[xmcqdpt2]

To shore up the FX value of the USD in an emergency,

https://en.m.wikipedia.org/wiki/Foreign_exchange_reserves

Most other countries hold USD for this purpose, but of course the US can't do that.

Note that this has literally nothing to do with the ability to repay debt, and that the Treasury bills market is larger and more liquid than the gold market. The US holds like 600 B$ worth of gold. There are like 30 trillion dollars in outstanding treasuries. Even if all the gold was liquidated at current market value without slippage, it would only be enough to pay back 2% of the debt.

[aww_dang]

It is it not also true that the hypothetical family would never go bankrupt if we assume they could pay in debt instruments indefinitely?

Instead of balancing a checkbook, they could simply buy groceries with IOUs. Of course, in an emergency scenario those IOUs would be heavily discounted by creditors seeking to make good on the debt. In this scenario, the price of gold as denominated in discounted IOUs would be much higher.

The entire exercise and the term emergency illustrates that there are indeed limits. This is the reason why they claim to hold gold.