Gold Confiscation of ?34?

[newprepper]

Don't remember the year, so forgive me, but I have a few questions regarding this part of history and I will lay them out in conversation. Feel free to participate. It may get interesting. Another post got me thinking

 

1. What was the Gov't's reasoning for this?

 

2. Do you think it could happen again?

[Afterword]

Wikipedia:

 

The stated reason for the order was that hard times had caused "hoarding" of gold, stalling economic growth and making the depression worse.[1] The New York Times, on April 6, 1933 p. 16, wrote under the headline "Hoarding of Gold", "The Executive Order issued by the President yesterday amplifies and particularizes his earlier warnings against hoarding. On March 6, taking advantage of a wartime statute that had not been repealed, he issued Presidential Proclamation 2039 that forbade the hoarding 'of gold or silver coin or bullion or currency,' under penalty of $10,000 and/or up to five to ten years imprisonment."[2]

 

The main rationale behind the order was to remove the constraint on the Federal Reserve which prevented it from increasing the money supply during the depression; the Federal Reserve Act required 40% gold backing of Federal Reserve Notes issued. By the late 1920s, the Federal Reserve had almost hit the limit of allowable credit (in the form of Federal Reserve demand notes) that could be backed by the gold in its possession (see Great Depression). If gold can’t be legally owned, then it can’t be legally redeemed. If it can’t be legally redeemed, then it can’t constrain the central bank.

 

[newprepper]

So the Govt could not print money at will as it does today. But back then wasn't the price of gold fixed? You had a 20 dollar gold piece that was worth 20 dollars, today the 20 dollar gold american eagle is worth 1250 or so.

[newprepper]

Wikipedia:

 

If gold can’t be legally owned, then it can’t be legally redeemed. If it can’t be legally redeemed, then it can’t constrain the central bank.

 

If this is true wouldn't that have made the gold certificates worthless?

[Mr. Smith Guesser]

Do you think it COULD happen again? Yes.

 

Do you think it WILL happen again? No. Absolutely not.

[Afterword]

Wikipedia:

 

Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 (equivalent to $376.58 today[4]) per troy ounce. Under the Trading With the Enemy Act of 1917, as amended by the recently passed Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up to $10,000 (equivalent to $182,185 today[4]) or up to ten years in prison, or both. Most citizens who owned large amounts of gold had it transferred to countries such as Switzerland.

[newprepper]

why not?

[newprepper]

Next question:

 

Do you think our Govt actually has the gold it says it has in hand?

[Nutmeg Coin]

 

But apparently it was not enforced that much according to Mr. Burdette in a previous thread.

 

 

 

 

[Nutmeg Coin]

Next question:

 

Do you think our Govt actually has the gold it says it has in hand?

 

Big questions on the whole Fort Knox myth....

 

A Crisis of Confidence

One reason the government might not want an audit is because it would lend importance to an asset that it swears is unimportant.

 

Or as hedge fund manager James Rickards puts it, “An audit would give gold too much credit and start to erode the official propaganda that gold is not a monetary asset. After all, no one audits the number of acorns in the national parks… They are too unimportant.”

 

Makes sense. Yet, I don’t think that’s substantive enough to justify the refusal.

 

What’s more likely is that an audit would raise more questions than it answers. Like, if the gold is really there, does it really all belong to the government?

 

I say that because central banks routinely lease or lend out gold. But current reporting guidelines don’t require them to distinguish between gold owned outright and gold swapped with another party.

 

Instead, the U.S. Treasury simply states its holdings as “gold (including gold deposits and gold swapped).” Or in the British government’s case, “gold (including gold swapped or on loan).”

 

Again, such a lack of transparency opens the door to abuse. Not only could all the gold be on loan (perhaps on unfavorable terms), but banks could also be “re-loaning” that very same gold, thereby creating a “paper pyramid of gold.”

 

The process is known as “rehypothecation,” and it’s exactly what happened during the mortgage crisis with collateralized debt obligations. And we all know how that ended.

 

An audit might also reveal that the government dumped some gold on the world markets to manipulate prices. (Yes, governments have done that before.) And if the U.S. government even sold a little without telling us, trust would be irreversibly broken.

 

More spectacularly, an audit might reveal that Fort Knox is littered with gold-painted tungsten. Here, too, a precedent exists, as counterfeit bars turn up from time to time. Although I doubt a government would confess to being so incredibly duped.

http://www.wallstreetdaily.com/2013/07/16/fort-knox-gold/

[Mr. Smith Guesser]

Why not?

Because the social and political backlash just wouldn't be worth it.

[newprepper]

Nut, you are jumping ahead........ why does the govt hold it if it is unimportant?

