Bulwark Takes - Elon and Trump's Goldfinger Plot For Fort Knox

Episode Date: February 24, 2025

Ben Parker is joined by Stan Veuger, senior fellow in economic policy studies at the American Enterprise Institute, to discuss Donald Trump and Elon Musk’s plans to check on the gold at Fort Knox, what it’s there for, and their calculated schemes to increase the value of BitCoin.

You can't rely on blind faith to get the pregnancy support you deserve. Ritual's Essential Prenatal Multivitamin is the only leading prenatal backed by its own human clinical trial. Essential Prenatal is proven to deliver key nutrients, including folate, biotin, and vitamin D during pregnancy. Get 25% off when you visit ritual.com slash clinical. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. Welcome back to The Bulwark.

Thanks for watching. I am Ben Parker of The Bulwark here with AEI economist and expert Stan Voiger to talk about the gold in Fort Knox. Stan, thanks for joining me. Of course. Thank you for having me. Yeah, thanks. So the news is that co-president Elon Musk and maybe actual president Donald Trump are

going to go to Fort Knox this week to make sure that the gold is still there. Now, we have no reason to believe that the gold isn't there. But I was wondering, why is there gold in Fort Knox in the first place? What purpose does it serve? Well, it currently doesn't serve much of a purpose at all. It is there because the value of the dollar used to be explicitly linked to gold. It was expressed in terms of gold. And so until the early 1970s,

not only was the value of the dollar expressed in gold, some counterparts were allowed to come to the US government and say, we have some dollars, we'd like to exchange them for gold. Basically, foreign governments and central banks could do that. President Nixon ended that. He ended the system of fixed exchange rates that was built on that premise of dollar

convertibility to gold. And ever since then, basically, we kept the gold. And we don't do anything with it. It just kind of sits there as a symbol of our might and power. Okay. So we once had a gold standard, meaning you could, in theory, take a dollar and say, I'd like $1 worth of gold, please. We no longer have that. But I looked it up and at the current price of gold, there's something like $400 to $500 billion worth of gold there. So even if we went back to a gold standard, there's not nearly enough gold to be useful for anything, right? Yeah. So it certainly wouldn't be enough to be able to guarantee the exchangeability of all the dollars out there. In fact, that's why we ended the system,

right? It's because we didn't have enough gold to fully cover the value of the dollar. So we ended up setting an artificially low dollar price of gold. That led to constant speculative attacks on the dollar. And that's why Nixon walked away from convertibility, from the breath and wood system, as they call it. And so, no, that's right. I mean, of course, one thing we could do with that gold and the other gold we have, I think in total, it's something like $750 billion, is we could gradually sell it,

you know, in an effort to lower the debt or something like $750 billion, is we could gradually sell it in an effort to lower the debt or something like that. It's not totally clear what the point of that is. We would reduce the value of one asset and then reduce the value of some liabilities. It wouldn't make us richer because our debt would be lower. Like paying off your credit card bill, right? You take your cash, you pay off the debt. It's net neutral, right? Yeah, that's right. Exactly. But that's something we could do. A little more at sort of the next

level of gimmick in this, you could revalue without selling and then say, because currently the dollars that we have are not valued at the market price of gold. They're valued at something like $40. What do I know about the price of gold?

Anyway, it's significantly undervalued. So one thing that people have talked about is you could revalue up to the market value of gold, and that would create sort of an artificial capital gain for the US federal government, which we could count as income. And then we could use that income to offset tax cuts or new spending or something like that. That is very gimmicky. Wait, sorry, let me explain that a little bit. Why is the gold currently undervalued? Why don't we just value it as the-

Because we never updated the price that we officially attached to gold. You remember, so under the Bretton Woods system, there was an official dollar value of gold. Okay. And so at some point, we just stopped devaluing the dollar officially, and we kept some artificially low price of gold.

That's just been on the record ever since. So there are people already? Yeah, of course it doesn't mean anything. But we could change that. And then on paper, we would have a gain that we could then use in the gimmicky budget math way

that Congress likes to offset maybe spending or tax cuts. I'm not saying we should do that. I'm saying that's... Because we're talking about, like, let's say... You were talking about... We could do it with all sorts of things the government owns. The government also

owns a ton of real estate, for example. We don't normally think of an appreciation in the value of public lands or if there's new minerals that are found or if office buildings that the government owns here in D.C., when they go up or down in value, we don't usually think of that as affecting the federal budget in a year-over-year sense.

