Type of PM to avoid confiscation?

16 posts / 0 new
Last post
dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
Type of PM to avoid confiscation?

I have heard from two different sources speculating that US eagles may be spared confiscation since they are products of the US Mint and considered legal tender.  I have been buying kruggerands for the most metal/least cost, but wonder if the legal tender risk warrants the extra $35 or so to buy eagles.  BTW, I guess the same applies to silver.  I have mostly rounds, but some eagles and maples.

Comments?  Thoughts?

AWR's picture
AWR
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 33
April 5, 1933 - Executive Order 6102

 Well I think when TSHTF if the government gets totally desperate to keep people from ditching dollars for PM they could confiscate whatever type of PM they want.  If you look back at the Great Depression when Roosevelt signed Executive Order 6102 it criminalized the possession of monetary gold including gold coin, bullion and certificates.  However, in that instance there was an exception made for numismatic (rare/collectible) coins...as you can imagine when a rare or collectible coin is melted down all of the numismatic value disappears.

So, if history repeats itself then I would say that at least part of your PM collection should be numismatic.  However, it has its cons such as finding a buyer in a SHTF scenario who cares enough to pay any sort of numismatic premium (unlikely IMO).  Or, if your house burned down and somehow heated the coins to their melting point you would see the numismatic value disappear.

I don't think there is any right answer except maybe to be diversified with your PMs.  I am 100% in Eagles so I'm not walking the walk.  I just can't bring myself to pay such high numismatic premiums and get so little silver or gold content for what I'm paying.

neutrino's picture
neutrino
Status: Bronze Member (Offline)
Joined: May 10 2009
Posts: 29
3 ways the Government could confiscate:

 

1) Apply a high capital gains tax to the sale of PM's.

2) Decree all bullion held in speculative pools and custodial accounts property of the State. (ETF's, ETN's, etc.)

3) Confiscate foreign gold held by US treasury/Fed, (compensated by US treasuries of course).

Now that is not to say that they could not confiscate individually held gold (besides merely taxing its sale). However in the bigger picture, that quantity is fairly miniscule. 

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1631
Eagles/Ex.Order 6012

In the aftermath of Executive Order 6012 the only citizens who had their gold "nationalized" (such a nice sounding word, huh?) were those who voluntarily turned it in to the government in exchange for paper fiat. No one was ever arrested or prosecuted for not doing so.  I agree with neutrino that the privately held gold coins of average citizens would most likely fly under the radar as the amounts involved are so small when looking at it from the US govt's perspective.  The small amount citizens might have (say 10 or 100 or even 200 gold Eagles) would be so spread out across the country and extremely difficult to find even with an unconstitutional search warrant that their recovery would seem to a reasonable person to not be worth the resources necessary to get them (especially if citizens resist with force).

Besides, I 've heard people float ideas for using gold and silver Eagles that would not require selling them and incurring a tax liability.  Someone suggested SPENDING Eagles to buy things directly from willing sellers (assuming you can find them).  For large purchases like a house, the buyer and seller would have a contract drawn up stating that in return for $1000 in US currency (i.e. specifically 20 gold Eagles at a face value of $50 each) the real estate owner would transfer title to the buyer. For smaller purchases, a handshake would suffice.  Someone else suggested using Eagles as collateral for a loan to purchase income-producing property such as an apartment building.  Income from the apartment building would then be used to pay back the loan.  Once the loan was paid off, the owner would still have his/her Eagles AND an income producing property. Eagles (and pre-1965 silver coins) are legal US currency and that status opens up some interesting options that other forms do not (eg. foreign coins, bars, commemoratives, mining stocks, etc.).

Why would TPTB go to all that trouble to find individual gold coins held by individual citizens (which would require a literal army to accomplish even partially) when it would take less than 700 people (Congress + government officials) to confiscate huge amounts of PMs stored here for foreign governments, bullion bank reserves backing paper silver and gold contracts (eg. GLD, SLV), and retirement accounts? The government might easily conclude it could get away with these measures without triggering riots in the streets.  Contents of safe deposit boxes at banks would also seem fairly easy to inventory and confiscate, though the risk of public resistance seems considerably greater.

