Congress is Considering Revaluing Gold to Buy Bitcoin

A bill was just introduced to Congress that would revalue the United States gold holdings and use that in order to buy Bitcoin. I'm going to show you exactly what this bill says, how it works, and show you why not only would this be extremely bullish for the price of gold, but it could push Bitcoin past $700,000. This is the bill in question that was just submitted to Congress. You may notice this bill is to establish a strategic Bitcoin reserve. However, that is something that President Trump did through executive order already. So what is this all about? Well, first of all, this is an old bill that has just been reintroduced to Congress. And the reason is because some people want this whole Bitcoin thing to stick. And they know that if it's created through executive order, it could also be destroyed through executive order as well. And so to make the strategic Bitcoin reserve stick, many people know they need Congress to do something about it. That's where this reintroduction of the Bitcoin Act comes in. Now, the second piece about this that requires congressional involvement is the fact that in President Trump's executive order, it specifies the strategic Bitcoin reserve will not accumulate more Bitcoin unless it can do so in a budget neutral way. In other words, he wants you to know that taxpayers are not going to be footing the bill for this. And don't worry, there's going to be some sleight of hand involved because taxpayers will be footing the bill for this. If this goes through, it just won't be through taxes. OK, so now let's take a look at the section that details gold revaluation in order to purchase Bitcoin. The Federal Reserve Banks shall tender all outstanding gold certificates in their custody to the secretary. Because of the Gold Reserve Act of 1934, all of the gold held in the Federal Reserve System was transferred to the Department of the Treasury. And in exchange, the Treasury gave gold certificates back to the Federal Reserve for the stated amount of gold transferred at the price of forty two dollars and twenty two cents per ounce, which was the price of gold set by law at that time. In other words, the United States government has a lot of gold. The Treasury is the one that holds on to it. And they took that gold from all of the banks through the Federal Reserve System. And in exchange, they gave them gold certificates that said the gold that you have access to is worth forty two dollars and twenty two cents. But as of March of twenty twenty five, the price of gold is over three thousand dollars per ounce. And yet legally, the United States government currently recognizes the value of its gold holdings still as only forty two dollars per ounce. And so this bill would require all Federal Reserve Banks to give all of their gold certificates back to the Treasury. Those gold certificates currently state that the gold is worth forty two dollars an ounce. The bill goes on to say that not later than 90 days after the tender of the last certificate, the secretary of the Treasury will issue new gold certificates to the Federal Reserve Banks that reflect the fair market value price of the gold held against the certificates by the Treasury as of the date specified by the Treasury on each new gold certificate. In other words, the Federal Reserve Banks will give their gold certificates back to the Treasury and the Treasury will give the Federal Reserve Banks new gold certificates that have the current value of gold listed on them. In this case, three thousand dollars per ounce. But the problem is you can't just swap that out without something happening on the other side of the balance sheet because the Federal Reserve would be giving up something legally worth forty two dollars and receiving something legally worth three thousand dollars. And so the bill then goes on to rectify this issue by saying that upon issue by the secretary, each Federal Reserve Bank that receives a new gold certificate shall remit the difference in cash value between the old and new gold certificates to the secretary for deposit in a general fund within 90 days. In other words, the Federal Reserve will be given up its forty two dollar certificates in exchange for three thousand dollar certificates and they have to print up the cash between the difference. So two thousand nine hundred fifty eight dollars and give that cash to the Treasury in payment for that new gold certificate. And from the Federal Reserve Bank side, because this is all just an accounting gimmick, they are giving up cash that they printed into thin air, but they're getting something in return worth the same amount of money they just printed. And so it's balance sheet neutral for the Federal Reserve and it's budget neutral for the United States Treasury because they didn't have to do any taxing or borrowing in order to accomplish this. If this is sounding familiar to you and you don't know why, it's because it's very similar to the trillion dollar platinum coin trick that gets brought up every couple of years. The United States government has the authority to declare the value of a specific type of platinum coin. And the idea would be for them to make one of these coins, sell it to the Federal Reserve for a trillion dollars. The Federal Reserve gets that coin, the government gets the trillion dollars, and then they can spend that money on whatever they want. At the end of the day, it is a declaration of value on something printing up the money for the difference. So really, it's just money printing. There's no difference here. Now, if you're thinking, well, how much gold does the United States actually have and how much buying power would that give them for Bitcoin? Well, let's pull out the calculator and we know that the United States government has a little over 8,000 tons of gold. And of course, here we are assuming the gold is actually there. And recently, there's been good evidence that maybe the US actually has more gold than they've let on, which brings up a whole new host of questions like, who did they steal it from? Where did they get it from? When did they get it? But right now, officially, the US has 8,000 tons of gold. So we plug in 8,000. We know that's tons, not pounds. So we have to multiply that by 2,000 in order to see how many pounds they have. And then we have to multiply that number by 16 to see how many ounces of gold they have. And then finally, we multiply that by 3,000, which is the number of dollars per ounce gold is worth right now. And we see that number is $768 billion. So by revaluing its gold holdings and having the Federal Reserve print the