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foreign exchange controls dollar currency controls

Domestic & Foreign Exchange Controls – Dollar Currency Controls?

by Trace Mayer, J.D. on June 9, 2009 · 20 comments

Reading time: 9 – 14 minutes

FOREIGN EXCHANGE CONTROLS  AND NATIONAL COMMON STOCK

National fiat currencies represent the common stock of nations.  Because of the large amounts of capital involved they usually move slowly according to trend.  As their share price sinks despots implement doomed currency controls enforced by violence in a vain attempt to artificially increase price.

Notice how the FRN$ trended downward with the 200dma tracking the 50dma.  Then a convergence happened and there was a very steep strengthening.  Likewise the 50dma and 200dma have recently converged and the slope of the declining curve is particularly steep.  The trend is changing.

CURRENCY CONTROLS

Currency controls, or foreign exchange controls, are imposed by governments on the purchase, sale, convertibility, or use of foreign currencies.  They are gross interferences with the unalienable human right to freedom of contract.

Most people think that currency controls are only implemented in ruthless socialistic, communistic or fascist countries like Russia under Stalin or Lenin, Germany under Hitler, Zimbabwe under Mugabe or other oppressive regimes like China, Argentina, etc.  Viewing explosive history through the lens of monetary policy reveals a common thread.  Dictators attempted to abrogate monetary rights and the people either killed them or were killed.

Harvard Professor Niall Ferguson wrote on page 149 of The Ascent Of Money about the French Revolution which seared the gruesome visage of the guillotine into the hearts and minds of French politicians.

Not surprisingly, some people began to anticipate a depreciation of the banknotes, and began to revert to payment in gold and silver.  Ever the absolutist, Law’s initial response was to resort to compulsion.  Banknotes were made legal tender.  The export of gold and silver was banned as was the production and sale of gold and silver objects.  By the arrêt of 27 February 1720, it became illegal for a private citizen to possess more than 500 livres of metal coin.  The authorities were empowered to enforce this measure by searching people’s houses.  Voltaire called this ‘the most unjust edict ever rendered’ and ‘the final limit of a tyrannical absurdity’.

Money and currency are essential and unalienable human rights.  The use of force or intimidation against innocent people is immoral.

With the pot calling the kettle black Vladimir Putin said, “The only problem:  your [U.S.] results were poor [Georgia] and this will always be the case because the work you do is unfair and immoral.  In the long run immoral policies always lose.”  Following the example of so many other failed nation-states as the FRN$ has evaporated additional currency controls have been put in place be unfair and immoral politicians.

PAST DOLLAR CURRENCY CONTROLS

One of America’s greatest tyrants, Franklin Delano Roosevelt, exacerbated the rapidly shrinking United States share price.  He greatly infringed on the Great Writ of Habeas Corpus, implemented Executive Order 6102, passed New Deal legislation, threatened to pack the Supreme Court if they did not vote his way resulting in a ‘Constitutional revolution’ and implemented extremely restrictive SEC rules.

At least Roosevelt was not as tyrannical as Abraham Lincoln who, among plenty of other nefarious things, issued an arrest warrant for United States Supreme Court Chief Justice Roger B. Taney when the Court checked Lincoln’s abuse of Habeas Corpus.

Then on 15 August 1971 Richard Nixon, who said he was not a crook, unilaterally declared international bankruptcy for the United States by refusing to honor the promise of gold convertibility.  Now the federal government has no intelligible answer to ‘What Is A Dollar?’ and yet strut around in their costumes robbing people if  they do not like how their unintelligible definition is applied.

CURRENT DOLLAR CURRENCY CONTROLS

Many currency controls trammel the FRN$.  For example, there are ‘qualified intermediary’ rules the Infernal Revenue Service require foreign banks to follow.  The PATRIOT Act allows for ‘sneak and peak’ warrants along with the ability to confiscate cash at will and in secret.