AWR's picture
AWR
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 33
 One other comment I would

 One other comment I would make: I think expropriation of PMs is actually pretty unlikely, if for no other reason because an estimated 70% of US dollars are held outside the country.  What good would it really do to expropriate PMs from US citizens?  It wouldn't do much good for the dollar and it would cause additional social unrest.

dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
Krugerrands are about $35

Thanks for the great input!

Krugerrands are about $35 less than eagles.  I realize there are a number of things the gubment can do, and taxing is easier than risking life trying to "nationalize" everyone's personal holdings.  I paid the $35 per coin extra and got conversion to eagles before the rands were shipped to give me a little less stress on that risk factor if legal tender is exempted.  Also, when it comes down to it, coins might only be worth their amount of gold, but maybe the eagles will hold some of the premium.

I do NOT have any SLV or GLD, but DO have some mining ETFs: GDX and GDXJ and SIL.  Thank God for the second ammendment!  It might keep the gubment from going as far as it would without it!   BTW, I have also heard that safe deposit boxes will be easy pickins!

I especially like the idea of direct payment of PMs into real estate.  When the credit bubble bursts alongside the dollar bubble and bond bubble, real estate should plummet and be a good value compared to transfer out of the PM bubble.  Sounds great, but who knows how it will work out and what pitfalls to navigate!

Travlin's picture
Travlin
Status: Diamond Member (Offline)
Joined: Apr 15 2010
Posts: 1322
Quick thoughts

I think it is very unlikely that the US government will confiscate gold again since it no longer backs the dollar, and gold coins are no longer used for payment at face value. In 1933 they paid $20.67? for the gold and then sold it for $35 to devalue the currency to pay debts more easily.

A thought I have heard, but can’t verify, is that the US government can legally call back the coins it issues, but not the coins of other countries, as they are issued by sovereign nations and the US has no claim on them. I would appreciate any information anyone has on this.

I have read that as part of the nationalization of gold in 1933 all safe deposit boxes were frozen and could only be opened with the IRS in attendance. True or false?  They can easily pass a law that a bank employee must be in attendance and make a report.

No one has to go door to door to find PMs. They just pass a law that all dealers submit their sales records to the IRS. These can easily be matched to tax returns so you have to explain what happened to your purchases.

PMs already have a special “collectables” tax of 28% on capital gains verses 15% for other assets. As Neutrino says it is easy to raise this drastically.

For indirect gold ownership (ETFs, etc.) consider companies out of the US like Sprott, and Central Fund of Canada, but if it’s purchased via a US broker, or in an IRA, that might not mean much. Consider opening an “overseas” brokerage account or use a central depository like BullionVault and GoldMoney, without an IRA.  You are required to file an annual report to the IRS on these accounts though, and the penalties for failure are severe.

They are unlikely to come after your PMs directly. They can just make it illegal to use them. The people who kept their gold in 1933 had to wait 40 years before they could use it legally. If that happened again and you couldn’t show a paper trail of how you purchased it legitimately then you’d still be screwed.

Do you see a pattern here? People will give up on gold if it is not effective for them. No need to be so heavy handed that people rebel.

Travlin

 

 

songbird's picture
songbird
Status: Member (Offline)
Joined: Apr 16 2008
Posts: 23
Gold Jewelry vs. coins

 Does anyone have any thoughts on holding some gold  as jewelry rather than in coins?  I realize that coins are perhaps more easily sold, but  no one seems to be having any problem selling gold jewelry  either, especially if you have a reputable jeweler that you trust.  While you may lose some value, would jewelry be safer from the risk of confiscation?

 

neutrino's picture
neutrino
Status: Bronze Member (Offline)
Joined: May 10 2009
Posts: 29
One problem with jewelry

One problem with jewelry over coins is confidence. An average consumer feels less confident that the piece they are buying is in fact the quantity and quality of gold claimed.  Many people feel unsure of how to determine the gold content of a piece of jewelry, and would be hard pressed to distinquish between a 14kt, 18kt, 22kt or 24kt or even a gold plated piece. So it tends to take out a large segment of potential buyers/sellers. Jewelers are able to determine exactly what they are buying but my experience is that they will offer to buy at a deep discount and sell at a premium over spot.

The reason Coins are popular with investors is that their legitimacy is easily determined. With a micrometer and a scale anyone can be confident that what they are purchasing is a legitimate gold coin.  This is why private sales of coins take place regularly and follow reasonable closely to spot.

