Confiscation of Gold! Let us theorize . . .

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Lemonyellowschwin's picture
Lemonyellowschwin
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Confiscation of Gold! Let us theorize . . .

For those of us interested in protecting ourselves against the risks of inflation/hyperinflation there is a topic that I have not seen discussed and that merits serious consideration.  Perhaps someone who knows more about history than me can help.  Let us ponder this:

 1. Bob is very concerned about hyperinflation.

2.  Bob does something about it.

3.  Bob goes out and buys lots of gold and puts in in his safe deposit box.  He has taken steps to protect his anonymity.

4.  Bob is right!  Hyperinflation comes..

5.  Bob is distressed to wake up one morning to discover that the governement has just banned the private ownership of gold a-la Roosevelt in 1933.  Bob clicks on the internet and learns that an Executive Order has been enacted that criminalizes his ownership of gold.  It gives him thirty days to turn his gold in to government officials who will compensate him with dollars.  (Let us give the governement the benefit of the doubt and say that Bob will be compensated at the current market price for the gold).

6.  Bob reads that there is a penalty -- five years in prison -- if he does not comply with the Executive Order.

7.  Bob feels cheated and sick.  He does not want to go to jail.  On the other hand, he does not want to turn in his gold because he knows that the dollars he gets for the gold will continue to depreciate. 

What can Bob do?

Here are some very hypothetical questions:

First, assuming that there are other countries where ownership remains legal, will the price of Gold in other currencies (take your pick) shoot up or will it plummet?  Would there be people who would simply defy the law and put their gold in a backpack and take it to Canada or another country where ownership is legal?

Second, would gold continue to hold its value in the U.S. despite the executive order?  With dollars worth less and less, would a black market develop with gold as the medium of exchange?  Or would the possibility of using gold as a currency simply disappear in the U.S. as people become unwilling to risk defiance of the law.

Third, what actually happened between 1933 and 1971?  What did people who were willing to defy the law DO?

Fourth, is there any reason to expect that a desperate government would NOT ban the private ownership of gold as they did in 1933?  Is there something different now?

Fifth, can you think of any more questions that someone should ask who wants to prepare for this possibility?

 Thanks!

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srbarbour
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Re: Confiscation of Gold! Let us theorize . . .

[quote]Fourth, is there any reason to expect that a desperate government would NOT ban the private ownership of gold as they did in 1933?  Is there something different now?[/quote]

Yes.

We don't have a gold standard.

Until the government announces a new gold standard, your gold is safe.

--

Steve 

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ds
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Re: Confiscation of Gold! Let us theorize . . .
[quote=Lemonyellowschwin]

5.  Bob is distressed to wake up one morning to discover that the governement has just banned the private ownership of gold a-la Roosevelt in 1933.  Bob clicks on the internet and learns that an Executive Order has been enacted that criminalizes his ownership of gold.  It gives him thirty days to turn his gold in to government officials who will compensate him with dollars.  (Let us give the governement the benefit of the doubt and say that Bob will be compensated at the current market price for the gold).

[/quote]

A solution proposed by Peter Schiff's firm is to purchase physical gold from Perth Mint and let them store it and send you a certificate.

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Set
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Re: Confiscation of Gold! Let us theorize . . .

This is a good topic that I've wondered about as well.  I'm glad someone brought it up.  With regards to srbarbour's reply to your fourth question: "Fourth, is there any reason to expect that a desperate government would NOT ban the private ownership of gold as they did in 1933?  Is there something different now?"

"Yes. We don't have a gold standard. Until the government announces a new gold standard, your gold is safe."

If the government were to announce a new gold standard, why would gold be unsafe?  It seems to me that it would be still just as safe and probably worth a lot more.  Doesn't a gold standard mean that paper money could be exchanged for gold? 

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ds
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Re: Confiscation of Gold! Let us theorize . . .

BTW, I resisted the urge to buy any gold during this whole panic period and I am glad I did. When gold comes down a bit more, I may purchase some. But I never ever make investment decisions to purchase something that people are buying in panic mode. That is a sure-fire sign of a bad decision.

