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Usually whenever gold is mentioned the specter of the confiscation hydra rears its ugly head. I do not think gold confiscation is a major threat. Usually those who consider confiscation a probable threat are biased. There are three main reasons why I think gold confiscation is improbable. First, there are great structural differences between the gold environment of 1933 and today. Second, confiscating gold again would releasing the guillotine blade on the fragile US dollar’s neck. Third, such a move would be political suicide even a tyrant of Lincoln or Franklin Roosevelt’s stature would shy away from.
Many coin dealers who raise the confiscation issue have a profit motive in doing so. Many ‘collectible coins’ that were not subject to confiscation in 1933 sell for significant premiums which means the coin dealers make a larger profit on the transaction. This conflict of interest does not vitiate the substantive argument but only reveals the bias.
For example, I have a beneficial financial interest in gold. If you ask me to contrast the advantages and disadvantages of gold and fiat currency what do you think I will say? While I write both objectively and persuasively depending on the occasion my conflict of interest does not vitiate the substantive basis of my argument. The same is true for the tenured university professor who derives his salary from taxation through inflation without representation via the instrumentality of fiat currency. Of course the professor is going to extol and indoctrinate his students with the virtues of a fiat currency system because his livelihood depends on it. When it comes to money and wealth everyone is biased.
Structural Differences. In 1933 the world was still on a gold standard and the US Dollar was convertible to gold at an exchange rate of $20.67 for 1 ounce of gold. If you showed up at the United States Treasury with a paper dollar you could demand payment in gold bullion. Most American banks kept gold in their vaults. Saturday March 4, 1933 the day after inauguration the second great American Tyrant Franklin Roosevelt broke his solemn campaign promises and unilaterally declared a four-day ‘bank holiday’ shutting down all the banks. A month later he issued Executive Order 6102 providing for the confiscation of gold. After confiscating the gold at $20.67 per ounce the dollar was shortly thereafter devalued to $35 per ounce. These drastic actions by a desperate tyrant effectively demonetized gold in the daily transactions of Americans and decoupled it from the banking system.
Currently under 31 U.S.C. 5,101-5,118 although gold clauses in contracts are legal and enforceable there are no links, legal or contractual, between gold and the US dollar, the Federal Reserve System or United States banks. If some tyrant wanted to outdo Roosevelt what could possibly be the rationalization to the markets and general population? I agree that governments act irrationally such as constantly and perpetually lying, cheating, stealing and murdering. But they do have a common purpose: Inertia. Very rarely do those in power wish to surrender any of it but instead seek to maintain the status quo of being attached like gluttonous parasites to the public’s wealth.
Guillotine for the Dollar. Confiscating gold from the American public would almost instantly vaporize the Dollar. A fiat currency is valued only by the confidence in it. There is no difference between the intrinsic value of $1, $20 or $100 bills and with no link to a commodity like gold the Dollar is no different from the bills found in a Monopoly game. Much of the federal debt is owned by foreign investors who watch the dollar gold price for any sign of weakness. A gold confiscation order would shock their faith to the very core and they would most likely immediately dump their dollar holdings.
Foreigners invest in America because of their Judeo-Christian principles in their law evidenced in property rights. If the government tries to seize property like gold in an arbitrary way then foreigners will bolt for the exit. Countries that violate the sanctity of private property are punished for their theft by international investors because they are unreliable and unpredictable which increases political risk. A new gold confiscation order would be a serious and seminal clarion call of political risk within the United States and of an imminent dollar devaluation. The deluge of dollar sellers would probably drown even Noah and the dollar would probably lose 20-80% of its value in a single day. The Dollar system would evaporate almost instantly. I seriously doubt any of the government parasites would intentionally instantly evaporate the Dollar system.
Political Suicide. Besides the geo-political problems there would be tremendous socio-political implications. Suppose Chris Wallace on Lockheed Martin Nightly News declares that all gold owners are required to take their inert yellow metal to the local Federal Reserve which has enemies and exchange it for worthless paper. What will the reaction be? Perhaps like Iceland in November 2008. Suppose of the 400 million Americans there are 150 million investors. Suppose only 3% or 4,500,000 own the yellow metal. We will assume that half of them voluntarily comply. That leaves 2,250,000 with their yellow metal. What is this group like?
I ran into a couple ‘gold bugs’ at the local fair once. I spotted them because each was wearing an African Krugerrand around their necks. Come to find out both were highly intelligent and upstanding active members of their community in both business and church. They were both ardent defenders of unalienable rights as found under the Declaration of Independence and protected by the United States Constitution. Both were strong advocates of the 2nd Amendment and were highly trained being snipers for the Army Rangers. They were both very wary of government abuses and knew the role gold played in protecting against despotic inroads by government. They were gold standard advocates.
So in this hypothetical situation the government has issued a confiscation order for physical bullion and suspects that about 2 million highly armed, distrustful, respected community leaders have it. What does the government do?
First, the government has to track down who owns the gold. Often transactions are carried out in cash and do not have much of a paper trail. Even if one purchased gold in the past why would they currently possess it? Going door-to-door looking for gold is extremely costly, disorderly, dangerous and politically suicidal. They can do it nicely or meanly. If it is done nicely then a single agent goes and kindly asks the 2,250,000 highly armed individuals who willfully and deliberately ignored the first gold confiscation order to please turn in their yellow metal.
If it is done meanly then they send a squad of jackbooted Blackwater mercenaries because no self-respecting federal agents, local police or members of the Armed Services would desecrate their honor by going door-to-door and stealing from their fellow countrymen and perhaps even ‘become the executioners of their friends and Brethren’. Even then it would have to be done slowly, house by house, gold investor by gold investor. It would be terribly personnel intensive with six mercenaries in the entry squad and another six to seal the perimeter.
In perhaps 10% of these unreasonable searches and seizures which grossly violate the United States Constitution worse than even King George was able to the mercenaries would run into a stubborn gold investor who would resist with physical force. The gold investor would most likely die in the Waco or Ruby Ridge-like firefight. But this atrocity of upstanding peaceful leaders in the community being invaded in their own homes and murdered would only need to happen a few dozen times across America before the viral YouTubes and public outrage would foment into a fervent political inferno. If any Armed Services, federal agents or local police were engaging in this horrendous massacre they would quickly be demoralized and demonized. The Blackwater mercenaries would be considered apparitions of Satan. The volcanic political response would result in the heads of politicians rolling. If not through elections then perhaps literally like the Reign of Terror.
There are certain political boundaries that exist which no representative-republic government dares to cross. Stealing private gold in a decoupled gold world is such a boundary. Digital gold currencies, like GoldMoney, safely nestled in offshore jurisdictions like Switzerland make physical confiscation much more difficult. Although not discussed in this article there are easier targets for pillaging wealth like 401Ks, IRAs, etc. For these reasons I consider the probability extremely low of a future gold confiscation.