create problems – huge problems. Ignoring those problems makes the ultimate “reset” worse.  Unsustainable!

Everyone knows that the U.S. officially holds a massive supply of gold in the Fort Knox Bullion Depository – about 147,000,000 ounces of gold.  It hasn’t been audited in 60+ years, but let’s pretend it still exists.

To put the debt, deficits and craziness into perspective, compare debt and deficits to ounces of gold and to the gold officially vaulted in Fort Knox.

First:  Examine the official U.S. national debt (in $ millions) on a log scale since 1970.  The exponential trend is evident.  Note that the national debt has gone up from under $400 billion to nearly $19 Trillion – $19,000 Billion.

U-Nat Debt

Second:  Take the INCREASE in the national debt each year and divide by the average price of gold that year.  The graph shows the INCREASE in the national debt each year measured in gold ounces.  Note that the average increase in the debt was about 710,000,000 ounces of gold EACH year since 1970.

U-ND in gold

Third:  Remember that Fort Knox officially contains 147,341,858 ounces of gold.  Define that as one FKGU – one Fort Knox gold unit.  Now show the above graph in FKGU’s.  How much did the US government increase its debt EACH year since 1970 by the equivalent value of all the gold in Fort Knox?  Note that the average for EACH year since 1970 was about 4.8 FKGU.

Repeat:  The US government INCREASED the official national debt by the “value” of all the gold in Fort Knox about 4.8 times EACH year since 1970.  Unsustainable!

Fourth:  Now add up the national debt increases in FKGU’s since 1970.  This shows the total official national debt, in FKGU’s, as it has been accumulated since 1970.  Note that the accumulated national debt, valued year by year in total official Fort Knox Gold Units, now exceeds 220.


Repeat:  The official debt of the U.S. government, measured each year in the total “value” of all the gold officially vaulted in Fort Knox, would have spent the Fort Knox gold over 220 times.  Unsustainable – this is not a viable system.

Really?  The U.S. (and other countries) is so deeply in debt that the accumulated year by year deficits would have spent the entire hoard of Fort Knox Gold over 220 times.  This suggests:

  1. Even if the gold has not been stolen or sold, 147 million ounces of gold is tiny and irrelevant compared to the mountain of debt – unless gold prices are revalued much higher.
  2. The mountain of debt can’t be paid, so it must be defaulted, either directly or via devaluation of the currency.
  3. What is a T-Bond actually worth if the borrowed capital can’t be repaid or will be repaid in mini-dollars?
  4. If the value of T-Bonds, notes, etc. is reset lower, since they can’t be repaid, what does that do to retirement accounts, pension funds, and most other assets? Reset much lower?
  5. Will the Fed and other central banks quietly observe most paper assets crashing in value, like oil has crashed in value, or will they “do something?” The financial and political elite will expect action to save their paper assets.

CHOICES?  What will the Fed do?

Per John Rubino:

  • “Intimate that the Fed’s balance sheet has contracted enough and maybe it’s time for it to stabilize (translation: a new but modest round of QE).
  • When that fails, promise to expand the existing QE program by an amount calculated to turn the market’s frown upside down.
  • When that fails, begin a new experiment with a catchy name like “QE for the people” or “debt jubilee” or NIRP, featuring the helicopter money that Ben Bernanke long ago promised to deploy in case of full-blown deflation …”

CHOICES?  More QE, “bond monetization,” bail-ins, pension fund confiscations, higher taxes, helicopter money, tax rebates, who knows?  In essence – “a new deal” that tries to bail out and extend the corrupt system at the expense of … guess who?  There will be substantial trauma.

As Charles Hugh Smith says, “Virtually every major program of every major nation-state is financially unsustainable going forward.”  Financial triage, along with most government programs, will fail, so expect considerable trauma in 2016 – 2020.

A reset is coming. 


Gary Christenson

The Deviant Investor


8 thoughts on “Gold Deficits, Fort Knox, and a Reset

  1. Gary, for fun I calculated your running U.S. National Debt for 1 hr – just over $2M/min – $128M/hr – $ 5.072B/day. This is INSANE & unsustainable. We both know this is not all inclusive re debt obligations. A reset is definitely in order soon.

  2. COMEX GOLD falls to 2.3 m tons

    BREAKING NEWS: COMEX Registered Gold Inventories Plummet 73% In One Day – Steve St. Angelo

    Looks like something big is about to take place on the Comex as Registered Gold inventories declined a whopping 73% in one day. This is a very suprising update as Comex Gold inventories haven’t experienced much movement over the past few months.
    Read More

  3. Rob Arnott’s comments on the Baltic Dry Index speak volumes on the state of the world economy:(please see King World News)
    Rob Arnott: “One of the things that’s gotten very little attention is that shipping rates, freight rates, are down 97 percent from their highs. It costs next to nothing to ship things globally, including oil and freight. That’s lower — even without adjusting for inflation — than at any time since records began in the 1970s (see shocking chart below).

    KWN Arnott I 1:30:2016

    That bear market in freight rates — 97 percent down — is one of the biggest that comes to mind, worldwide; the only deeper bear markets in my lifetime would likely be the collapse of purchasing power for hyperinflation currencies like the Zimbabwe dollar. What does this tell us about the global economy?”

  4. Mayslinger – you bring up some good points. The 1-1/2 $T DERIVATIVE MONSTER is lurking even closer – the oil drop is putting pressure as are other dropping factors. It is surprising how few people really know the potential imminent danger of Bank Bail-Ins brought about by the G20 agreement in Nov./14 meeting in Australia. I know many senors who are withdrawing their bank monies & closing safety deposit boxes which are not insured.

    Physical gold & silver are finally looking more & more attractive. Fort Knox gold may be the Farce of the century – no audit in over 60 yrs says it all. No wonder places like Texas want their own gold depository. This year may be the most dramatic in many decades. Diligent people must protect themselves – sadly banks can no longer be trusted. Negative interests are still possible in North America. Japan has just done so, following several European countries.

  5. Thank you Gary.

    Better also respect on combination with silver for not that tremendous numbers. Is there any ?

    Seems too simple, but nice math:

    100% gold standard: $ debt / 147.000.000 oz Au = 129.251,70 $/oz Au

    30%: 38.775,51
    10%: 12.925,17

    On the other hand – truth always is simple.
    Hard or not to understand explanations of “experts” are used to becloud people, so “legal bribery” can leave average people with nothing. Unrecognized – until BOOOOM – game over.

    Hard landing ahead – get prepared.

  6. While Treasury Secretary, William Simon lied to the Senate about arranging a tour of Fort Knox, and later reneged. “Treasury Secretary Lies About Gold” is a report on that and related matters, released originally at Silver Investor site in July 2010
    Particularly insulting of Simon (Pilgrims Society) was that he dispatched a flunky to address a 1977 meeting of the Northwest Mining Association telling them that the role of gold in world monetary affairs would continue to lessen. Under Simon’s term, gold was bombed from $200 to $105 and as the lead COMEX governor, the Hunt-Arab silver play was destroyed with assistance from some of his Pilgrims pals in key positions. For that coverage, see #10 Silver Squelchers. Everyone please note my work is 100% free research in the public interest.

  7. I’ll just repeat what Bob Moriarty has been telling me
    for years….

    “it’s the end of empire”.
    All the Roman coins buried in the ground in Europe are a clear indication that government kleptocracy is not a new
    concept… only this time , the looters will need no shovel…
    with a click of a mouse $20 trillion can be looted
    from retirement accounts…. that is, if derivative counterparty feedbacks have not already erased it.

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