Since returning to the White House roughly 19 and one-half months ago, U.S. President Donald Trump has found a variety of ways to alienate the United States’ closest allies — from steep tariffs to the Iran war to threatening to take Greenland by force. And according to liberal economist Paul Krugman, some of those allies are taking steps that prove the United States “is no longer trusted.”
In a Substack column posted on Friday morning, Krugman warns that fears that Trump and his allies will “seize gold” no longer seem far-fetched. And U.S. allies, according to the economist, are taking steps to protect themselves.
“‘Rule of law’ is not a phrase often applied to the Trump administration,” Krugman argues. “And the administration has special contempt for international law. Many of Trump’s tariffs have been ruled illegal under U.S. law, but more or less all of those tariffs were and are in clear violation of past agreements solemnly signed by previous U.S. presidents, including Trump himself. So, the idea that the U.S. government might devise some excuse to seize gold held in the Fed’s vault is no longer far-fetched. And nations are taking precautions.”
The former New York Times columnist continues, “Earlier this week, the Dutch Central Bank announced that it was shifting about $12 billion in gold from the vault in New York to the Bank of England’s vault in London. This follows a move by the French Central Bank to shift an even larger sum from New York to Paris. Other countries are considering similar moves.”
Krugman notes that although the “direct economic or financial impact of these actions will be minimal,” the “symbolism is chilling.”
“America is no longer trusted,” the economist warns. “Foreign governments can no longer count on us to obey the most basic rules, like the commandment that thou shalt not steal other people’s gold. And even when Trump is gone, it will take many years of honest, responsible U.S. government to restore that lost trust.”
In his column, Krugman explains the relationship that central banks have to gold.
“For the most part, monetary gold — gold held as reserves by national central banks — is a lot like the stones of Yap,” Krugman notes. “Central banks own trillions of dollars’ worth of gold, which they sometimes sell to each other to settle international payments. But these transfers rarely involve physically moving gold across borders. A large fraction of the world’s gold reserves actually sits in a vault underneath the Federal Reserve Bank of New York, although the New York Fed does move ingots between compartments when transfers take place. And why not? The sanctity of nations’ ownership of gold stored in New York is guaranteed by the word of the U.S. government — a government that is utterly reliable, because it honors the role of law. Or anyway, that’s the country we used to be.”