I cannot believe people on here are feeding the fear. Last week (or weekend) someone suggested waking up early Monday morning and driving as fast as possible to the local shops selling gold. If I owned gold, that would be my signal to sell some.

During times when everyone is buying on panic and fear is at high level, it is likely to be a top in the market. Gold will probably have several dips before this whole thing plays out.

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Gold standard and the confiscation of Gold

[quote]If the government were to announce a new gold standard, why would gold be unsafe?  It seems to me that it would be still just as safe and probably worth a lot more.  Doesn't a gold standard mean that paper money could be exchanged for gold? [/quote]

The whole point of confiscating the gold in 1933 originates from the gold standard.   Essentially, in the 1900s the number of bills (as always) was artifically inflated via the printing of additional notes.   During this period people begin to realize this and starting exchanging the notes for the artifically low gold values (because gold was pegged to the note).   This risked destabilizing the currency, as those who were extracting gold from the system, where in essence further inflating the currency (Gold is approaching 0 much faster than the dollars).

This is best explained like this.   Say we have 100 dollars, and 100 units of gold.    If each dollar is exchanged for one unit of gold,  everything works out fine.   But if each dollar is exchanged for two units of gold the ratio of dollars to gold gets increasingly worse as the process goes on, eventually reaching hyper inflationary levels.

Alas, President Hoover did little to stop a system approaching exactly that.

What Roosevelt did, is make the process reverse.  He put gold back in and gave out dollars at the pegged cost.   Once he had as much gold as he could get his hands on, he readjusted the dollar to fit the actual amount of gold backing it.

In otherwords, if he hadn't confiscated the gold, the resulting inflation from refixing the dollar would have been much higher.

In modern times the same principle remains.   The reason for the government to confiscate your gold would be to create a gold standard, or prop up one.  Otherwise, gold is little different than a 1000 other commodities. 

.

As a side, I'll point out that those who complain about Roosevelt stealing their gold have little grounds to stand on.  Most (but not all) exchanged cash for gold at the previous unfair rates, and essentally obtained that wealth by robbing their fellow Americans.  Wittingly or not, they were in essence theives whose ill gotten gains were being confiscated.

Now, for those who obtained their gold through more legitimate means real pity is deserved.  Of course, today things are different.  If gold confiscation happened tomorrow or next year it really would be government thievery. 

--

Steve 

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jdb123 (not verified)
Re: Confiscation of Gold! Let us theorize . . .

Steve-some very good points/questions....

Anyone who would recommend that gold be bought and put in a vaulat in Norway or wherever is just plain wrong...If/When you buy take physical possesion--PERIOD.... A certificate that would take 2 weeks--if that-- to redeem is worthless....

Ive read the notes on here that finding gold and silver is very hard---I can put you in touch with 400-500 oz of gold at $90 over spot ( today ) in minutes---Chris can let me know--or post a message on here with your email available and Ill contact you if you'd like --Id be glad to assist...

BTW Chris---IMO---this topic needs a full 5 minutes on chapter 20.... 

 

 

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Re: Confiscation of Gold! Let us theorize . . .

The threat of confiscation is often given as one of the reasons for purchasing numismatic coins.  Normally you pay a hefty premium for the coins vs bullion, but consider lately at how bullion is either not available or is selling over $100 > Ask.  It ridiculous.

Rather than buying plain old American Eagles you might buy some low grade St. Gaudens.  Then you get the "protection" of owning collector's pieces AND gold. (The 1933 law allowed ownership of numismatics.) I suggest low grade because then you are not spending extra $$$$ on a rare, gem quality collector's item that might not have collector's value if things got really desperate.  Again, at the price of bullion today + transaction costs + shipping, I can buy a St. Gaudens for the nearly the same price.

Given the current disregard for the rule of law, do I think exceptions to that 1933 law would be honored? Probably not, but how far do you want to go?

