Abracadabra—Washington’s $1.3 Trillion Magic Trick

Somewhere on a Treasury spreadsheet, a ridiculously small number might soon become a number so large, the human mind can’t even fathom the size… and through the magic of a simple phrase, “Because I said so.”

Maybe you’ve heard; maybe not. Either way, there’s jibber-jabber across the conspiracy channels that the US is on the path to revaluing gold—something I’ve written about in the recent past.

It does make sense at some level.

But it raises some questions: How would this even work? Could it even work? And how would the rest of the world respond?

Right now, the US government values Uncle Sam’s hoard of gold (assuming it exists) at just $42.22 per ounce. Congress set that price in 1973, before Nixon became POTUS-non-gratis. That wonderfully specific $42.22 figure came as Washington devalued the dollar in an effort to salvage the imploding Bretton Woods system. And there it has sat ever since, frozen in accounting amber.

So, on paper, America’s gold is worth about $11 billion.

In terms of 2026 reality, Uncle Sam’s golden wealth is closer to $1.15 trillion.Not what you’d call a rounding error.

That hidden-in-plain-view wealth gap is what Washington’s cleverest budget hawks now want to unlock. They want to do so by way of revaluing the gold.

And there… we have a bit of meaningful history.

On April 5, 1933, FDR signed Executive Order 6102, ordering every American to hand over their gold coins, bullion, and gold certificates to a Federal Reserve bank. Refuse, and you faced a $10,000 fine or 10 years in prison. The Treasury paid $20.67 an ounce—the price set by the Gold Standard Act of 1900.

Then Congress set about with the tomfoolery. The chicanery. The rip-off. It’s what Congress does…

So, Congress passed the Gold Reserve Act of 1934, and Roosevelt fixed the new official price at $35—a 41% devaluation for the dollar and a 69% markup on Uncle Sam’s freshly-nationalized gold. Treasury booked a paper profit of roughly $2.8 billion in 1934 dollars, equal to about 4.2% of the GPD back in the day.

Two billion of that capitalized the Exchange Stabilization Fund—a Treasury slush fund that intervened in currency markets as recently as this month, when Treasury Pooh-Bah Scott Bessent stepped in to prop up an ailing yen, to prevent Japan from having to sell US debt to raise the cash necessary to support their collapsing currency.

The Americans who had surrendered their gold at $20.67 got exactly none of the markup. All the value emerged out of thin air overnight, simply because the US government decided that gold was magically now worth $35 per ounce.

The world effectively had no choice but to just “deal with it.”

France, Belgium, the Netherlands, Switzerland, and Italy all tried to defend the classical gold standard. But they couldn’t. All had to devalue their own currencies by autumn 1936—competitive devaluations that paired with America’s beggar-thy-neighbor tariffs helped grease the skids that sent the planet into World War II.

That’s the historical baggage that travels with this “revalue gold because I said so” idea.

The 21st-century version is a pure bookkeeping maneuver. Treasury retires the roughly $11 billion gold certificate sitting on the Fed’s balance sheet, issues a new certificate marked at, say, $5,000 an ounce, and the Fed credits the Treasury General Account with the difference—north of $1.3 trillion in freshly-minted spendable dollars, without issuing a single Treasury bond.

Interestingly, that’s about 4.2% of America’s GDP today.

Probably a coincidence.

Whether a revaluation requires an act of Congress or whether Bessent can just wave a Magic Twinkie and say “$5,000 per ounce because I said so” is an open debate. Technically, Bessent has that existing authority under that old Gold Reserve Act. Treasury lawyers are being very quiet about this.

Either way, the math is seductive when you’re a government drowning in your own fiscal incontinence.

More than $1.3 trillion.

Then again, it’s not like there’s any magic there. The gold is already worth what it’s worth based on today’s prices. A possible revaluation is just a giant mark-to-market exercise with a lot of extra zeros.

But against nearly $40 trillion in national debt, all those new zeros would still be nothing but a rounding error. The US is going to spend more than $1 trillion in debt repayment costs just this year. So, one rightly must ask, “what’s the point?”

There is a lesson here for the rest of us: 1934 wasn’t a proof-of-concept that revaluation works. It’s that governments reach for last straws when they’ve run out of politically survivable options… and someone always pays for that panic.

Last time, it was the Americans who surrendered their gold at $20.67 and then watched their purchasing power collapse.

This time?

Pretty much the same: Anyone who holds a dollar is scrod. Anyone who holds gold will see their purchasing power surge.

And that’s the big takeaway.