Can this really happen?

I was at a private conference last month and heard two really interesting ideas that were supposedly being discussed at the US Treasury and inside the White House but wondered whether it was just talk or actually had a chance of happening. One, the US Treasury would revalue to the market the 8,133 metric tons/261 million troy ounces of gold that they hold and currently marked at just $42 per ounce. Via a relationship with the Fed that holds gold certificates in return as they handed over the gold to Treasury many years ago, this maybe can be monetized via a repo deal with Fed or something else, giving Treasury about $800b-900b in cash in the snap of a finger.

The second was the US Treasury would give some of our foreign friends that own US Treasuries an offer that they could not refuse, to swap some of them for much longer term bonds, like 50 to 100 year bonds that would allow us to term out our debt and maybe even make them zero coupon.

Then I hear last week comments from Scott Bessent who at the White House said he is looking about monetizing some things on the balance sheet of the US Government. Interesting in light of what I said above. Also, President Trump made some comments yesterday about potential problems in the Treasury market where maybe we don't have as much as debt as we thought, though there was no further color or clarification on exactly what he was referring to.

I wasn't intending on mentioning any of this until news actually came of it but what got me to write this today and reveal what I heard last month and after the Bessent comment, was the Gillian Tett article over the weekend in the Financial Times titled "The Unimaginable is Now Imaginable as Gold Glitters" where she seems to be on to this story.

She goes through some of the reasons for the record high price in gold that we're all aware of but then said, "some hedge fund contemporaries of Scott Bessent, the hedgie-turned US Treasury secretary, are speculating about a revaluation of America's gold stocks."

"Currently, these are valued at just $42 an ounce in national accounts. But knowledgeable observers reckon that if these were marked at current values - $2,800 an ounce - this could inject $800 billion into the Treasury General Account, via a repurchase agreement. That might reduce the need to issue quite so many Treasury bonds this year."

Now this would only be a one-time reset but something that apparently is being debated.

Also, on point number two. She cites an investor memo that Stephen Miran, the head of Trump's Council of Economic Advisors wrote last year. In addition to talking about the use of tariffs and eventually weakening the US dollar via "voluntary co-operation from the Federal Reserve and a multilateral dollar devaluation accord...he also contends that the dollar's reserve status and American military dominance are so tightly entwined that the White House could force countries who enjoy the US security umbrella to finance its deficit by buying very long-dated treasury bonds."

Bottom line from Gillian, "Such ideas might seem mad. And Miran acknowledges that the policy 'path' to implement tactics like these 'without material adverse consequences' is 'narrow'...But what Miran's memo shows is that once unimaginable ideas are now becoming entirely imaginable."

"Thus it is no surprise that gold is outperforming bitcoin right now; nor that traders are flying gold bars from London vaults to New York. Welcome to a financial Alice in Wonderland world where buying bullion seems almost sane."

I'll add, it is clear that at Treasury and in the White House, some really creative, outside the box thinking is taking place in dealing with the overload of US debts and deficits. Who knows if any of this takes place, the legal ability to do so, etc... but these are all things to now be thinking about and considering as possibilities.

https://www.ft.com/content/f6459ed1-8a65-4d89-8bd8-40e8546912f0

Moving on. Quietly, the Manheim Used Vehicle Index is at its highest level since October 2023. Their January index rose .4% m/o/m and .8% y/o/y. "While it's not yet spring, wholesale values increased more than we usually see in the month of January, with particular strength at the end of the month...Currently, retail days' supply at used dealerships sits nine days lower than last year, and we are just now on the cusp of starting the spring wholesale market."