If you really want to hold physical gold,and avoid prison another option might be to buy jewelry.  If you purchase white gold, I'm sure the average enforcer wouldn't be able to discern it from silver without proper testing.

Heck, make friends with a dentist. They keep gold shot on-hand for "medical" reasons because it's so inert and still makes the longest lasting crowns and fillings.  Maybe they'd store some raw metal for you?

Lastly consider other metals. We agree the idea is an inflation hedge and preservation of wealth.  Metals both industrial and non tend to be positively correlated, so you can go with silver, platinum, paladium, copper, zinc etc.  There's lots of value even outside of gold. Look at how people are stealing copper pipe out of houses.

Just my $0.02

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Re: Confiscation of Gold! Let us theorize . . .

I think the chances are remote because too few Americans own gold, and the Mint has made sure very little is available at the retail level. The same applies to silver.

That said, I would still take precautions just in case. I would not store precious metals in a safe deposit box because these thugs are not above rummaging through safe deposit boxes or shutting down a bank, denying you access to your box. I prefer a hidden safe at home, but when these thugs declare martial law, they are not above searching through homes for whatever reason they please. A registered gun is an open invitation to have it confiscated and whatever else they find in your home that attracts them.

I'm not comfortable burying my gold and silver, but if the atmosphere got dangerous enough, it would be my first choice. There are lots of woods in my area. I'd take a GPS with me and write down the coordinates. It's important that the gold be buried under a slab of stone so it can't be picked up by metal detectors. And I'd spread out my burying sites in case any are discovered. There are books on Amazon with tips on hiding things.

If they wanted to, they could subpoena  your brokers records. Under no circumstances would I voluntarily turn in my gold. I've been pretty good at at staying ahead of events. I'll bury my gold when I think the time is right. If the feds come after me, as far as they are concerned, I sold my gold at coin shows.

It's just a hunch that COMEX warehouses are safe if you can afford 1,000 ounce bars. They would be commingled with commercial and the priviledged wealthy, so not subject to confiscation.

If you are really concerned about confiscation, then numismatic coins are a good bet even with the premium above the raw metal price.

Kings and emperors have been known to outlaw gold and silver under penalty of death, but they could not enforece the law. I understand that on occassion, Italians find Roman gold coins buried in the ground. So make sure a trusted family member has a copy of your coordinates, expecially if you have children. 

 

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Re: Confiscation of Gold! Let us theorize . . .

As far as "... unitl the government announces a new gold standard, your gold is safe..."

Firstly - I still believe the reintroduction of a gold standard is highly unlikely.  However, for the purpose of theorising - if Government's were considering such a measure - and they knew they didn't have enought gold to back it - do you really think they would introduce the standard and then subsequently make gold ilegal? 

Not likely - because doing so would be likely to cause a gold flight to places where a standard and compulsory acquisition was was less likely - consequently the introduction of a gold standard and making it illegal to own would probably happen simultaneously - the latter might also be interpretted as including measures such as a compulsory buyback scheme.

If you genuinely believe in the reintroduction of a gold standard and also that the various governments won't have enough gold then I suggest now is the time to look at how you will secure your holdings and unless you will hand back your holdings get ready to break the law.

Personally I can't see a gold standard being reintroduced - there will be new standards but I currently believe they will be based on other value platforms and not gold.

 

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Re: Confiscation of Gold! Let us theorize . . .

I think it would turn into a situation very similar to the illegal drug trade.  Anyone remember the old Saturday Night Live character who, when asked about certain merchandise, said "You put your weed in there!"

 I'd be/am stashing it all over. False walls, floorboards, compartments in appliances, musical instruments,  HVAC ducts, automobile nooks and crannies. It's very easy to find/create hiding places for valuable. I just wouldn't hide it something someone might steal anyway (tvs, stereos, etc.) 

 Read up on some of the places drug smugglers and dealers stash their narcotics. Should give you plenty of ideas. As far as the Law catching up with you at that point, I'm thinking they'll have very little bite left.

