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Gold confiscation

Saturday, November 29, 2008, 8:34 PM

Here's a question I received today, and it is both quite common and legitimate.

Hi Chris,
I know you have been a strong physical gold advocate as many on this
site have been as well. I can't think of a less risky term to store wealth
over the long term.

However, although gold confiscation has been mentioned in a few
articles on the site, I have yet to see you post any comments or opinions.
The biggest risk I see with gold is the confiscation issue. Everyone will
have to decide their own course of action if this comes to pass, but my
question to you is this:

What evidence do you see for or against the reimplementation of a
gold standard and what evidence do you see for or against another round of
gold confiscation??

Hopefully you can answer. Also, I check your site multiple times a
day, but still I don't have a chance to see every forum post. Is there any
way you can notify me of a response?

Thanks so much for your time and effort. You have already made a
great positive impact on my family!

Sincerely,
Mike

All I can offer here is my opinion, as I certainly do not have any better insights than anybody else.

When gold was confiscated in 1933, gold was money.  Today it is not.  That, in a nutshell, defines why I place the possibility of gold confiscation quite low on my personal list of Things to Worry About.

First, here are the reasons I am not terribly worried about gold confiscation:

  1. The current official stockpile of gold in the US stands at 261 million ounces.  While there is more in private hands, we also have to consider that the US has almost certainly leased a lot of the official gold out, so it is unlikely that there's a whole lot more than that within our borders at the moment.
  2. At the current price of $810/ounce, the total value of all the official gold in the US is $211 billion.
  3. $211 billion is barely two-thirds of the amount that was lavished on Citibank over a single 24 hour period last weekend and less than one-sixth the amount of new money created by the Fed since September.
  4. Total debt of the US government stands at nearly 50 times as much as $211 billion.
  5. Total credit market debt of the US stands at  more than 230 times as much as $211 billion.

The case I am making here is that the total amount of gold, at current values, is puny and insignificant compared to either the amount of debt or money creation.

And the amount of gold in private hands?  An even tinier amount than supposedly exists in the official US stockpiles.

So in the context of current monetary and fiscal policy, gold in the hands of US citizens is not significant enough to merit the distraction and possible legal difficulties that would be required to seize it from law-abiding US citizens.

Well in advance of gold being seized, I would expect 401Ks to have their tax rules amended to pass more funds to the government.  I would anticipate enhanced seizure and forfeiture rules, directed at larger pools of money and larger assets.  Why?  Because that's where the wealth currently resides.

And here are the conditions under which I will become more concerned that gold forfeiture and seizure rules might be in the offing:

  1. Gold climbs to some meaningful dollar value that both represents a threat to the perceived value of the dollar and represents a meaningful target for seizure.  For me that number begins around $5,000/ounce and becomes critical around $10,000/ounce.
  2. Some foreign country with a resource we want demands payment in gold.  For example, if some oil-producing nation suddenly demands gold in exchange for oil, I would place a very high probability that gold will be seized under the umbrella of "national security."
  3. A major bank, playing the short side of the paper gold trade, gets caught, is unable to deliver, and faces insolvency as a result.  Here I might also expect the rules to suddenly be changed to protect yet another "too big to fail" institution.
  4. A new international standard of currency exchange arises, based in whole or part on gold.  In this scenario I could see all gold in the world being declared off-limits for everybody except for official purposes and uses. 

While reason #4 gives me the most pause, I am counting on two things:  My ability to see this coming from a long way off, and my ability to sell out at a much higher price prior to it happening. 

But the short version of all this is that gold is not money in today's financial system, and it is a tiny asset compared to other more readily identified and liquid assets.  Those, like Argentinian bank accounts in 2001, would presumably become the first targets of a desperate government.

Great question, and thanks for asking!

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32 Comments

TNdancer's picture
TNdancer
Status: Silver Member (Offline)
Joined: Aug 20 2008
Posts: 127
Re: Gold confiscation

The only thing a govt can confiscate is what you let them.   At some point, you draw a line in the sand, and say "this is it".

cannotaffordit's picture
cannotaffordit
Status: Gold Member (Offline)
Joined: Jun 12 2008
Posts: 273
Re: Gold confiscation

I'm sorry, but I have never quite understood the part about gov't seizure of 401k's etc.  How, exactly, and why, would they ever do that?  Would it also include IRA's?  Thanks.  Ben

joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
Re: Gold confiscation

government has seizure rights called taxes/ they are already talking about it. i cant remember his name but several months ago this rep i believe said the government was losing too much money with the tax breaks people were receiving from their 401k's and th egov. could get another 80 billion or so in taxes.

who's looking out for you?

Headless's picture
Headless
Status: Gold Member (Offline)
Joined: Oct 28 2008
Posts: 363
Re: Gold confiscation

Chris,

With all the talk of gold and (a lesser amount about) gold confiscation, your post is timely. All the talk had put the questions in my mind: Is that even a practical possibility? and How would that work? The only answers I could come up with, and for the main reason you cite (the SIZE of the problem), were a resounding No! and No way no how!

