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There are still a lot of gold bugs out there who really dislike the idea of fiat currencies and believe gold is an investment. Rick Perry, the former Governor o

There are still a lot of gold bugs out there who really dislike the idea of fiat currencies and believe gold is an investment. Rick Perry, the former Governor of Texas, for instance thought it was treason that the Fed printed more money during QE. Fears of hyperinflation still seem to exist out there even though we went through a brief deflationary period. The gold in question actually isn't in the Federal Reserve in New York. It is at HSBC in a private vault [1]. Texas bought the gold back in 2011 near the height of the gold bubble [2]. It has actually lost quite a bit of its value since then since gold prices are about 25% lower since it was purchased. Sadly, the Governor seems to still say they are moving $1 billion in gold (as opposed to $750 million). You'd think losing $250 million would be a big deal for a state. 1. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/26/texas-wants-its-gold-back-wait-what/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/26/t... 2. http://www.ai-cio.com/channel/ASSET_ALLOCATION/UTIMCO_Bullion_Buy__Political_Statement_or_Prescient_Investment_.html http://www.ai-cio.com/channel/ASSET_ALLOCATION/UTIMCO_Bullio...

nostromo 11y ago
They haven't lost $250 million as they haven't sold their holdings. For what it's worth, UT has the second largest US educational endowment now, only second to Harvard. On the whole, they've done very, very well. It doesn't surprise me that some of their investments are currently underperforming, as that's a hallmark of a diverse portfolio.
- cnst 11y ago
  Fair point; however, if the price was increased 10 fold, would they still be saying that they're moving 1 billion dollars in gold, and not 10?
- mikeyouse 11y ago
  Paper losses are still losses.. If your holdings decrease in value by 25%, they need to increase by 33% to recover their previous price. Another way to think of it; You can borrow against assets using the gold as collateral. Texas's borrowing ability is much smaller today than it was when the gold was worth $1B. It's clear that they've lost some tangible value.
- blatherard 11y ago
  That's why I refuse to sell my Beanie Babies.
cnst 11y ago
I'm a little confused here -- if the money is actually stored at HSBC in New York, not at Federal Reserve, why http://gov.texas.gov/news/signature/21038 http://gov.texas.gov/news/signature/21038 explicitly mentions "The law will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas."? Is it done simply with the intent of playing on the anti-federal-gov sentiment?
- Aloisius 11y ago
  They probably bought the gold originally from the Federal Reserve, so the statement would be technically accurate though highly misleading.
zeckalpha 11y ago
The Fed doesn't print money, the Treasury does. QE is artificial strangulation of supply, not increasing supply.

nostromo 11y ago

They haven't lost $250 million as they haven't sold their holdings. For what it's worth, UT has the second largest US educational endowment now, only second to Harvard. On the whole, they've done very, very well. It doesn't surprise me that some of their investments are currently underperforming, as that's a hallmark of a diverse portfolio.

cnst 11y ago
Fair point; however, if the price was increased 10 fold, would they still be saying that they're moving 1 billion dollars in gold, and not 10?
mikeyouse 11y ago
Paper losses are still losses.. If your holdings decrease in value by 25%, they need to increase by 33% to recover their previous price. Another way to think of it; You can borrow against assets using the gold as collateral. Texas's borrowing ability is much smaller today than it was when the gold was worth $1B. It's clear that they've lost some tangible value.
blatherard 11y ago
That's why I refuse to sell my Beanie Babies.

cnst 11y ago

I'm a little confused here -- if the money is actually stored at HSBC in New York, not at Federal Reserve, why http://gov.texas.gov/news/signature/21038 http://gov.texas.gov/news/signature/21038 explicitly mentions "The law will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas."? Is it done simply with the intent of playing on the anti-federal-gov sentiment?

Aloisius 11y ago
They probably bought the gold originally from the Federal Reserve, so the statement would be technically accurate though highly misleading.

zeckalpha 11y ago

The Fed doesn't print money, the Treasury does. QE is artificial strangulation of supply, not increasing supply.