A particularly insidious but scarcely mentioned currency control was implemented by the United States Mint on 14 December 2006 which provided:

The United States Mint has implemented regulations to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins, to safeguard against a potential shortage of these coins in circulation. … Prevailing prices of copper, nickel and zinc have caused the production costs of pennies and nickels to significantly exceed their respective face values.

“We are taking this action because the Nation needs its coinage for commerce,” said Director Ed Moy. “We don’t want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer. Replacing these coins would be an enormous cost to taxpayers.”

Specifically, the new regulations prohibit, with certain exceptions, the melting or treatment of all one-cent and 5-cent coins. The regulations also prohibit the unlicensed exportation of these coins, except that travelers may take up to $5 in these coins out of the country, and individuals may ship up to $100 in these coins out of the country in any one shipment for legitimate coinage and numismatic purposes. In all essential respects, these regulations are patterned after the Department of the Treasury’s regulations prohibiting the exportation, melting, or treatment of silver coins between 1967 and 1969, and the regulations prohibiting the exportation, melting, or treatment of one-cent coins between 1974 and 1978.

The new regulations authorize a fine of not more than $10,000, or imprisonment of not more than five years, or both, against a person who knowingly violates the regulations. In addition, by law, any coins exported, melted, or treated in violation of the regulation shall be forfeited to the United States Government.

 

Notice the underlying assumptions Mr. Moy makes evidenced by ‘the Nation needs’ and ‘see our pennies and nickels’.  Who owns the penny or nickel in your change jar?  Are one-hundred nickels five dollars?  Are one-hundred pennies a dollar?  What Is A Dollar?

If you own the penny or nickel then why would you be prevented from doing whatever you want with your property so long as you do not violate another person’s rights or harm their legitimately acquired property?

Often I receive questions about the ultimate form of currency control: gold confiscation which I think is highly unlikely.

INFLATION AND SHORTAGES

Inflation leads to shortages and shortages lead to rationing.  The adjusted monetary base has spiked tremendously since October 2008.  Many prancing court economists seem to think that this activity is not inflationary because asset prices have not risen.  They are wrong.

Inflation is an increase in the money or currency supply.  Rising prices are an effect that generally results from inflation.  Rising prices are not inflation anymore than wet streets are rain.

The United States Treasury Bubble is the biggest bubble of them all and there are reasons for how and why the Treasury bubble will burst.  Should the effects of this out of control inflation begin to be felt then it will be real things of intrinsic value and not paper tickets that will be of the most worth.

During these relatively calm times it is important to learn how to buy gold or silver and why to avoid the problematic GLD or SLV ETFs.  There will likely be shortages, delivery delays and other potentially chaotic conditions.

Many of the complex systems society takes for granted, like the just-in-time inventory systems of our supermarkets, may become difficult or impossible to operate.  Due to rapid advances in supply chain management the margin for error is getting increasingly thin.

The marketplace and creative entrepreneurs will likely devise alternative services and digital commodity currencies, like GoldMoney, to fulfill market demand for a medium of exchange but they may take a while to be adopted in commerce.

In Zimbabwe the people are trading gold for bread at a price of about one tenth of a gram of gold per loaf.  I think it would be wise to set aside at least three months of food and get a 72 hour kit.  Food storage is a great form of insurance that is not subject to counter-party risk.  Store what you eat and eat what you store.  Chicken Little may also like to have a plan for how to vanish.

CONCLUSION

Money and currency are unalienable humans rights.  Infringements on these rights are immoral and always fail.  As the FRN$ continues evaporating the mendacity of the United States government appears unbounded as decade after decade it keeps implementing increasingly oppressive currency controls and uses greater savagery to perpetuate its influence.

There is not enough real capital, private liquidity, to sponge up all the bonds the incontinent government is selling; 10-20x per month more than a few years ago.  Interest rates need to rise higher for Treasuries to become attractive because of the budget and trade deficits which act like an millstone on the income statement and balance sheet of a devalued nation.