But we could take that into account. But even if we did that with the gold, let's say we were to say, oh, we just found $750 billion, whatever it was. The national debt is north of $30 trillion, right? Of course, of course. Yeah, yeah, yeah. No, no, no, for sure. Yeah, we're talking like tiny, tiny drops in the bucket. For sure, for sure. Tiny drop

in the bucket for the debt. But it could be a meaningful offset for some of the new spending plans we have. For example, Republicans want to spend $175 billion in additional outlays on border security, on immigration, on anti-immigration

measures. But that you could cover with the proceeds from the gold. It is that order of magnitude. It's not a meaningless amount. But this is where sort of economics always became really tricky for me. So you say... This is not really economics. This is fake budgetary accounting.

Right. So you say, oh, well, on paper, this amount of gold went from being, you know, $20 million to being $400 billion, whatever it was. Therefore, we have all this extra money. But the gold is the same. Oh, for sure. Yeah, of course. Now, it's not like

we use the gold for anything, right? It's really only there as a store of value. Okay Now, it's not like we use the gold for anything, right? It's really only there as a store of value. Okay. So it's basically, I imagine we're paying some amount of money to keep it secure there. So, I mean, maybe actually the best thing to do is to gradually sell it off. I don't know. At least then we wouldn't have to pay to guard it, right? Yeah.

No, I think that's probably a reasonable thing to do. It's really, for historical reasons, I think there's probably a large enough subset of the population that really thinks that if we sell out the gold, it means the end of civilization is nigh. And so that's why we're not selling it off. That kind of symbolic argument, cultural, financial system is still based on gold. But yeah, there's no reason not to sell it off. It's not really in vogue anymore. But of course, privatization was a big deal for a while in the 80s and 90s. And you'd sell off airports and roads and those kinds of things. This is much easier to sell off than those things,

because you don't have to worry about what people are going to do with the gold once they have it. Whereas if you sell off an airport, someone still has to run it. And there's all sorts of operational questions that follow. Whereas if we just sell the gold, someone still has to run it. And there's all sorts of operational questions that follow. Whereas if we just sell the gold, then yeah, we've sold the gold. Right, and there's someone makes jewelry out of it or whatever. Yeah, that's right. Well, that's all super interesting.

I'm so glad they're going to go confirm that the useless gold is still sitting there being useless. Didn't Mnuchin go there to look at the eclipse during Trump's first term? Yeah, I think he did. I think Mnuchin was the first person in 40 years or something to go and actually go to Fort Knox. The first person who doesn't normally work there.

So it's there. Just why? Okay, so some of the other loony ideas that we've seen. I don't know. You tell me whether or not they're loony. They sound loony to me. I think it's probably better. Honestly, it's hard to think of better ways for Trump and Musk to use their time than to go to Fort Knox for a few days.

You know, at least they're not doing damage actively while they're there, I assume. That is a great point. I take it all back. They should spend all of their time at Fort Knox. They should never leave the vault. You're right. You totally changed my mind.

They should go there. Okay, so there are a few other maybe wacky economic ideas. There's something that sounded wacky to me that Trump and Musk have put forward. One of them was Trump said he wants to create a strategic cryptocurrency reserve. Now, I know we have a strategic petroleum reserve,

which is a bunch of billions of barrels of oil or however many it is in case many it is, in case there's war, in case there's a hurricane in the Gulf of Mexico, shocks to the supply. It's like, okay, we have a little extra oil saved. How would that work with Bitcoin? Well, it wouldn't. But the people who currently own Bitcoin, they would benefit if we bought a bunch of Bitcoin because the price of Bitcoin would go up. And that's what they want. The people who are heavily invested in Bitcoin, the whole use case for Bitcoin is speculation. So they want the price of Bitcoin to go up, and so they would benefit from a massive purchase

by the federal government. And so that's what they want. And then they have backfilled that idea with nonsense arguments in favor of a strategic Bitcoin reserve. One is somewhat similar to what you sometimes hear about gold, which is that if we are in an economic downturn or the reserve position of the dollar is undermined, perhaps Bitcoin would appreciate it. So we'd be able to hedge our losses somehow. It's never totally clear why.

Yeah, that's not totally clear how that would work. The other one really is something like if civilization crumbles, we can use Bitcoin as a payment device. And so it really is like the oil, right? If we run out of other ways to make our payments, we can use the Bitcoin. But it's really, it's always.

But we all still have computers and ways to charge them and ways to guarantee transactions online and things like that. But I mean, it's an initial collapse. If the apocalypse were to come, surely the gold would be more useful than Bitcoin, I think. Right. No, it's all nonsense. But the idea is, I think, for them to just get a bailout as an industry. I'm sure they wouldn't. And once we have a strategic Bitcoin reserve, of course, they would say, oh, but we need a strategic Ethereum reserve.