 

I "heard" a report where Germany requested it's gold back.....Our Gov't could only return to them a small % in something like 6 months, the rest would have taken years.... any truth to this?

[newprepper]

Why not?

Because the social and political backlash just wouldn't be worth it.

 

Not wanting to get political, but the govt doesn't care about the social and political backlash on other subjects that are more mainstream. Affordable Care Act, Fast and Furious.....

[Afterword]

Germany-Demands-Return-of-Gold-Held-by-US-Federal-Reserve

 

http://lionsdenmedia.hubpages.com/hub/Germany-Demands-Return-of-Gold-Held-by-US-Federal-Reserve-ButHow-it-Affects-Your-Wallet

[Mr. Smith Guesser]

Why not?

Because the social and political backlash just wouldn't be worth it.

 

Not wanting to get political, but the govt doesn't care about the social and political backlash on other subjects that are more mainstream. Affordable Care Act, Fast and Furious.....

 

The government just wouldn't get that much out of it. How much gold would they stand to confiscate? Even if it's 100,000,000 ounces, it's not even close to being worth it.

 

At spot price, 100 million oz would be $125 billion. That's nothing for the U.S. government. The Department of Defense alone spends over $500 billion a year.*

 

*https://aau.edu/WorkArea/DownloadAsset.aspx?id=13038

 

So confiscating gold could, what, keep the lights on at the Pentagon for a few months? It's just not worth it.

[newprepper]

It's not about lights, How much gold do you think we are holding for other govts? How much gold have we sold that is not ours? The damage comes when the people find out what the real debt is when we have to replace the gold sold that was not owned. Confiscation seems more plausible than buying gold to replace it.

[Mr. Smith Guesser]

Will PM.

[RWB]

"What was the Gov't's reasoning for this?"

 

The reasons and purposes were much more subtle than wikidoodle, or other superficial, glib commentary. It also had very little to do with the FRB.

 

The initial difficulty was not gold; it was the so-called "gold standard." This had two fundamental tenants: 1) the government agrees to a certain weight of pure gold as being equal to their monetary unit, and 2) the government agrees to support that relationship by purchasing all gold offered at that ratio.

 

When two countries do this, it establishes a fixed relationship between the two monetary units. This is called parity. For example the parity or "par value" in 1910 between the British pound and the US dollar was 1 pound = $4.867; equivalent to US $20.6666667 per troy ounce 1.000 fine gold. Because of the cost of shipping, insuring, testing, etc of physical gold, there was a practical range of "par" which was called the "gold export point" or the "gold import point." Whenever the price of gold in one country exceeded these gold points, it became profitable to ship the metal to the country with the higher price. This was the gold exchange standard of international commerce and finance.

 

The gold standard was, however, completely arbitrary - it had no fixed rules, or codes or much of anything except that the Bank of England and the City of London acted as international exchange agents and arbiters. That and that alone kept the whole thing from falling apart. Many countries came and went from their gold standard - so it did not ensure stability. In fact, it tended to spread financial problems from one country to another very quickly - there was no buffer.

 

[More later, if anyone is interested.]

[michael]

Do you think it COULD happen again?

 

 

Yesssssssssssssssssss.........................

[DaveG]

If this is true wouldn't that have made the gold certificates worthless?

 

 

When we went off the Gold Standard, gold certificates became just like any other piece of US currency.

 

That is, they were still worth their "face value" in terms of dollars, but you could no longer go to the bank and get, for example, a double eagle for a $20 bill.

[PerryHall]

If this is true wouldn't that have made the gold certificates worthless?

 

 

When we went off the Gold Standard, gold certificates became just like any other piece of US currency.

 

That is, they were still worth their "face value" in terms of dollars, but you could no longer go to the bank and get, for example, a double eagle for a $20 bill.

 

They were made illegal to own so they were NOT "just like any other piece of US currency". I guess that having an IOU that the government refused to honor still in circulation was just too much of an embarrassment for them.

 

 

 

 

[World Colonial]

Do you think it COULD happen again? Yes.

 

Do you think it WILL happen again? No. Absolutely not.

 

Gold owners have little political clout. It will be much easier to stiff them than many other more powerful constituents.

 

As to the probability and circumstances under which it would happen, it is a question of motivation as you imply. As things exist today, it doesn't make any sense. This doesn't mean that it will not later.

 

I don't buy the conspiracy arguments associated with the supposed crisis of confidence. I don't believe the price of gold (or silver) is manipulated as some (or many) "metal bugs" claim because I don't believe these claims make any sense. I can explain that in a follow-up (again) if necessary.

 

The crisis of confidence argument (which is a component of the manipulation claims) doesn't make any sense to me because I don't believe that a higher or lower price influences confidence. This logic is backwards. People lose their confidence first and the price change is the result of it. It's no different than any other asset class such as Greek government bonds.

