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Big numbers are a
particular fascination of ours, and nothing says ‘big’ like the
modern federal budget. It seems that for politicians, there is
simply no limit to spending on any number of seemingly
worthwhile endeavors, particularly today, when borrowing against
our nation’s future is so easy to do.
So President Bush’s $2.9 trillion budget was really no surprise
to anyone. But take a look at it this way:
The United States government will spend, in one year’s time, a
sum equivalent to the current value of all the gold in the
world. That is, all the gold that has been discovered and mined,
every single nugget and grain, since the dawn of mankind – the
equivalent in dollar value of all that gold will be spent by the
federal government in a twelve-month span.
Let’s do the numbers.
First off, how much gold is there in the world? The Gold
Institute estimates 118,000 tonnes (a tonne is 1,000 kilograms),
while the World Gold Council calls it 145,000 tonnes. Of course,
no one knows for certain, as gold exists in government, bank,
and private bullion holdings, jewelry, coins of all types, and,
being the private metal that it is, quite a bit of gold is
squirreled away out of reach of any official accounting.
For the sake of argument, let’s call it 138,000 tonnes, a number
comfortably within those two official estimates.
A kilogram of gold is 32.15 troy ounces, so at $650 spot, a
kilogram is worth $20,897.50. A tonne is 1,000 kilos, which
makes each tonne worth $20,897,500.
Take that figure and multiply by our estimate of total world
gold supply at 138,000 tonnes, and we arrive at
$2,925,650,000,000. Round it off to $2.9 trillion, and you come
up with the same sum that the U.S. government proposes to spend
in a span of 52 weeks.
Pretty impressive, eh? All the gold treasure in the world, spent
in a year. That’s what a $2.9 trillion budget really is – the
astounding miracle of government profligacy writ large.
But the more practical lesson we can take away from
contemplating these enormous numbers is how cheap gold is today.
When one nation can spend, in a year, a sum equal to all the
gold in the world priced in that same nation’s currency, we are
witnessing something truly astounding in monetary history.
Either gold is an obsolete relic, or the biggest bargain
available at U.S. dollar prices today.
Which do you think is true?
-Richard Smith
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