Why Governments should Like Gold

Consider why governments should like Gold:

1) Gold acts as the perfect sponge for money/liquidity. Money put in gold does not really affect the broader economy like money going into oil or treasuries does; money put into Gold goes absolutely no where except into Gold. This is the primary reason governments do not like Gold in deflationary periods because it acts a dampner on their money printing purposes.
2) You can easily assess the value of another nation's currency by how much gold they have. If I have 400 tons with $1T in circulation and you have 800 tons with $1T in circulation, it's pretty easy to determine that your currency should be worth more than mine. With floating fiat currencies, determing actual, absolute levels of trade on a global basis is difficult at best.
3) You can always trade your gold to another nation for goods or services required. For example, a war or some oil.
4) Whether we want to admit it or not, ultimately a nation's status is based on two things -- what they have already and what they can produce. We can talk all day about intangible things like "free speech" and "rule of law" but at the end of the day, and I admit only over the short run, what a nation has and what it can make are most important in determining its next 5 years. Gold is something that productive, wealthy nations should have. Gold is something that Gold producing nations can extract. The value of their nations [currency] is intrinsicly higher than those who have not. That value ultimately largely determines who would be victorious in any sort of battle -- whether it be trade or military.

My country, The United States of America, at least on paper (if you want to believe some of the consipiracists who say the Gold out of Fort Knox has been moved or sold, be my guest), has the world's largest Gold reserves -- far and away. I also find it interesting that the United States in the past 60 years has not really been a net seller of gold either. What does that really tell you about what the US Government truly belives about Gold?

When push comes to shove, the precious metals are one of the most tangible things a nation has in its economic arsenal for trade in times of last resort. Our government knows that. Do you?