I turned to your site hoping someone would be addressing the issue, and wow! There it is: a post on gold confiscation(Thanks Mike).

I was immediately reminded of that great movie, Broadcast News; specifically, the scene where James Brooks is home on the couch attempting to drown his self-pity with a bottle of Jack? and he calls in to the station where his arch rival, played by William Hurt, is doing a live broadcast. Brooks is talking to Holly Hunter, who is producing the live broadcast, and he makes recommendations as to what Hurt should be saying; thus, Voila! Brooks says it over the phone, Hunter relates it, Hurt says it live to the nation.

Brooks then falls back in the couch--as I remember it--ever more sullen, and says "I say it here and it comes out there (with that eloquent and precise voice that renders you a button on our "favorites" menu)..."

All that by way of saying: I think you've got your finger on the pulse; it may be a pulse that you've had a finger in creating (You touch it; it comes to life)... 

 Next time I'm pondering something, I'll look to your site to clarify my thought processes.

NZO

P.S. Chris mentions $5K to $10K as a minimum threshold value (Gold kills dollars). My thinking is that, if one, then all, meaning that the only way I see a gold standard being reinstated would be for all fiat currencies (for obvious reasons) to be replaced or backed by gold equivalents; that begs the question, What is the value of ALL currency?, and the observation, Imagine the coordination mechanics of that!

P.P.S. Stream of consciousness begins here..I think... (<- this statement inserted after the ramble...)

Those thoughts leave me wondering about the "We have to return to a gold standard" pundits; I think we're  more likely to return to barter than to a gold standard--which is another way of saying: I think the gold bugs have the color wrong: There will be blood--everywhere! Gold just ain't practical...

Given what wars have been fought for throughout history, I have to think that the leaders of nations who continue to buy U.S. bonds are the bureaucratic equivalent of "Generals with Temporary Heads ©" (I hereby copyright that expression, as it just came to me and Google says it's never been said); every leader of every nation outside the U.S. should be considering the present situation with the teachings of Sun Tzu (The Art of War) in mind ("Every war is won before it is fought," etc."), as the results of this particular assault on the world's wealth by the U.S. makes previous wars (and the spoils sought) petty by comparison (Consider America's Own Private billion screaming chinese indentured servants et al); perhaps those leaders are...perhaps they have been for some time...

All great accomplishments--and killing of oppressive tyrants--require tactics, strategy, and time.

Were I the leader of one of the countries known more for wisdom than for greed--given the adolescent behavior of the American Association to Rape the Planet (AARP)--I would be slightly less than forgiving.

Having lived in Asian countries for a decade, I think we (Paulson and Bernanke and their posse of Idiot Idiots (as opposed to idiot savants, which would leave us in awe for  a reason turned 180 degrees)), are, shall I say, "complacent" in our (their) view that intelligent, education-respecting beings, who work a factor of 10 times harder than do we, are going to just continue to bend over, smile, and  say "Oh baby! Ram me with that big red, white and blue *%!~ of yours one more time Uncle Sammy!"

We may be in for a shock; it may not be far in the future; it may be tomorrow--which will turn out to be yesterday last year?...

 

Final P.P.S. It seems obvious to me, given that almost every real product is proportional to and can be equated to the energy resources required to create it (simplified, but more reasonable than alternative IMO), the "backed" currency that should have been created from the very beginning (and I think this parallels and objectively quantifies Chris' thought on money being a claim on labor), is one based on BTU's or its twin brothers (of course this implies a thorough life-cycle analysis of "things"--and exposes The Wall Street Mafioso for the energy-consuming Black Hole that it is).

 

 

 

kiwidave's picture
kiwidave
Status: Bronze Member (Offline)
Joined: Sep 7 2008
Posts: 37
Re: Gold confiscation

Clever cartoon, funny AND frightening!

Cheers,

David.

Set's picture
Set
Status: Silver Member (Offline)
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Posts: 112
Re: Gold confiscation

Here is a link to a well written article that provides an interesting perspective regarding the feasibility to implementing a new gold standard.

http://www.financialsense.com/editorials/hultberg/2005/0203.html

 

RubberRims's picture
RubberRims
Status: Silver Member (Offline)
Joined: Nov 22 2008
Posts: 145
Re: Gold confiscation

Hi, it is a good informative piece and well written.

I tend to think what ever lays round the next corner will be a credit system sooner or later spelling the end of paper Money. Mind you this is probably 35 - 45 years away.

Alan Greenspan, used to be a proponent of the gold standard. His words:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other goods, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves."

Or to put it in context:

The Trilateral Commission, World bank, The Bipartisan Political Establishment has turned our government into a monster, which is eating out our substance, but failing to deliver on the promises the politicians make. Through the Internal Revenue Service, everyone of us, and every working American, is in the government files. Our economy is being crushed by a burden of debt, taxes and regulation. The last vestiges of our privacy rights are being eliminated as part of the War On Drugs. And now, the Trilateralists seek to police the world in alliance with a revived Japanese and German militarism.

 

nodebthere's picture
nodebthere
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Posts: 22
Re: Gold confiscation

Yes we must bring the gold standard. If we don't we will have toilet paper for money.

                                                                                           Bob

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Gold confiscation

Hello:

Yesturday I posted on the Daily Digest a paper written by Romer since she will be on the advisory board to President-Elect Oboma.

She, in my opinion, is the clean up crew along with Vockler. The Geithner's will re-value the dollar turning its' worth into fractions of pennies to pay off our 53 trillion "off balance sheet" debt and our 10.8++++ on balance sheet debt vis-a-vis hyperinflation. 

She said in that article, 

"There is a notable correlation between the time countries abandoned the gold standard (or devalued their currencies substantially) and a renewed growth in their output. For example, Britain, which was forced off the gold standard in September 1931, recovered relatively early, while the United States, which did not effectively devalue its currency until 1933, recovered substantially later. Similarly, the Latin American countries of Argentina and Brazil, which began to devalue in 1929, had relatively mild downturns and were largely recovered by 1935. In contrast, the "Gold Bloc" countries of Belgium and France, which were particularly wedded to the gold standard and slow to devalue, still had industrial production in 1935 well below its 1929 level. "  

http://elsa.berkeley.edu/~cromer/great_depression.pdf

Also, if you watch http://perotcharts.com/issues/ SLIDE #14 (thanks to someone who posted this on a past post a few weeks ago) you can see that "defense" spending is 50% of our Empire, I mean Republic, I mean Democracy. I seriously doubt our "democriaPhobes" are going to allow a standard that takes their military down to one general and one F-18 because they can't inflate the dollar. An inflated dollar to them is like steroids. They don't want to watch Chavez and Putin doing military exercises in the Chesapeake Bay. Face it, the world is what it is.

The ONLY caveat that I can think of would be this: 

  • The rest of the World goes to a gold standard because our dollar is de-pegged as the reserve currency and then we have to follow along or our funny paper is worthless and we can't import oil or flat panel tv's from China without a gold backed dollar. 

I'm with Chris I'd worry more about the 401(k) and the worst part of that plan is: 

  •  The government gets 50% of your money when you die, your kids get the other 50%
  • They pay 3% above inflation - when you have Enron accounting determining inflation you might as well plan on starving to death in your older years 

http://www.carolinajournal.com/exclusives/dems-target-private-retirement-accounts.html 

Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.  

  Take care.

Fogle's picture
Fogle
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Joined: May 18 2008
Posts: 35
Re: Gold confiscation

The biggest problem when they outlaw private gold
ownership is the inability to trade with it. They cannot search every
home. But they can effectively shut down all exchanges of gold.

There is some talk of a massive global devaluation of
all currencies. This would make all debts worth less, as all savings.
I don't understand the mechanism behind devaluation, but it seems
that in other to make all money worth less, something has to become
worth more. What? Gold, I guess.

 

Davos's picture
Davos
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Posts: 3620
Re: Gold confiscation

Fogle:

Gold would be a black market traded commodity. They'd lose the 30% capitol gains tax afforded to it now. 30%! They don't like gold now.

If the dollar lost its remaining 4% of value, say it was worth .0000000000001 cent then your pay would be like a million bucks a week. We'd pay off our mortgage and skip a loaf of bread to eat one week. The government would pay off its debt and even replenish the Social Security "Trust" "Fund" which is empty.

Then Romer would come in and re-denominate the dollar with a new dollar. Vockler would raise interest rates to protect it.

Basically, rather the world forgiving debts the kind way they do it the hard way.

Again, this is my opinion based on just reading a lot of stuff. I could be way off.

Lastly, if some other country (Iran, China) take the gobs of gold they are buying and demand a gold standard be imposed (i.e. no gold no oil, no gold no Wal-Mart imports) on the world I'd say watch out, I think there will be the mother of all wars. 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Gold confiscation

Our government could do what Argentina just did to their private pension accounts:

http://www.reuters.com/article/bondsNews/idUSN2345934020081023

Personally,  I'm not putting any more money into my retirement accounts. I'm also storing my physical metals in a safe location, outside the banking system. What the government can't see is what the government can't tax or seize.

 

Look up at the moon...that's how high gold is going. 

RedShift's picture
RedShift
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Posts: 25
Re: Gold confiscation

Are Humans Smarter Than Yeast? Humans eat, they breed, they die - but for a purposeful plan only known to the "brewers and bakers" which compose the New York financial and banking cabals. The total sum of human toil is about to be harvested vis a vie confiscation of lands, goods and labor. The trillions in debt dollars will lay claim against the billions of hands multiplied by man-hours of labor per lifetime.

