The proposal to fund Bitcoin purchases previously put forth by U.S. Senator Cynthia Lummis partly relies on the large gold legacy that the U.S. possesses—gold that was left over from the time when the dollar was linked to precious metals and dollar holders could exchange gold at a fixed price. Although the dollar has not been redeemable for gold since the early 1970s, the Treasury and the Federal Reserve still hold about 8,100 metric tons of gold. The government values this gold at $42 per ounce, far below the current market price of $2,650.
Cynthia Lummis hopes that the Treasury can reevaluate this gold at current market prices and use the paper profits to fund Bitcoin purchases without raising taxes or issuing new debt. However, critics point out that this operation is not a free lunch; it will require the Federal Reserve to cover the gap between the gold certificates held by the Treasury and the new valuation through a combination of printing money and asset sales.
Monetary economist George Selgin argues that this operation is akin to a 'backdoor loan' from the government, bypassing the regular appropriation process to avoid new debt and covering up the truth. The Lummis bill relies heavily on a lot of gilded magic, with George Selgin saying, 'What better way to win public support than to make people believe this plan will cost nothing?' (Gold Ten)