If you want to diversify to avoid confiscation consider some of the other PM's - Silver, Platinum and Palladium.   Of the 3 I like Palladium.  Buy from a reputable dealer (APMEX, Gainsville Coin, Kitco), keep the receipt and either sell it back to the dealer or a private individual when/ if the time comes.

MrEnergyCzar's picture
MrEnergyCzar
Status: Bronze Member (Offline)
Joined: Oct 14 2010
Posts: 54
Non issue

I would imagine it would be a non-issue as transactions outside the traditional economy would flourish.  Start with Junk Silver and work up, be diversified to hedge yourself if worried.  

MrEnergyCzar 

dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
I'm curious to know why you

I'm curious to know why you like Palladium best of the three non-gold PMs you list above.  I am thinking of getting some to diversify my PMs.

 

neutrino's picture
neutrino
Status: Bronze Member (Offline)
Joined: May 10 2009
Posts: 29
 I'm curious to know why

 I'm curious to know why you like Palladium best of the three non-gold PMs you list above.  I am thinking of getting some to diversify my PMs.

This has to do with historical supply economics.  Palladium was heavily stockpiled during the Cold War by the Soviets.  Afterward they began selling off their  stockpiles over a 20+ year period resulting in the price behavior we have seen.  However there is indication (and here) that Russia has finished reducing their stockpiles to an acceptable minimum in 2011.  This would imply a significant artificial supply that has heretofore been feeding the market has dried up.

Secondly, the largest (and few) producer of Palladium swiched to a Platinum refining process that yields significantly less Palladium by-product. 

Also, Pallaium is a metal with strange properties.  I think there is a real possibility that we could see some of these properties exploited in ever more creative ways.  And while Paladium's primary use is in conventional cars, it is also an important catalyzer of Hydrogen Fuel cells too.  So  it's no going away soon.

I think it will perservere as a store of value and perhaps side step any attempts to confiscate through oppressive taxation or the like.

dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
Thanks!

Thanks!

TNdancer's picture
TNdancer
Status: Silver Member (Offline)
Joined: Aug 20 2008
Posts: 127
Travlin wrote: I think it is
Travlin wrote:

I think it is very unlikely that the US government will confiscate gold again since it no longer backs the dollar, and gold coins are no longer used for payment at face value. In 1933 they paid $20.67? for the gold and then sold it for $35 to devalue the currency to pay debts more easily.

A thought I have heard, but can’t verify, is that the US government can legally call back the coins it issues, but not the coins of other countries, as they are issued by sovereign nations and the US has no claim on them. I would appreciate any information anyone has on this.

Just because "they call" doesn't mean you have to answer.  The whole notion of "confiscation" is based on the presumption that folks will simply knuckle under and play along.  My suspicion is MOST metal owners will do nothing of the sort.  A govt with no respect for property rights is not a legitimate govt, IMHO.

 

Travlin wrote:

I have read that as part of the nationalization of gold in 1933 all safe deposit boxes were frozen and could only be opened with the IRS in attendance. True or false?  They can easily pass a law that a bank employee must be in attendance and make a report.

True......and with that experience, only a fool would store anything in a "safe" deposit box.

 

Travlin wrote:

No one has to go door to door to find PMs. They just pass a law that all dealers submit their sales records to the IRS. These can easily be matched to tax returns so you have to explain what happened to your purchases.

I know of one dealer that only keeps paper records on flash paper, anticipating the need for a sudden source of heat one day.

As for other records, "I lost ALL my PM's in a boating accident while moving them to my summer home.  Now prove otherwise".

 

Travlin wrote:

PMs already have a special “collectables” tax of 28% on capital gains verses 15% for other assets. As Neutrino says it is easy to raise this drastically.

Yep...true.  But that assumes that folks aren't getting around that now.....ala "Cash for Gold" places. 

OR buying items directly WITHOUT conversion to paper dollars.  IF I bought a one ounce Gold Eagle ( legal tender, remember )  for 300 FRN ( Federal Reserve Notes ) in 2000, and 5 years later, I bought a set of tires with it that are either one GEalge, or 600 FRNS, or 630 FRNS on a credit card, has there REALLY been a gain ?  I say "nope"......merely a cash price, and a "better" cash price....ahahahaaaaaa......assuming they could even find out about a private transaction between two folks to even question it.  My dentist was more than happy to take 10 REAL dollars ( c.1880 ) for a procedure that would have cost me 1,000 in Federal Reserve Notes had I gone that route.  The guy that put the granite countertops in my kitchen remodel was more than happy to take 2 gold eagles ($100) as partial payment for them.  And so on......you'd be amazed at the transactions, and price discounts, you can negotiate with REAL money.  Try it sometime !