The consensus trance among the fattened, tranquilized American Middle Class expects salvation form their demigod Technology as evidenced by mindless demand for faster home computers and flatter flat screen TeeVees. But these devices will only deliver more fat producing anesthetic to the sofa bound infotainment grazers.

The rescue remedy redemption (i.e. confiscation) plan will follow a hierarchy. Here is a vague list of how the American Middle Class will be harvested by the master brewers:

Wages -> investments -> weapons/ammunition -> stored commodities (food/fuel/gold) -> land/water -> inscription/slavery.

Between investment and weapon confiscations, expect restrictions on travel (except for those carrying National ID
Cards), restrictions on local manufacturing and trade (except for
Card carriers), and regular patrols with occasional house-to-house search for "contraband" and suspects (those without a Card).

Just before land confiscation, expect prohibitions against raising farm animals or gardening (for health/infectious disease/public safety reasons). All food production will be limited to "terrorism free" government sanctioned corporations (Monsanto, ADM, Tysons, etc).

The post-Peak Oil depletion of refined fuels will generate prohibitions against stockpiled heating and cooking liquids and gases. We could see laws restricting fuel containers limited to five gallons per person per week. Forested areas will be nationalized and "closed" in the name of protecting national resources.

Water will be more precious than gold or oil. Expect the biggest and most desperate battles to be fought over fresh water access and pump/storage resources.

Any and all people who fail to willingly and completely surrender will quickly find themselves subject to the last redemption: forced labor, Chinese factory style. What irony that the Walmart shoppers of today might be forced into the same labor factory model that once produced their salad shooters, plastic wading pools and Christmas tree decorations.   Those people who try to "cheat" the system by growing, manufacturing and bartering, any or all without the benefit of National ID Cards, will be easily spotted: they will appear well fed, clothed and shodded, and in general good health and spirits.

Are Humans Smarter Than Yeast? We shall soon see.

 

RubberRims's picture
RubberRims
Status: Silver Member (Offline)
Joined: Nov 22 2008
Posts: 145
Re: Gold confiscation

Hi Bob

No I don't think they will bring back the gold standard. It was removed and substituted buy Fiat money for a reason.   

The truth of the matter is scandalous, the formulation of Fiat currency by the US Government addressed the very problem with the depression in the 1930's. You have to change your mind set and think of a commodity as being worthless until some one wants to give you something for it. The same would apply for gold. At the moment It's value is artificially exaggerated. The winners in the gold markets are the investors of prey 2002. Or to look at it from another angel Post 9-11.

Be very careful about the future of gold. I thought about making an investment not a large amount just a little of the real stuff. Any how long story short, I took a walk to my local bullion dealer in London just outside the Savoy hotel. Things whitch are evident when you make a purchase. You have to declare you passport, so they know who you are, and they will only sell a you a base amount because supply is at an all time low.

I Spoke candidly with the chap on the other side of the counter and asked some hard questions. Little did I realise the UK Government claims the authority in declared emergencies to seize and freeze just about everything that might be considered a financial instrument. So with that bit of understanding buying gold would be a gamble in times where unsertinties run high. 

I hope people begin to understand how life's trouble's and toils amount to very little when faced with what Government's are capable of.

gak's picture
gak
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Posts: 12
Re: Gold confiscation

Chris,

Very good post!  But I was surprised, however, that I did not see a very important element mentioned in your post.  It is an element that the saver hates, but the debtor loves (fixed, that is :-) ). It is an element that the politicians have to have in order to save them from themselves, and it is an element that is unseen in the day-to-day, but it is an element that destroys us every day.

What is this magical element of which I write?  What is this magical entity that pervades us all?

Why, it is the debtor's friend and the savers enemy. It is inflation. Not official inflation, but real inflation. While everyone understands that inflation lowers the amount of good you're able to buy, what is less understood is how our government (over decades, not years and certainly not through any conspiratal efforts) purposefully misstates the amount of inflation that we have.

Why?

If you had $54 trillion in obligations that you had to pay, and you were able to subtly manipulate the "official" inflation level so that you could inflate the dollars of promised payments, you would be a fool not to. If you want to see how this works, meander on over to shadowstats.com . I don't run that site, John Williams does, but it is a fantastic resource to understand the true cost of inflation. Here is an article that also does a good job of putting it in perspective:

http://www.financialsense.com/fsu/editorials/amerman/2007/0404.html

Since the official government rate of inflation is so widely different from the actual rate of inflation, the government is going to be able to honor its obligations; it's just that those obligations will buy fewer and fewer resources.

There will be cuts but the cuts will not be as devastating to us as a spread between actual inflation versus official government inflation.  And as more people across the world get payments (Social Security, Medicare, Medicaid, food stamps, etc) from their governments the more incentive that governments have to alter how they measure inflation. 

As I have posted before, I think we're in a period of massive deflation right now but it will turn inflationary in the future. The $54 trillion question is, when? 

Gak 

Bill85's picture
Bill85
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Re: Gold confiscation
gak wrote:

If you had $54 trillion in obligations that you had to pay, and you were able to subtly manipulate the "official" inflation level so that you could inflate the dollars of promised payments, you would be a fool not to.

This would only work if the govt was actually making payments on the debt right?

 

gak's picture
gak
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Posts: 12
Re: Gold confiscation

Bill85.

I know (assume?) the comment was made tounge in cheek, but it does bear mentioning that as of today, 11/30/08, the US gov't has not defaulted on its debt. It has done lots of very bad things, but it  has not defaulted on its debt. When, as Chris has pointed out, debt is the lifeblood of the gov't, then the last thing that Treas will do is not pay back bond holders. In order to ease payments that they (Social Security, and HHS, etc)  are contractually bound to make, then they have no other place to go but to use inflation to make their payments doable.

Inflation is the salve that soothes the insolvent. And when the invsolvent are creating economic policy and control the printing presses, watch out.

Gak 

pinecarr's picture
pinecarr
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Posts: 2237
Re: Gold confiscation

Good question Mike, and thanks for answering it with such clarity, Chris.  I was wondering how real the risk of gold confiscation was, too, to determine if it even made sense to hold physical gold, and am glad to have your detailed thoughts in it.

Fogle, I saw an article a week or 2 ago that spoke of that devaluation of all currencies to reduce debt, etc., as you brought up.   If I can find it again, I'll post a link to it.  I think it was on financialsense.com.  But you're right, they were talking about doing that relative to the price of gold , which I believe they said would be set to some high amount.  It was a very interesting article, as it was a different angle on reducing debt than I'd seen.  So let me see if I can find that article again and post the link to it.

 

pinecarr's picture
pinecarr
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Posts: 2237
Re: Gold confiscation

Fogle (and others), I found that article (actually articles) I said I'd look for above.  The idea they convey is that the G-20 may try to reduce debt by developing a new financial architecture that simultaneously devalues all currencies and reinflates all asset prices.   This would be accomplished by raising the official central bank price of gold to a price that monetizes a large portion of the world's outstanding debts.  The G-20's motivation per the author?  ""If we can't print money fast enough to fend off another deflationary Great Depression, then let's change the value of money [devalue]."" 

It turns out the articles were not from financialsense.com as I'd thought, but were written by Larry Edelson at www.moneyandmarkets.com , Martin Weiss's website.  The first article, "The G-20's Secret Debt Solution", dated 11-13-08, can be found at this link: http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996 

A follow-up article, "More on the New Monetary System", dated 11-20-08, can be found at this link: http://www.moneyandmarkets.com/more-on-the-new-monetary-system-6-28166 

Per the first article, Larry says he can't know what price the G-20 would set gold at.  But he hypothesizes that to monetize the following percentages of the outstanding public and private sector debt in the US, gold would have to be priced as follows:

- To monetize 100% of debt in US, gold would have to be raised to $53,000 per ounce;

- To monetize 50% of debt in US, gold would have to be raised to around $26,500 per ounce;

- To monetize 20% of debt in US, gold would have to be raised to  around $10,600 per ounce;

- To monetize just 10% of debt in US, gold would have to be raised to around $5,300 per ounce.

One of the reason these prices get interesting is that if Larry's right, gold could hit that much higher price that Chris mentions above, where he'd re-assess the likelihood of gold confiscation.

Larry makes the idea even more interesting by suggesting that the G-20 would move from a single reserve currency, the US Dollar, to 3 (possibly 4) new currencies, each with equal reserve status: a new dollar, a new euro, and a new pan-Asian currency (with the Chinese yuan as the possible 4th currency).

I should add that Larry's background, per his blog at www.moneyandmarkets.com  is 30 years experience analyzing and trading precious metals and natural resources.  So I leave it to you to decide if that implies superior insight or, instead,  bias.  I don't know the answer to that, but I enjoy reading Larry's articles.

I'd be very curious to hear the opinions of others here on the plausibility of Larry's ideas.

kemosavvy's picture
kemosavvy
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Posts: 254
Re: Gold confiscation

a return to a gold standard would mean a return to periods of frequent boom and bust cycles and having to live through periods of high unemployment before returning to periods of gainful employment. in the past when we had a gold standard and endured long periods of high unemployment, citizens of this country turned to their farms and community for food, clothing, necessities, etc..

we no longer live in such a world, a return to the gold standard is fraught with high risk! we no longer live in a country capable of farming their way through a crisis, most americans live in a metropolis setting and own no land, they do not know their neighbors, communities of helpful people are scarce. it is far better to inflate your way out of a problem, that is what bernanke has said! in his writings he describes how the u.s. could have inflated their way out of the 'great depression'. what do you think he is doing right now?

politicians would not allow a return to the gold standard because high unemployment would limit their ability to return to office after the next election. therefore, you must consider the political economy and realize that neither party is in favor of high unemployment and periods of recession.

i wouldn't completely rule out a retun to the gold standard but i would put the probability at about 0.1%.

 

 

Erik T.'s picture
Erik T.
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Posts: 1234
Putting it in a different perspective...

I agree with everything Chris wrote, but might have said it differently:

Many people cite the 1933 seizure of privately held gold as possible precedent for another similar event. The problem here lies in understanding what really happeend in 1933.

The action that Roosevelt took in 1933 was to substantially de-value the U.S. Dollar, not to seize privately held gold for the sake of the gold itself. Because the country was on the gold standard at the time, the mechanism necessary to de-value the dollar included seizing all the privately held gold, because otherwise the people with gold would have experienced a windfall (no devaluation of their gold) in comparison to other citizens whose non-gold monetary assets were de-valued.

In other words, seizing the gold was never the objective, but rather it was a necessary step toward achieving a different objective: currency de-valuation. Because we are now on a fiat money system, seizure of gold would not be a necessary step if the government again wanted to de-value the currency, which is an extreme tactic for fighting deflation.

I would argue that if you're thinking about that 1933 event as precedent, the question on your mind should be, Will it come to pass that our government is eventually forced to markedly de-value the U.S. dollar intentionally, in order to combat a deflationary collapse of the economy? That's a darned good question, and one that I believe bears careful consideration. But I don't think that seizure of gold will be part of the process if this happens again, because it's no longer necessary in order to achieve an equitable de-valuation across the board.

Erik

 

Carl Veritas's picture
Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Re: Gold confiscation

Kemonotsavvy,

The recurring boom and job destroying bust was created by fractional reserve banking practiced by private banks, then later centrally coordinated with the arrival of the Federal Reserve system in 1913. Not the gold standard.

 

Here is a question that we should be trying to answer:

How can the US economy create jobs without adding to the national debt, taxes, and inflation?

 

I also didn't read any mention about the status of the gold FDR confiscated that is still being held at Fort Knox, built for the purpose. Melt into gold bars and stamped " Property Of The U.S. Government" I assume.

 

 

 

GDon's picture
GDon
Status: Bronze Member (Offline)
Joined: Apr 2 2008
Posts: 86
Re: Gold confiscation

Good question Mike, and solid answer Chris (and Erik).

It is apparent that the preferred current route which the Gov would take, to pay the notional value of it's current and promised debt, is an inflationary one - i.e., one where the $USD debt-currency is "devalued".

In 1933, the "fixing" of the FRN ($USD) against gold, by using a gold standard, actually allowed Roosevelt to enact a scheme of confiscation, and thereby achieve the desired "devaluation" of that period in "one fell swoop".

So even though the Gov at that time, had a continuous design for inflation (devaluation) through money-supply and interest rate manipulation, the gold standard, and consequently, gold confiscation, allowed for a large "step-wise" (mathematically discrete) devaluation, at an instant in time (actually over a weekend).

But what discrete-step (i.e., confiscation of a "standard") can the Government do under the current fiat-currency regime? 

A step-wise "devaluation" would require that the fiat-currency $USD instantaneously change relative to it's purchasing value - i.e., what you can trade it for.   By precendent reference to 1933, this would occur through the confiscation of the specie "standard".  That used to be gold, but not now, so now what?.

How does a Government "devalue" a fiat-currency for which there is no explicit "standard"?  What does the concept of "devaluation" mean in a fiat-currency context?    

a) Does it get devalued relative to how it trades against other currencies, and thereby admit that the US Government is relatively bankrupt to other sovereigns?   or,

b) Does it get devalued relative to how it trades against hard commodities, and thereby admit that the $USD is just "paper"?  , or

c) Does it get devalued relative to precious metals, and thereby admit that gold and silver are indeed, the "real money" in the world?  

Wouldn't any of the above require admission from the Government, that there really is a requirement for an explicitly defined (or de facto) "standard" basis of value for the generation of currency?

I would question that there exists even a single fiat-currency advocate (and likely recipient of it's fraudulent gifts) that would pursue any of a) through c) above.   Wars have been fought for less.

Instead, under the guise of "benefiting society", some "acceptable" approach to achieving the necessary "devaluation", in a relatively short time-frame, might be necessary, such as;

d) destruction of the $USD in a very short time-frame (months or weeks?), or perhaps;

e) a "currency replacement program", whereby a "new" currency replaces the $USD, allowing the $USD a fairly rapid death (this would be a "confiscation" of foreign wealth...).

I would like to hear others' opinions.  

It would seem that the current fiat-currency world regime has made it somewhat difficult to perform a "discrete-step" devaluation, through confiscation of some explicit "standard", and, as a result, are limited to some "continuous" (albiet over a relative "short-term") devaluation.

Or, perhaps;

f) through the "confiscation" of real estate (as is occuring at present....) the Government will "repeg" entitlement benefits to the value of housing in the US, and make housing a de facto "standard".

In summary, while no governments are throwing their gold away, it would be a giant blow to the current fiat-currency world regime, to "admit" to gold and precious metals as being, once again (as was in the US Constitution), the only "real money", as would be apparent in their confiscation.

 

 

 

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Gold confiscation

Thanks everyone for the great discussion here. I am Mike, the originator of the question.

 I think the responses of Chris and Erik are particularly insightful in the A) gold represents a relatively small portion of the wealth of our nation, and B) attacking gold is not really necessary, at least right now.

 As I ponder this issues, I also ask myself the question of the ability of the government to enforce a confiscation and the willingness of the sheople to comply. Although I don't have the degrees that Chris does, I consider myself to have an academic mindset and the evidence presented by Chris and many others is overwhelming. If we accept the fact that "this is IT," then for me there is no question that gold will financially be one of the soundest investments. Pragmatically, I think we are in such a precarious political and resource situation now that I think something like a confiscation could actually be the impetus for a sort of rebellion.

 Many people I speak with tell me that confiscation would not be possible "because we have the internet now." I agree somewhat. The free-est speech you can find is on the internet. Likewise, the internet is one of the most critical forms of infrastructure in the event of a widespread non-compliance. I think that a necessary precursor to effective confiscation would be additional regulation or censorship of the internet that would help to fracture the unity of the bloggers.

I actually can foresee additional attacks on free speech from an increasingly desparate government and I think that the attacks on free speech will come before attacks on gold. Also, bear in mind that attacks on "free speech" are often not direct assaults on the first Amendment. Today, they take the form of bogus government statistics, an entertainment focused media, and a near-fascist cooperation between the government and certain private sectors (defense contractors, the media, etc.).

In short, I think that good information and understanding is potentially more "dangerous" to the government than gold itself. My hunch is that we will see larger and larger distortions of reality before we see a direct attack on gold. Our government is less honest than it was in the '30s, but it is also smarter. It rarely attacks head on anymore but rather uses more subversive strategies to achieve its goals.

 Mike

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Gold confiscation

Mike, I personally think that your assesment is as good as Bodos!

dickey45's picture
dickey45
Status: Bronze Member (Offline)
Joined: Oct 12 2008
Posts: 77
Re: Gold confiscation

GDon,

I'm intrigued by:

"f) through the "confiscation" of real estate (as is occuring at
present....) the Government will "repeg" entitlement benefits to the
value of housing in the US, and make housing a de facto "standard"."

Can you further explain your theory? 

DanS's picture
DanS
Status: Member (Offline)
Joined: Apr 6 2008
Posts: 21
Re: Gold confiscation

I generally agree with all that Chris has said. Gold can no longer serve the role of money in the global economy.  Look for a new form of "electronic" money, in which a near majority of industrial nations participate in.  The US will likely lead the move before the dollar entirely collaspes.  

 

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Gold confiscation

I don't want to be too much of a Malthusian, but I personally think that the "global economy" is going to be forced to switch gears very quickly. As population soars and resources decline, the gap between supply and demand will open up very quickly. I've done extensive research into conventional and alternative energy technologies and I personally see absolutely no evidence for alternatives even coming close to replacing fossil fuels at the rate they are likely to be declining.

 I think people will find the greatest prosperity in smaller, more localized communities. As much as the politicians pander about "global solutions" we have to realize that many countries (most prominently the USA) are put at a greater risk precisely because of their dependence on other countries. If we truly had energy independence in America, we would be a lot less involved in foreign wars (which waste a bunch of resources anyway).

The hard and fast truth of it is that while we perhaps need the entire globe to deal with these issues at the same time, the best solutions are likely to emerge at the local level. Trade will, of course, continue but we are more likely to be trading strategic resources rather than iPods, cars, and computers. If we don't end up fighting more wars over oil, I see trade being largely focused on things like oil, coal, uranium, copper, and the like. Food might play into this somewhat, but importing oil to grow crops here just to export them or convert them to ethanol to burn again strikes me as terribly wasteful.

The politicians seem to see no end in sight to the increasing linkages caused by globalization. But I remain a skeptic. I believe the global economy will gradually unwind to a large extent as we become more and more focused on basic needs and less and less focused on consumerism. These changes will be imposed by fundamental limitations, not simply by an act of policy.

James Wandler's picture
James Wandler
Status: Martenson Brigade Member (Offline)
Joined: Aug 11 2008
Posts: 219
Re: Gold confiscation
RedShift wrote:

...Here is a vague list of how the American Middle Class will be harvested by the master brewers:

Wages -> investments -> weapons/ammunition -> stored commodities (food/fuel/gold) -> land/water -> inscription/slavery.

...

Just before land confiscation, expect prohibitions against raising farm animals or gardening (for health/infectious disease/public safety reasons). All food production will be limited to "terrorism free" government sanctioned corporations (Monsanto, ADM, Tysons, etc).

... 

Water will be more precious than gold or oil. Expect the biggest and most desperate battles to be fought over fresh water access and pump/storage resources.

...   Those people who try to "cheat" the system by growing, manufacturing and bartering, any or all without the benefit of National ID Cards, will be easily spotted: they will appear well fed, clothed and shodded, and in general good health and spirits.

Yes, this is the Orwellian nightmare that we are silently sliding into. 

There is a way out - we can choose now to bend the Matrix by transitioning to healthy sustainable farming and to purchase the same at a grassroots level.   

We are battling to protect our net worth by choosing gold.  However, isn't farmland farmed sustainably inherently more valuable?  Especially in a future where fossil fueled agriculture is no longer economical?

Hmmm...

RedShift wrote:

Those people who try to "cheat" the system by growing, manufacturing and bartering, ... they will appear well fed, clothed and shodded, and in general good health and spirits.

Thanks Redshift...Sounds pretty good to me.

All the best,

James

James Wandler's picture
James Wandler
Status: Martenson Brigade Member (Offline)
Joined: Aug 11 2008
Posts: 219
Re: Gold confiscation
UVAkid wrote:

...The free-est speech you can find is on the internet. Likewise, the internet is one of the most critical forms of infrastructure in the event of a widespread non-compliance. I think that a necessary precursor to effective confiscation would be additional regulation or censorship of the internet that would help to fracture the unity of the bloggers.

I actually can foresee additional attacks on free speech from an increasingly desparate government and I think that the attacks on free speech will come before attacks on gold. Also, bear in mind that attacks on "free speech" are often not direct assaults on the first Amendment. Today, they take the form of bogus government statistics, an entertainment focused media, and a near-fascist cooperation between the government and certain private sectors (defense contractors, the media, etc.).

In short, I think that good information and understanding is potentially more "dangerous" to the government than gold itself. My hunch is that we will see larger and larger distortions of reality before we see a direct attack on gold. Our government is less honest than it was in the '30s, but it is also smarter. It rarely attacks head on anymore but rather uses more subversive strategies to achieve its goals.

Excellent post Mike.

This emphasizes for me the importance of making Chris' message as widely communicated/understood as soon as possible.  It isn't necessary for everyone to understand the message - what is necessary is a broad grassroots movement that can lead others in the steps of the Framework for Action.  We must work together but there is more obligation on those of us that have had the benefit of earlier awareness of the issues and more time to take action.

Are we taking action?

All the best,

James

James Wandler's picture
James Wandler
Status: Martenson Brigade Member (Offline)
Joined: Aug 11 2008
Posts: 219
Re: Gold confiscation
UVAkid wrote:

 

I think people will find the greatest prosperity in smaller, more localized communities. As much as the politicians pander about "global solutions" we have to realize that many countries (most prominently the USA) are put at a greater risk precisely because of their dependence on other countries...

The hard and fast truth of it is that while we perhaps need the entire globe to deal with these issues at the same time, the best solutions are likely to emerge at the local level... Food might play into this somewhat, but importing oil to grow crops here just to export them or convert them to ethanol to burn again strikes me as terribly wasteful.

The politicians seem to see no end in sight to the increasing linkages caused by globalization. But I remain a skeptic. I believe the global economy will gradually unwind to a large extent as we become more and more focused on basic needs and less and less focused on consumerism. These changes will be imposed by fundamental limitations, not simply by an act of policy.

Another excellent post Mike.

Have you read Deep Economy:The Wealth of Communities and the Durable Future by Bill McKibben?  The author provides an illustration of the local level solutions.

By the way, we can't continue to farm by growing crops using fossil fuels - we'll run out of soil (estimates I've seen range from 42 to 84 years assuming current mainstream agricultural practices are continued).  This makes me think of Jared Diamond's book Collapse where he wonders what was going through the minds of the Easter Islanders when they cut down the last tree so that they could move their stone monuments...and were left without the means of building new boats for fishing or escaping from the island.  Some of the Easter Islanders did survive but there was terrible violence...

Fortunately we can reverse course and rebuild soil - the Grow Biointensive method claims that using their cold compost method and holistic gardening practices an inch of topsoil can be created in eight years - which would take nature 500 to 2000 years to produce.  This method is very labor intensive so it is a solution in the developing world - the developed world has more resources with fewer people so sustainable farming will be suitable.

Never before have our problems been so great...or our solutions so available.

All the best,

James

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Gold confiscation

James, and others: If you haven't already seen the "Power of Community: How Cuba Survived Peak Oil" I highly recommend it. It shows the changes the Cubans were forced to make when the USSR collapsed and they lost the bulk of their oil imports. It is a priceless case study, and can give us many clues as to what we will need to do.

See here 

 Enjoy!

 

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