Monetary economist: Selling Fed gold to buy BTC is equivalent to backdoor lending

The proposal to finance Bitcoin purchases previously proposed by U.S. Senator Cynthia Lummis relies in part on the large gold legacy the U.S. holds—left over from an era when the dollar was pegged to the precious metal and dollar holders could redeem gold at a fixed price. Although the dollar has not been convertible into gold since the early 1970s, the Treasury and the Federal Reserve still own about 8,100 metric tons of gold. The government values ​​this gold at $42 per ounce, well below the current market price of $2,650. Cynthia Lummis hopes that the Treasury can revalue this gold at current market prices and use the paper profits to finance Bitcoin purchases without having to raise taxes or issue new Treasury bonds. However, critics point out that this operation is not a free lunch and will require the Federal Reserve Bank to pay the difference between the gold certificates held by the Treasury and the new valuation through a combination of money printing and asset sales. Monetary economist George Selgin argued that this operation was equivalent to a "backdoor loan" by the US government. In order to avoid new debts, skip the regular appropriation process, and cover up the truth, the Lummis Act relied on a lot of gold-plated magic. George Selgin said: "What better way to win public support than to make people believe that this plan will not cost a penny?" (Jin Shi)