According to a woefully outmoded law of the United States, the American government must account for the more than 8,100 tons of gold it owns at the now completely irrelevant price of $42.22 per ounce. In the precise language of the 1973 Act to Amend the Par Value Modification Act, still in force, the legally stipulated price is “forty-two and two-ninths dollars per fine troy ounce.” (That “two-ninths” is interesting.) But the real value, the market price of gold, has now traded over $3,000 per ounce, about 71 times the statutory price. Alternately stated, the statutory price is less than 2% of the real price. How does this antique artifact survive?
Whatever was the case in 1973 when Congress raised the official price from $38 to $42.22, for us in 2025, after a further half-century of depreciation of U.S. paper money, the statutory price makes no sense at all. It comes from a law passed 52 years ago in a different world of political finance. Why hasn’t it been updated with a realistic relationship between gold and the dollar? Indeed, it is high time for an update.
The value of gold in terms of dollars has gone up by about 7,000% from the statutory price; the price of the dollar has dropped from 1/42.22 to 1/3,000 of an ounce of gold. So priced in gold, the value of the dollar has gone down by more than 98%. Alternately stated, from taking 2.37 ounces of gold to buy $100, now it takes only 0.033 ounces.
This means that the U.S. Treasury has a giant gain on its gold. Although the gain is unrecognized on the government’s books, it has already happened and is already real. In round numbers, at a price of $3,000 per ounce there is a gain of $2,958 per ounce on the Treasury’s 261.5 million ounces of gold, for a total unrealized profit of about $773 billion. That is a big enough number to get anybody’s attention, and for any Secretary of the Treasury to think about.
When Treasury Secretary Scott Bessent recently said, “We’re going to monetize the asset side of the U.S. balance sheet for the American people,” many financial commentators immediately thought of the Treasury’s gold and how it might be turned into a big realized gain and spendable cash. This can certainly be done, but not in any case until Congress amends the official price set by the1973 act.
The possibilities are important for the fundamental theory and politics of money, because they would reintroduce some monetary role for gold a half-century after the U.S. led the world into its current inflationary, pure paper money system in 1971. That was when President Nixon ordered the Treasury to default on the international commitment of the United States to redeem dollars for gold.
Suppose that Congress brought the official price of gold up to reality. The Treasury would immediately realize a $773 billion gain on the government’s books. To turn the gain into cash it would not have to sell any gold, but could borrow against it.
For example, the Treasury could issue gold bonds, as it did historically, and as monetary theorist Judy Shelton has suggested it do again. (The Treasury would have to overcome the issue of having defaulted on its former gold bonds in 1933.)
With a more radical return to historical practice, the Treasury could issue gold-backed currency in competition with Federal Reserve notes. I know which currency I would prefer—how about you? But this would take further controversial legislation.
Much simpler and more direct would be for the Treasury to issue Gold Certificates, which are already authorized by the Gold Reserve Act of 1934, but now would be based on the current value of its gold. The profit on the gold could then be easily monetized by depositing these certificates in the Federal Reserve, which would correspondingly credit the deposit account of the Treasury with the Fed. Voila! Money ready to spend without issuing more Treasury bonds.
As Paul Kupiec and I have previously pointed out, this would be an efficient way to create interim financing for any future debt ceiling crisis.
We should certainly bring the finances of the United States current with the reality of the vast rise of the value of its gold with respect to the dollar and the vast fall of the value of the dollar with respect to gold. At the same time, we could open our monetary theory and practice up to a renewed monetary role for gold.
Congress should immediately amend the Par Value Modification Act by enacting a “Gold Value Modification Act of 2025” that deletes the former official price of “forty-two and two-ninths dollars,” and replaces it by “the fair market value of gold as certified by the Secretary of the Treasury.”