 

 

 

SingleSpeak's picture
SingleSpeak
Status: Platinum Member (Offline)
Joined: Dec 1 2008
Posts: 506
Concurring with TNdancer
TNdancer wrote:
Travlin wrote:

I think it is very unlikely that the US government will confiscate gold again since it no longer backs the dollar, and gold coins are no longer used for payment at face value. In 1933 they paid $20.67? for the gold and then sold it for $35 to devalue the currency to pay debts more easily.

A thought I have heard, but can’t verify, is that the US government can legally call back the coins it issues, but not the coins of other countries, as they are issued by sovereign nations and the US has no claim on them. I would appreciate any information anyone has on this.

Just because "they call" doesn't mean you have to answer.  The whole notion of "confiscation" is based on the presumption that folks will simply knuckle under and play along.  My suspicion is MOST metal owners will do nothing of the sort.  A govt with no respect for property rights is not a legitimate govt, IMHO.

 

Travlin wrote:

I have read that as part of the nationalization of gold in 1933 all safe deposit boxes were frozen and could only be opened with the IRS in attendance. True or false?  They can easily pass a law that a bank employee must be in attendance and make a report.

True......and with that experience, only a fool would store anything in a "safe" deposit box.

 

Travlin wrote:

No one has to go door to door to find PMs. They just pass a law that all dealers submit their sales records to the IRS. These can easily be matched to tax returns so you have to explain what happened to your purchases.

I know of one dealer that only keeps paper records on flash paper, anticipating the need for a sudden source of heat one day.

As for other records, "I lost ALL my PM's in a boating accident while moving them to my summer home.  Now prove otherwise".

 

Travlin wrote:

PMs already have a special “collectables” tax of 28% on capital gains verses 15% for other assets. As Neutrino says it is easy to raise this drastically.

Yep...true.  But that assumes that folks aren't getting around that now.....ala "Cash for Gold" places. 

OR buying items directly WITHOUT conversion to paper dollars.  IF I bought a one ounce Gold Eagle ( legal tender, remember )  for 300 FRN ( Federal Reserve Notes ) in 2000, and 5 years later, I bought a set of tires with it that are either one GEalge, or 600 FRNS, or 630 FRNS on a credit card, has there REALLY been a gain ?  I say "nope"......merely a cash price, and a "better" cash price....ahahahaaaaaa......assuming they could even find out about a private transaction between two folks to even question it.  My dentist was more than happy to take 10 REAL dollars ( c.1880 ) for a procedure that would have cost me 1,000 in Federal Reserve Notes had I gone that route.  The guy that put the granite countertops in my kitchen remodel was more than happy to take 2 gold eagles ($100) as partial payment for them.  And so on......you'd be amazed at the transactions, and price discounts, you can negotiate with REAL money.  Try it sometime !

 

I believe TN makes some good points and the further into this money grab we get, the more people will come up with ways to avoid any transactions in dollars. When people know that they are being stolen from, even if it's only done by the "friendly" government, they will protect their assets. BTW, I remember that boating accident because mine were on the other boat that went down. (Where did you say that summer house was?)

SS

 

 

tictac1's picture
tictac1
Status: Silver Member (Offline)
Joined: Sep 25 2009
Posts: 175
The free market

...is the black market.  There is already considerable black/grey market action due to the nature of the economy.  Especially in the trades, anyone that's scraping by will take cash to avoid taxation, because their financial survival depends on it.  Anything you ban, regulate, tax or permit to death will inherently create some type of black market, it's human nature.  Like SS said, people know when they are being stolen from, regardless of color of law, and will do what they can to protect themselves.

If/when the economy gets bad enough that the gold bugs are selling their metal, rest assured, there will be a black market for it.  Even now, we have black market prescription and non-prescription drugs, alcohol, pesticides, labor, food and most of the other things governments like to tax and regulate.  Yes, there is risk in dealing with a market like that, but freedom has always been inversely proportional to safety.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments