Restoring gold to legal tender is best solution

THE article by Conal Gregory (Yorkshire Post, July 13) is balanced, and one of the best commentaries on the present crisis I have read.

The unseemly procrastination and wrangling in Europe presumably reflect attempts to shift the blame and/or financial loss. While there is understandable discussion about the debt mountains and bail-outs, I cannot but wonder if the other side of the ledger deserves closer scrutiny. I refer, of course, to the incredibly shakey assets held by supposedly reliable institutions.

In his book The Ascent of Money: A Financial History of the World, Niall Ferguson notes that “the Bank of England’s bullion reserve actually exceeded the value of notes in circulation from the mid 1890s until the First World War”. By contrast, many central banks now hold a portfolio of “toxic assets”, accumulated during bail-outs and quantitative easing.

Can anything be done about this? Given the political will, I believe it can.

The US International Reserve Position, as stated by the Treasury Department, includes a gold holding of 261.5 million fine troy ounces, worth only $11.041bn. A note leads to the disclosure that this gold stock is valued at $42.222 per ounce.

The US Treasury’s prime asset is booked at about 2.6 per cent of its market value, at a time when the nation’s credit rating is under threat. Of course, this bizarre situation is rooted in politics.

Gold not only provides stability, it is the final extinguisher of debt. In the present climate, no reform would be more beneficial than an early international agreement to remonetise it.