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Lemonyellowschwin
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Re: Confiscation of Gold! Let us theorize . . .

Great thoughts people.

Does anyone care to take a crack at this question:

 If the USA were to confiscate gold, what happens to the price of gold in, say, Canada?  (Or France, or Chile, or any other country where gold is still legal).  Does it go up?  Down?  Sideways?

I am just assuming it goes through the roof, but maybe I am overlooking something.

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Re: Price of Gold in Canada
[quote]

If the USA were to confiscate gold, what happens to the price of gold in, say, Canada? (Or France, or Chile, or any other country where gold is still legal). Does it go up? Down? Sideways?

[/quote]

Most likely it would stay pretty much the same. More people might go to Canada to buy (which could drive the local price up some), but there would also be plenty who go to sell.

In any case, gold like most things these days, is globally traded. Local shortages might put pricing pressure on, but it'll also increase gold shipments to that locality so as to alleviate it. As such, I wouldn't expect much of an effect at all.

Except maybe local Canadians taking advantage of out of town Americans and cutting/raising the price for  those selling/buying.

--

Steve

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Price effects of confiscating gold

Greetings Lemonyellow - thinking on the run here:

If we accept the principle that price reflects demand then let me pose this to you - if it is made illegal what will happen to the demand for gold in the USA and how will this effect the world demand? 

Unlike drugs and booze which give you a "fix" holding gold doesn't do a lot for you in an environment where it is ilegal.  I actually suspect that making it illegal would reduce demand.  The question then is how sigificant a player is the USA in the international gold trade. 

In the absence of ready data lets align it with economic activity - the USA economy accounts for a quarter of the worlds GDP.  Unplug that sort of demand from the world gold market and I would actually expect a significant downward shock.  This would probably be compounded by fear from people in other countries that their administrations might follow suit.

............. But I could be readily convinced with evidence to the contrary.

 

 

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Re: Price effects of confiscating gold

My understanding is that countries like India have a larger share of demand for bullion, certainly on a per-capita basis, than the USA.  I suspect that they would be more than happy to take up any slack in demand that a ban might create.  They are one of the reasons behind the seasonality in gold prices - what we in the northern hemisphere call Autumn is, in their customs, an auspicious time for them to buy gold.

All the best.

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Re: Confiscation of Gold! Let us theorize . . .

[quote]A solution proposed by Peter Schiff's firm is to purchase physical gold from Perth Mint and let them store it and send you a certificate.[/quote]

This will make it really easy for the government(s) to confiscate. In the thirties most of the gold that was confiscated  was the gold stored in bank vaults. Gold stored and hidden on private properties was not taken., or taken to a much lesser degree.

As long nobody knows you are holding metals, you are safe. Most times my neighbours bought gold and silver it was traded off-balance and no receipt was written. He paid cash. No registration no lines.

You should keep you storage, be it food, fuel or metals, should be kept secret.

Here (Europe), some people say that if a disaster stikes, the goverment should conficate all food stored by the people and redistibute. This scares me more than any crisis scenario.

My neighbours are also putting some of their money into solid fuel. In the shed they have several tons (!) of brown coal brikettes. They plan to use it as fuel to heat their home AND to trade for other other things. I don't see the goverment conficating solid fuels. But, hey, these are strange times, so he keeps his stash of coal also a secret. 

 

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Re: Confiscation of Gold! Let us theorize . . .
[quote=srbarbour]

[quote]Fourth, is there any reason to expect that a desperate government would NOT ban the private ownership of gold as they did in 1933?  Is there something different now?[/quote]

Yes.

We don't have a gold standard.

Until the government announces a new gold standard, your gold is safe.

--

Steve 

[/quote]

 

But this could be closer than most think. I my country there is a law (last updated in the late nineties) that allows the goverment to issue emergency money and it allows them to confiscate all privatly owned gold to back this emergency curreny. I don't know if simelar laws exists in the US.

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Re: Confiscation of Gold! Let us theorize . . .