 

Most people don't own any gold and I don't believe they pay any attention to its price either, at least in most countries and this includes the United States. They are probably aware that it sells for more now than it did in the past (since they see all these outlets offering to buy it) but that is all. True, they are interested in protecting their purchasing power but how they do so is irrelevant except to "metal bugs".

 

The crisis of confidence that I expect in the future is the same one seen in other countries now and in the recent past and that is when people really start questioning the US Government's ability to service its debt. Most here probably expect the Government to "print" its way out of it but I consider that an overly simplistic and wrong. "Eventually", I can see this happening but only after every other option has been exhausted and I don't see that circumstances remotely support or imply this outcome in the foreseeable future.

 

Going back to gold confiscation, at this time, the most likely rationalization I see for it is under a stricter enforcement of the PATRIOT ACT to combat terrorism and "money laundering". Its easily the most liquid untraceable asset and under the "right" circumstances, whether the "metal bugs" like it or not will be irrelevant.

[BillJones]

I can't see the government confiscating gold any more unless we degenerate into a political system that is like the Nazis who took property from Jewish people and other minorities simply to take control of assets. Unfortunately the government has learned how to create money out of thin air; they don't even need to print it any more. The Federal Reserve simply buys the U.S. debt which only requires entries on computers.

 

If you think my Nazi comment is over top, I would advise you to be vigilant. Our rights are slipping away bit by bit under a number of guises including national security, wealth and income redistribution, court decisions and power grabs by government agencies that are no longer accountable to the Congress and barely accountable to the President if he chooses to oversee them at all. Call me nuts, but this is how dictatorships operate.

[World Colonial]

It isn't necessary for the government to confiscate gold to make it impractical or uneconomical to own. Already, metals (along with collectibles) are taxed at higher rates versus financial and busisness assets. Rates could be raised even more. The risk of owning the metals would also increase if you could no longer insure them, for whatever reason. AGE is currently permitted in IRA and self-managed retirement accounts but the exemption could be removed. There are any number of statutory or regulatory changes that could be made (out of sight to most) which would alter the relative economic merits of owning metals versus other assets.

[PerryHall]

I can't see the government confiscating gold any more unless we degenerate into a political system that is like the Nazis who took property from Jewish people and other minorities simply to take control of assets. Unfortunately the government has learned how to create money out of thin air; they don't even need to print it any more. The Federal Reserve simply buys the U.S. debt which only requires entries on computers.

 

If you think my Nazi comment is over top, I would advise you to be vigilant. Our rights are slipping away bit by bit under a number of guises including national security, wealth and income redistribution, court decisions and power grabs by government agencies that are no longer accountable to the Congress and barely accountable to the President if he chooses to oversee them at all. Call me nuts, but this is how dictatorship s operate.

 

Don't you believe in "social justice"?

 

 

 

 

 

 

 

[RWB]

This subject always gets out of hand quickly....So much innuendo, ignorance and emotion tangled together.

[DaveG]

They were made illegal to own. . .

 

 

OMG!

 

Somebody better tell the currency dealers, then!

[Mr. Smith Guesser]

I'm just making an educated guess based on what I think is the most likely scenario. I accept that gold confiscation is within the realm of possibility. But I think it's far outside of the realm of probability because, as already mentioned, I don't think it would be worth it.

 

Moreover, I think gold confiscation is a distraction from the more important macroeconomic issues; among them being the reserve currency status of the U.S. dollar.

 

 

 

[World Colonial]

This subject always gets out of hand quickly....So much innuendo, ignorance and emotion tangled together.

 

Are you referring to the past or the future?

 

To give you an example of how government steals people's money today, failure to file federal income tax Form 8938 MAY result in a $10,000 fine and a bigger one if recurring. This form is required for covered financial accounts owned outside the United States by US citizens and residents.

 

Apparently, now it isn't just enough to pay your income taxes, failing to tell the government where you keep your money is a punishable offense. And yes, I know what the intent of this requirement is for anyone here who thinks I do not. I know the reason and it doesn't change my opinion about it at all.

 

Do I know the exact circumstances under which this fine will be assessed by the IRS? No, I do not. In typical fashion today, discretion is left to bureaucratic whim so that they can apply it as they please. Great to know that. I certainly wouldn't count on the Tax Court to over rule the IRS in a court challenge.

 

A lot of things that seem improbable or "impossible" can happen. They just seem normal once they have been in place for awhile like many things do to so many people right now. I am pretty sure that many who are aware of this type of law or regulation (which is almost certainly only a minority) never would have thought they were possible either many years in the past.

[Afterword]

"Call me nuts, but this is how dictatorships operate."

 

 

 

 

 

Dictatorial conglomerate?