People around the world love gold. It has always been the most reliable hedge against economic uncertainty. Yet few people consider that the government (who is usually responsible for the turndown in the first place), has the authority to seize your gold.
Historically, the government will seize gold when it’s the most valuable, during times when its fiat currency has become utterly devalued. When President Roosevelt made ownership of gold bullions illegal in 1933, the move was preceded by the boom of the Roaring Twenties, then the crash of 1929. Although Roosevelt didn’t call it gold confiscation; he preferred the term “gold hoarding.”
By the 1930s, the US government was facing its most severe financial crisis, and it needed gold (something of value), to stimulate the economy that was running on the fumes of fiat currency. So, it took people’s gold. It was as simple as that. Non-compliance was threatened with severe punishment.
We may be facing another financial crisis, and it might be best to avoid the role of fugitive “gold hoarder.” At this point, it doesn’t make sense for the government to confiscate private gold, as a cashless society will indirectly control peoples finances.
Why would the government seize gold? In 1933, under the 1913 Federal Reserve Act, the dollar had to be backed by 40 percent gold. This would give the Federal Reserve room to print new money when needed. What’s a government to do when it needs to print money, but doesn’t have the gold reserves needed to back it up? It passes an Executive Order making gold ownership illegal but buys up the illegal gold itself. That’s what Roosevelt did. When the government continued to print more money, it declared ownership of silver illegal a year later.
Soon after the government confiscated all gold, the price rose by 40 percent. As if by magic, the US government had a lot more funds than it had before. What happens is that the government buys your gold with cash, then devalues the cash and raises the value of the gold. It wins, you lose.
While the government attributes artificial value to money, it can do and does the same to the value of gold. The government currently holds 261 million ounces of gold in reserve at marked on its book at $42.22 per ounce. That’s a total value of $11 billion. Or is it? The fair market value of gold today is around $1,300 per ounce. As Jim Rickards pointed out in the New Case For Gold, gold is actually what kept the Federal Reserve solvent in 2008.
It is important to know, that under extreme circumstances, the U.S government can still keep you from “hoarding” gold if it wishes to do so.
Many countries recently have repatriated their gold reserves to keep the precious metal closer to home. Germany is just one of the countries that have called back all its gold. When this happens, countries are often preparing for geopolitical and financial events. People buy gold for the same reason.
Since the US dollar is no longer backed by any amount of gold, why would the government want to confiscate it these days? The government is keeping afloat by printing as much fiat currency as it can. The more it prints, the less valuable the dollar becomes, while gold concurrently rises in value. A desperate government might very well begin to eye private gold as the solution to its problems.
Want to know a sad fact?
$20.00 in 1971 has the same buying power as $123.88 in 2018… in other words, inflation has destroyed savings.
Money is supposed to be:
a) medium of exchange
b) unit of account
c) STORE OF VALUE
Fiat currencies DO NOT store value; it erodes it. pic.twitter.com/Lfq7a9g8ml
— Gold Telegraph (@GoldTelegraph_) May 3, 2018
It is unlikely that the government will confiscate your gold in the short term. But the whole purpose of keeping gold is long-term, so it’s a good idea to be prepared. Keeping some physical gold tucked safely away is always a good idea.
Investors wanting a hedge against inflation should be aware that old and rare gold coins retain their value without falling under the definition of gold that can be seized by the government. Once you get over the hefty premium, rare gold coins can be had and kept even when it has been declared illegal. Currently, many rare coins are still exempt from seizure.
If any government were to confiscate gold, it would be to enable governments, instead of free trade, to control the economy. The more power the government claims, the less power lies within the hands of its citizens.
Gold has been the most reliable form of money by being a trusted store of value. Its physical properties is the reason gold has remained a coveted asset for over five thousand years.
With the “everything bubble” only getting bigger and bigger, will the U.S government want gold to be under its control or under the control of its citizens?
Time will tell…