Are
We Being Conned About Gold Confiscation?
Doug Hornig
Editor, Casey's
Gold & Resource Report
Aug 13, 2009
There's a lot of Internet chatter
these days about the possibility of the U.S. government seizing
its citizens' private gold holdings.
What are the chances?
Well, it's always good to bear
in mind that there is no telling what the government might do.
It's already doing things that were unthinkable just a few years
ago. If President Obama believes there is political hay to be
made from seizing your gold - or even if he sincerely thinks
such a move would be "good for the country" - we're
sure he won't hesitate to make the grab. After all, his favorite
predecessor, Franklin Roosevelt, set the precedent.
Many Americans don't even realize
that private gold ownership was forbidden for forty years, but
it was. The relevant edict is Presidential Executive Order 6102
of April 5, 1933, which begins:
"Forbidding the Hoarding
of Gold Coin, Gold Bullion and Gold Certificates
"By virtue of the authority
vested in me by Section 5(b) of the Act of October 6, 1917, as
amended by Section 2 of the Act of March 9, 1933, entitled An
Act to provide relief in the existing national emergency in banking,
and for other purposes, in which amendatory Act Congress declared
that a serious emergency exists,
"I, Franklin D. Roosevelt,
President of the United States of America, do declare that said
national emergency still continues to exist and pursuant to said
section to do hereby prohibit the hoarding of gold coin, gold
bullion, and gold certificates within the continental United
States by individuals, partnerships, associations and corporations..."
There was, of course, no constitutional
peg on which to hang such an outrageous crime against the people,
so FDR decided to fall back on the 1917 Trading with the Enemy
Act, which he claimed gave him the authority to do this in order
to prevent gold from falling into the "wrong" hands.
If that seems a flimsy argument, it is.
But it echoes eerily today.
How much of our personal freedom have we already been asked to
sacrifice to the Forever War on Terrorism? And note also the
reference to an "existing national emergency in banking"
that requires extreme measures. Sound familiar?
So, no question that Obama
could follow in the footsteps of his mentor, if he wanted to.
That said, though, the likelihood of a new gold confiscation
is remote, for a number of reasons.
2009 is not 1933. Back then,
the money supply was constrained by the gold standard. As Roosevelt
concocted the New Deal, he ran smack up against that wall. He
needed more money than he had, couldn't raise taxes in a depression,
and couldn't print dollars that weren't gold-backed.
His solution may have been
reprehensible, but it was elegant. First, make the private possession
of gold illegal, paying those who surrender their metal the official
price, $20.67 per ounce. Then revalue gold to $35 per ounce.
Voilà: Instant inflation, lots of new money, problem
solved. And the New Deal was off and running.
But we have long since abandoned
the gold standard, and Obama doesn't face FDR's constraints on
monetary inflation. However much money is needed to finance his
New Deal Redux, he can have it. All he has to do is rev up the
printing press or turn an unlimited number of bits and bytes
into electronic cash.
Given this kind of clout, what
does he need gold for?
An argument can be made that
the yellow metal is still useful. It runs like this: Creating
money out of thin air is inflationary, and a large stash of gold,
even if it doesn't officially back anything, serves as a sort
of counterweight. People around the world will have greater confidence
in your currency knowing that, as a last resort, you can pay
your bills in gold. And the more gold you have, the better.
Furthermore, confiscating gold
and assigning it a fixed dollar value would also prevent the
kind of runaway gold price that the coming massive inflation
is bound to trigger. As those who argue that the gold price is
already suppressed correctly point out, the government has decided
to sacrifice the dollar in order to avert deflation. Thus a lower-than-free-market
gold price helps obscure the damage that's been done to the currency.
People feel richer with more, albeit inflated, dollars in their
pockets; a rapidly escalating gold price shows them that they're
not.
These two arguments aren't
empty, but they're not convincing. Most folks in government subscribe
to the "barbarous relic" school of thought about gold.
Precious metals probably cross the minds of Obama's economists
only when they're out buying jewelry.
And most American citizens
have never even seen a physical gold coin, much less own one.
Reeling in all the bullion out there will, in reality, do the
government little if any good.
One final point. In the 1930s,
when people were asked to turn in their gold, compliance was
quite high. Americans believed their government when told that
it was for the greater good. Imagine.
Today, that attitude seems
laughably naïve. Those who have gold know that it is an
unequaled storehouse of value. That they would meekly part with
it at the government's behest requires a belief that naïveté
still rules the land.
Far more likely is that gold
owners would resist. And since they also tend to be gun owners,
there could be serious confrontations. The government doesn't
want mass resistance to one of its orders, nor an escalation
of the domestic violence it will probably get anyway, when unemployment
rises to Depression-era levels. It's simply not worth it.
Never say never where government
stupidity is involved. But all things considered, a modern-day
gold confiscation is not high on our list of financial worries.
Physical gold and silver, as
well as select gold-related investments, are the go-to assets
in times of uncertainty. Learn more by
clicking here.
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1998-2009 by Casey Research, LLC.
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