Can Greece's Gold Reserves Pay Off Debt

As I awoke this morning and began my ritual of checking the world's Financial News, of course much of the banter is about Greece and how it may deal with its $405.7 billion of public debt.It occurred to me that no one has brought up the potential to use Greece's gold reserves to pay off its debt.Does Greece even have gold reserves?So, I did some checking.

Greece does have gold reserves and informal discussions have commenced as to the possibility of using that gold to pay the debt.Now when I say informal, I mean discussions like this one, however you have to believe behind closed doors all over the world, officials are raising the prospect.Currently Greece has $112.4 tonnes of gold worth some $4.2 billion based on a spot price of $1166.Barely enough to pay off 1% of its debt.

The possibility has also been raised that Greece may pull out of the Euro and create its own currency.Should that happen a million questions come up.Would the Euro strengthen?Would Greece back the new currency in part with Gold?What would they call a new currency - the Gyro?Will Greece sell its gold to pay off just 1% of its debt?What would happen to the gold price?Just to list a few.

At this point I'm not sure I want to or can even speculate as to all the answers so I won't pretend so.What I do feel, is that the minute gold does enter into the discussion at any level, whether it be to pay debt, back a currency or be sold, we will see gold prices rise.Any discussion would give credibility to gold and just the hint that it could be used to settle the debts of the world, would send prices rocketing.

One statistic I heard with respect to U.S. foreign debt is that our own gold reserves (if we have any) would have to be worth 10 times what gold is today in order to pay off our foreign debt.Would that make gold price predictions of $12,000 even $13,000 and ounce viable?Yeah!I think so.At least possible.But again, don't buy gold because you think it is going to make you rich.

If gold spot prices do rise to those levels, it may be easy to pay off debt, but going forward a gallon of gas and a gallon of milk may be $10, $15 even more.It would be a whole new world out there.This is likely one reason gold is holding steady, even though the Dollar is gaining enormous strength vs. the Euro.

Personally, I don't see how gold reserves can continue to be excluded from conversations about settling global debt.Why do central banks own it if it has no value, especially in times like this?And if Greece does not create its own currency or use its gold reserves to help mitigate the debt, then the only choice is to print Euros and bring hyperinflation to the doorstep of the European Community.

In turn that gives the U.S. license to creat even more debt as the world continues its efforts to inflate its way out of the growing debt crisis.Then, as inflation and gold go walking hand in hand into the sunset every night, we can watch the gold spot price climb off the gold charts every night along with them.

greeks are not willing to step back and they are yelling
``molon lave``=come and get it