difference, the United States government's bank account would receive $768 billion of brand new printed money. But how far would that go in purchasing Bitcoin? Well, first, we have to answer, how much Bitcoin does this bill want the United States government to buy? If the United States owns 8,000 tons of gold, that means it owns roughly 3 to 5 percent of all known gold. And so this bill proposes that the United States government would own the same ratio of all Bitcoin. In other words, over a five year period, the United States government would acquire a total of one million Bitcoins. That'd be roughly 5 percent or one twentieth of all existing Bitcoin. So the question is, is $768 billion enough to do this? All we have to do is divide $768 billion by one million to see how much they could spend on each Bitcoin. And when we do that, we come up with an answer of $768,000. In other words, if Congress were to instruct the Federal Reserve to print up the money equaling the current market value of the United States government's gold holdings and the government use that cash to buy Bitcoin, the price of Bitcoin could be driven up all the way to $768,000 per Bitcoin and the government would still be able to buy one million Bitcoin with that. Now, the price of Bitcoin today is hovering around $84,000 and this purchase plan would be set to take place over a five year period, which means that in the beginning, at least they would be purchasing Bitcoin for much less than $768,000. But understanding all this buying pressure is coming in, there would certainly be other actors, states in the United States, other nations, sovereign wealth funds, institutions, pensions that would all be trying to front run this. And it's interesting that just within the last couple of days, Larry Fink, who is the CEO of BlackRock, predicted that Bitcoin is going to $700,000, which is eerily close to the amount that it would cap out at if supported only by U.S. government purchases, which means that this plan would have the potential to drive Bitcoin up even higher than that. And so you ask, what would they do if they run out of the money that they printed in order to buy Bitcoin and they still haven't gotten all million that they want? And that's where we have to go to the section right before the revaluation section in the bill and see that they plan to use Federal Reserve Bank remittances of net earnings, in other words, profits, in order to fund these purchases. Now, this is a discussion for another time, but usually the Federal Reserve runs a profit. They have a balance sheet full of U.S. government treasuries, mortgage-backed securities that pay interest to the Federal Reserve. After they pay out dividends and cover all their costs, if there's anything left over from that, they just give that money straight back to the U.S. Treasury. During recent times, they've been running a loss, so they just print up the difference, which means they're not sending any money to the Treasury. But eventually, if and when interest rates go back down, that flips, the Fed starts running a profit again, and all that money goes back to the Treasury. This bill proposes that all that money being sent to the U.S. government from the Fed, from its profits on its balance sheet, would be used to buy Bitcoin. This means that even if the $768 billion they print from the gold revaluation isn't enough to buy a million Bitcoin, because Bitcoin price goes up too high too fast, they would still eventually be able to get there by using the profits from the Fed's balance sheet. Now, at the beginning of the video, I mentioned that this is considered budget neutral because they're not taking money from taxes or taking money from borrowing and using it to buy Bitcoin. But that doesn't mean that it's not the taxpayers footing the bill, because at the end of the day, this is still new money. It is money being printed into existence in order to buy something. And every person that they buy that Bitcoin from is receiving a payment of those new dollars in exchange for the Bitcoin they're selling to the U.S. government. And those people that sell Bitcoin to the government then get to spend that money. And it goes into people's bank accounts. It goes into people's paychecks. In other words, it drives up the supply of money, increasing the cost of goods and services. And the people who are wage earners and savers are the ones who disproportionately pay the cost of the rising price of goods and services, in other words, inflation. So just because you aren't paying for something out of direct taxation doesn't mean as a taxpayer you aren't going to foot the bill for it. Now, the final point to make here is whether or not this will be bullish for the price of gold. And the answer to that is almost certainly yes, and not because of the revaluation. The federal government's declared value of gold is almost irrelevant. As you can see, the price of gold, price of gold is currently $3,000 per ounce. You can buy and sell it right now for $3,000 per ounce, but the U.S. government still says gold is worth $42 an ounce. So it's irrelevant. And it will also be irrelevant if the government says it's worth $3,000 an ounce. It'll also be irrelevant if the government says it's worth $5,000 an ounce. But here's why this would be bullish for the price of gold. It would be bullish for the price of gold because it would be money printing. And gold has a knack for sniffing out inflation. That's why the purchasing power of gold stays consistent over the course of hundreds and thousands of years. And so if you print close to a trillion dollars, it doesn't matter what you use to buy with that printed money. Eventually that printed money makes its way into the economy, which is bullish for inflation protected assets like gold. At the end of the day, this would be yet another example of Congress picking winners and losers in the economy. The winners would certainly be asset holders, primarily Bitcoin and somewhat gold holders as well. And the losers would be everybody who owns no assets, has some savings and lives off of wages and has to wait until their cost of living goes up for them to get a raise. And by then it's too late. They're already behind. This is just a bill, and so it is yet to be seen whether this will actually pass. But if it does, I guess you know what to do. If you want my help applying ideas like this to your investing so you can take advantage of these kinds of things before they happen, make sure you don't forget to sign up for my asymmetric trading masterclass. The link is in the description below. As always, thanks so much for watching. Have a great day.