U.S. Senator Rand Paul visited the Gold Depository at Fort Knox located in the State of Kentucky that he represents in the U.S. Senate. Senator Paul spoke by video message about the U.S. government holding about a hundred and forty-seven million ounces of gold, with about half of it stored at Fort Knox, and the other half at the Denver Mint. At the current market price, the gold is worth about $647 billion. However, the national gross debt has surpassed $39 trillion, and when combined with federal employee and veteran benefits obligations, total liabilities sit at roughly $45.5 trillion. Thus, the gold reserve would meet only a small fraction of the liabilities. Meanwhile, the US Federal Government runs annual deficits of two trillion dollars ($2,000 billion). Senator Paul also stated “The Federal Reserve (Central Bank) buys about a third of that debt by creating new money. Every new dollar dilutes the value of the dollars already in people’s pockets. Gold does not expand when the U.S. Congress spends. Paper does. That is the difference”.
It is in that alarming situation that investors like my Columbia University teacher Jim Rogers, George Soros’s first business partner, often speak about how the dollar gets debased. Interestingly, Treasury Secretary Scott Bessent, when at Yale University, took an internship with Rogers, who was Soros’s original co-founder. Rogers famously offered Bessent a couch in the office to sleep overnight on while he broke into finance. There are other pressures too on the dollar because of efforts by some major countries to skirt usage of the dollar for international trade and investment, and still others since digital linkage of central bank digital currencies and nostro and vostro accounts can potentially enable local currencies to be used for bilateral trade and investment.
While the United States federal government officially owns $6.1 trillion in total assets according to its official balance sheet, however, external financial analyses that account for unrecorded physical land, vast mineral estates, and natural resources estimate the total comprehensive value of all U.S. government assets to be between $140 trillion and $269 trillion. That also includes loans receivable, property, plant, and equipment such as federal buildings, military bases, heavy hardware, cash and monetary assets including official Treasury cash reserves and foreign currency, inventory and related military stockpiles.
The official balance sheet severely underestimates the total economic value of the government because federal accounting standards exclude most public land, natural resources, and the power of taxation. When these are included, the valuation jumps exponentially: mineral and energy reserves are at $125 to $150 Trillion. The U.S. government owns the rights to offshore and onshore oil, natural gas, timber, and coal reserves managed by agencies like the Bureau of Land Management. The government owns roughly 28% of all land in the United States (about 640 million acres), including national parks and wildlife refuges, which carry immense real estate value.
Thus, it is feasible to do a debt-swap to extinguish much of the debt overhang that is casting a pall of gloom over the future of the US dollar. However, it is politically charged to exchange national assets to eliminate external debt. Debt-swaps came into prominence in the Latin American debt crisis of the 1980s, and I led a project on that at Harvard University when we undertook the world’s first debtfor-health research swap. It was done with mentors Dr Saburo Okita, Japan’s most famous development economist who also had served as Foreign Minister, and Prof David Bell, who had been Budget Director for President Kennedy’s Administration.
Eliminating or drastically reducing external debt frees countries from crippling interest payments that often exceed spending on health and education. It prevents defaults, stabilizes fragile economies, and redirects scarce financial resources toward critical domestic infrastructure, poverty reduction, and sustainable long-term growth. Relief from debt overhang stops the cycle where a country’s extra export revenue goes straight to foreign creditors rather than boosting local living standards, enhances macroeconomic stability by lowering inflation pressures and reduces currency depreciation risks tied to massive foreign exchange outflows required for debt payments. Such a goal of dampening down external debt overhang can only be sustainable if the annual budget deficits are themselves drastically reduced. Thus, it is not only high finance but also high politics that is the need of the hour.
In effect, most countries are only now emerging into feeble growth following the man-made catastrophe of COVID, including unprecedented lockdowns and inappropriate usage of experimental vaccines, that Senators Rand Paul, Ron Johnson and Mike Lee doggedly exposed. The Senate hearings on illegal financing of gain-of-function research in Wuhan by NIAID led by Dr Fauci riveted the world’s attention. Never before had entire nations been locked down with no logic, given that the mortality rate was skewed towards the elderly with comorbidities, with the young largely free of deadly risk. Entire sectors such as small and medium enterprises were wrecked.
In these columns, I covered since early year 2020, months into the pandemic, the grand folly of the approach in most countries towards COVID as well as my conviction of the Wuhan lab-leak likelihood given my prior work on organizing a conference in the 1990s on emerging infectious diseases at the Rockefeller Foundation with Nobel Prize winner Josh Lederberg, and certainly the “smoking gun” furin cleavage site highlighted by another Nobel laureate David Baltimore.
In conclusion, the accumulation of debt overhang in country after country has been the net effect of multiple factors and often misguided policies. To achieve a clean break from that path of unsustainable finance, debtswaps can clean the slate and enable new beginnings including innovative, cost-effective healthcare, enhanced prevention, and economic development. But is there sufficient political capital to achieve such grand objectives?
*Dr Sunil Chacko holds degrees in medicine (Kerala), public health (Harvard) and an MBA (Columbia). He was Assistant Director of Harvard University’s Intl. Commission on Health Research, served in the Executive Office of the World Bank Group, and has been an Adjunct Professor and faculty member in the US, Canada, Japan and India.
