This is wacky, dwb. To pay off the international...

This is wacky, dwb.

To pay off the international holdings of treasuries (at current debt levels), the Fed would need to manipulate gold to the price of gold up to at least $8,000 (current gold prices value US gold holdings at $500 billion, so you'd need a very significant hike), though there is no real indication that this kind of thing would happen.

It is much, much easier to default on the debt gradually through inflating the currency, which will lift the price of gold gradually and allow the US to retain its gold reserves.

Of course, as holders of fiat-denominated instruments, the international bond market should understand that this is the case, and accept it.

But if your theory is true, at the very least gold will be sold at far above its current spot value. Even if your theory is wrong gold's nominal value falls in the future, holders of physical gold will still have the only liquid asset with negligible counter-party risk.

So unless you're buying at a price in excess of $8,000 an ounce, it seems highly dubious you will end up as a bagholder. Gold is not going to FOFOA levels any time soon, but it's certainly not in a bubble.