We need a strategic, you know, Trump coin reserve, Dogecoin, et cetera. The whole thing is to just keep pumping up the price of their assets. Great. Well, that doesn't sound corrupt at all. So glad we're doing that. Okay. And the last one. No, if there's one thing we do have,

I think really what they want to avoid. So the federal government owns a lot of Bitcoin right now, like 20 billion worth of it that we've seized from various criminals. Because of course, yeah, there's a lot of criminals who use Bitcoin. And so I think really their sort of more minimalist desire is for us not to sell off that 20 billion in Bitcoin and instead for the federal government to give to Bitcoin. And so I think really their sort of more minimalist desire is for us not to sell off

that $20 billion in Bitcoin and instead for the federal government to just keep it. If we sell it off, that puts downward pressure on prices. Yeah, okay. So I think that's the more minimalist version of the agenda.

Okay, well, that's maybe marginally better from a corruption point of view. Okay, so the last thing we wanted to talk about is Trump's executive order directing the heads of the Treasury Department and the Commerce Department to establish a sovereign wealth fund. So this is a thing that a bunch of other countries have, where my understanding is it's basically like an investment fund for the government, right?

I mean, you can explain it better than I can, sure. Does it make sense to make one? I don't know. Yeah, I mean, so the countries that are most often associated with this are countries that run large budget surpluses, right? Smallish oil and gas producing countries, right? That just on a year overyear basis run large surpluses. And so just like we have a national debt, they have a national stockpile of past surpluses. And you have to do something with it. Right. That's usually because they have a government company that sells petroleum products or whatever it is, right?

Like it's a national monopoly that sells gas and oil, right? Yeah, like Saudi Arabia or UAE. Norway is sort of the most famous Western country that has one. And so that's what they are, that's what they're trying to mimic. Of course, the US does not have these year over year large surpluses that we need something to do with. And so that justification, I think, is not really reasonable here. The other context in which other countries have these large asset managers, for lack of a better word, is in the pensions context, where you have a large funded pension fund, right? So where people pay in on those payments, then sit in the fund until they're paid out. That often leads to large accumulated amounts of funds as well.

So for example, the California Public Sector Employee Fund has large amounts of assets in it. At the federal level, the Medicare Trust Fund and the Social Security Trust Fund have large amounts of assets in it. At the federal level, the Medicare trust fund and the social security trust fund have large amounts of asset in them. So the social security trust fund is about, I think, 2.5 trillion. So that's real money. And so right now at the federal level, those are basically invested in treasury bonds, in risk-free government debt. You could pursue a more aggressive investment strategy there. That's what Norway does with its sovereign wealth fund. That's what a lot of pension funds do.

CalPERS, the California pension fund, invests much more aggressively than the Social Security Trust Fund. The Netherlands has a large public sector pension fund that also invests much more aggressively than social security trust funds. Now, the question is, is that wise? And I would say no. So the reason why you can get higher returns by investing in other assets that are not sovereign debt, that are not treasury bonds, is because those assets are riskier.

So you're really just taking more risk with these investments. You have a higher expected return, but also a higher risk of losses. Now, the only reason to make that kind of shift is if you think that the people who will be doing the investing for the federal government are better at assessing that risk return trade-off than market parties. And that's just quite implausible. I think especially because having the federal government do it comes with, I mean, a pretty obvious set of downsides. One, once you start using, say, the Social Security Trust Fund to invest in private companies,

the federal government would become a very large shareholder in a lot of private companies and could start demanding that those companies do all sorts of things that the government wants them to do. That could also just be straight up corrupt ways of using the money, right? You're funneling it to your political allies. I think we're already seeing enough of that. I don't know that we need to expand the scope for that dramatically. But of course, Trump and some of his allies would like to dramatically expand the scope for those kinds of corrupt actions. What about on the other side? It seems to me that if you have $2 trillion in the Social Security trust fund, that basically you're, in a way, sort of forcing Americans to buy government debt, right? Because it's their money that they're paying into the

trust fund, at least in theory, right? You'd have to sell the debt to someone else. That's right. And so does that make it easier or harder for the government to borrow money? Because they'd have to actually go out and sell it, right? As opposed to forcing people to buy. It would make it harder, exactly. Because now we would not have this intra-government

holdings of sovereign debt. Instead we'd have to sell those bonds on the open market. Yeah, that's right. And so that would make it harder to probably put some open pressure on interest rates. Yeah, it's hard to see major advantages to this scheme. Okay, so it sounds like we're over three.

It sounds like the gold in Fort Knox doesn't serve a purpose. The strategic Bitcoin reserve doesn't serve a purpose. The strategic Bitcoin reserve doesn't serve any useful purpose. And the federal sovereign wealth fund also doesn't really

make a lot of sense for a country like the United States that runs massive budget deficits. So over three, you agree? That's right, though.

I think we agree that it would be good for Trump and Musk to spend significant amounts of time at Fort Knox. Yes, on that, we totally agree.

One for one on that. Stan Voyger, thanks so much for joining me and explaining this all to me, to everyone watching the Bulwark.