The debt ceiling has again come to haunt the US. For those unaware of the term, the debt ceiling, as imposed by the Congress, refers to the debt level that the US can carry at any given time. While the Republicans have been opposing the idea of raising the debt ceiling yet again, the idea of having a trillion dollar platinum coin issued was doing the rounds. Fortunately, better sense seems to have prevailed and the idea has been rejected. So the next alternative appears to be selling the huge sovereign gold deposits. The US Treasury has about 261.5 million ounces of the yellow metal. At the current gold price, that could raise over US$ 440 bn. But even this idea has been dumped by the US Treasury Secretary Tim Geithner. Selling gold would appear like a fire sale. As per him, this would affect US' reputation and have adverse global implications.

It is worrying that the US policymakers are refusing to acknowledge the magnitude of the crisis that their economy is facing. If you are unable to service and repay your loan, what would you do? Sell some assets, maybe gold, and repay the loan right? But governments tend to take a different course. They make the debt cycle so vicious that they keep borrowing debt to service old debt.

But there are other reasons, too, why selling gold may not solve the US debt ceiling crisis. This is because the US government currently borrows about US$ 100 bn of debt every month. So selling the Treasury gold would cover up just over 4 months of the debt obligations. So it remains to be seen what new trick US policymakers come up with to further postpone the impending crisis.