When FDR confiscated gold he excluded pre 1933 coins because they were considered to be numismatic coins of value in excess of just the gold content.  All the coins I purchased are pre 1933 for this reason.

IMO, the govt attempting to confiscate gold today would have poor compliance.  I certainly would not turn my coins in.  Folks don't trust the govt today nor are we as law abiding as they were in '33. With the advent of computers and the internet there are many ways to sell or trade anything of value.  Those are my opinions.  

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Re: Confiscation of Gold! Let us theorize . . .
The government exists mainly to circulate value. The parasitic class taps into that flow. Like a tapeworm, it strongly influences the feeding preferences of its host. If gold and silver have value, they are vulnerable to this process of circulation and parasitism. There are two ways to cope. One is a black market in precious metals. The other is insurrection. This is a bit of a problem. It means simply that one or more parts of the country will become untouchable by the federal government. To make it work, the new entity will have to convince the feds that they're better off leaving them alone. Not and easy task. They will have their own systems of law and coin their own currency. And faced with similar problems might resort to similar measures unless these new entities take a radical approach to currency, banking, taxation, &c.
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Re: Confiscation of Gold! Let us theorize . . .
Government is not above confiscating anything they want when they need money. I'll bury my silver if I have to so they can't get it. You can't do that with your savings and pension.
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ds
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Re: Confiscation of Gold! Let us theorize . . .
[quote=ds]

BTW, I resisted the urge to buy any gold during this whole panic period and I am glad I did. ...

During times when everyone is buying on panic and fear is at high level, it is likely to be a top in the market. Gold will probably have several dips before this whole thing plays out.

[/quote]

Gold finished the month with an 18% loss, heading for its worst monthly drop since 1980.

I take note of the emotional mastery of Warren Buffett. He buys when everyone is panicking to sell; and he doesn't buy when people are panicking to get in.

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Re: Confiscation of Gold! Let us theorize . . .
Lemonyellowschwin wrote:

Third, what actually happened between 1933 and 1971?  What did people who were willing to defy the law DO?

Fourth, is there any reason to expect that a desperate government would NOT ban the private ownership of gold as they did in 1933?  Is there something different now?

Fifth, can you think of any more questions that someone should ask who wants to prepare for this possibility?

Thanks!

The Government seems to have a habit of changing the rules when things don't work out for the benefit of the super wealthy. A good example of rule changing happened a few months ago when the SEC banned the short selling of financial stocks. They did however, allow Goldman Sachs to continue short selling even thought the rest of the World was banned.

I'm pretty sure that this Goverment has lost all of their credibility and people will be less likely to listen to them. Confiscation of gold is a very real possibilty since the bankers will lose power if people start rushing into this safe haven.Goldman Sachs recently covered a large gold short position they held on the Tokyo Commodities Exchange. They must know something about the prospects of gold and the eventual demise of the US Dollar. The following article sheds some light on what's going on with gold and the financial markets..... 

 

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DurangoKid
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Re: Confiscation of Gold! Let us theorize . . .

The notion that gold is money is just commodity fetishism.  There is nothing intrinsic about gold that makes it money.  It is scarce.  It can be carved up in to very small pieces.  It doesn't tarnish.  But so what?  Other metals can do this.  One could even argue that gold is too scarce to be money.  Even under a fractional reserve system, gold is too scarce.

Money is simply what we all agree is money.  The problem is not what we call money, but the process by which money is issued into the economy.  Bank note currency is issued by profit seeking banks.  Fine if you want a private interest to manipulate the stock of money for their own gain and charge rent in the form of interest on the stock of money.  Not only do they issue it for their own profit, but they can destroy it by simply letting old loans be repaid and refusing to issue new.  Another important distinction is that bank note currency is not fiat currency because it is not issued by government fiat.  The tender laws only force us to recognize bank note currency as legal tender.  The power to issue is not by government fiat, but by private bank monopoly.

Kids, the monetary system is a rigged game.  They have us arguing over gold standards and financial minutia.  Get over the gold fetish and get onto serious matters of exchanges.  Sheesh.

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