At all times and in all circumstances gold and silver remain money.  They constitute insurance against currency crisis.  And it is the world reserve currency, the FRN$, that is in a currency crisis.  Gold and silver, being safer and more liquid, are immune to the black hole above them which constitutes The Great Credit Contraction.

Click here for a full-size easy to read version of the Liquidity Pyramid

Disclosure:  Long physical gold and silver.

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20 comments

ABOUT THE AUTHOR: Trace Mayer, J.D., author of The Great Credit Contraction holds a degree in Accounting, a law degree and studies the Austrian school of economics. He works as an entrepreneur, investor, journalist and monetary scientist. Follow him on Twitter. This is merely one article of 241 by .
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{ 13 comments… read them below or add one }

1 Bruce June 9, 2009 at 7:05 pm

The whole purpose of a paper based monetary system is to draw private title rights into the public realm. Once drawn in they can be administered by the issuing bank through the various political governments. In short, the purpose is to consolidate power into the hands of the bankers.

Property traded under contract in paper instruments gives the party who issues the paper a presumptive title interest in the property. There may also be an expressed title interest through a mortgage deed.

The purpose of public accounting is to keep track of the equitable interests that the fiduciary title holders of property have in the sovereign’s absolute title to the property. Thus, in the United States now we have fee simple titles to land which has been mortgaged because all the land held under mortgage is held in fee simple, the Bank being holder of the feud. Unencumbered land is held allodially.

Under United States Notes, the (corporate) United States was the holder of the feud. Federal and Feudal are interchangeable terms. Under Federal Reserve Notes, the Federal Reserve is the holder of the feud (the sovereign in other words).

Since the United States no longer issues its own notes, but does so through the Federal Reserve, the Federal Reserve is the actual issuer, and is therefore the master, or dog wagging the United States as its tail.

That’s why congress was compelled to grant the Fed the bailout money. Congress is held hostage as a mere servant to the Federal Reserve.

Despite the fact that this arrangement was made covertly and is highly fraudulent, on its face it is very legal, and thus enforceable in court, particularly courts whose judges are bought and paid for in script.

Gold and silver would not serve the purpose of being an international exchange medium which allows the banks to control and hold hostage the various countries at will. Gold and silver would promote actual free trade, and in the process free the enslaved people, particularly those who don’t even know they are enslaved.

Gold and silver used as money provides that title to the property which is exchanged for it passes with the transaction because an exchange in substance occurs and actual payment is made. Thus, Gold and silver used as money works to privatize property formerly held by a fiduciary in the public trust, and thus it reduces the quantity of property that is administered by the banks through the various political governments.

2 Bruce June 9, 2009 at 7:42 pm

The other half of the equation is that banks use script to purchase gold from ignorant people who exchange their gold for an equitable interest in a joint commercial venture.

Banks then artificially depress the market price of gold by selling it into the market if the price rises. They debase the currency (equitable interests / common shares in the joint venture) by issuing new shares to water down the previously issued shares. This increases the number values of the assets held in the joint venture by ignorant investors. The increase in price hides the fact that the actual value is declining relative to the total value of property held by the joint venture. It hides the fact that new shares are purchasing more private assets, drawing them into the public realm or into the private hands of the privileged. (re- public — to make public).

They then depress the value of public assets of any particular country or political subdivision by using derivatives to move the wealth off shore (See CAFR1.com Comprehensive Annual Financial Reports of all government entities.) which contracts the money supply and cause price deflation.

In the process, they purchase public assets at fire sale prices and re privatize them, thereby obtaining absolute title.

The NEW WORLD ORDER is a bunch of guys who understand banking and law, who use a system of due process to obtain private title to the world’s assets in an attempt to obtain private title to it all. Where there is no public interest (in title), the government has no say. The NWO doesn’t want to allow anyone to have any say in their plans. That’s why they are private.

They did it in Argentina in the 90s (privatizing public assets and purchasing them for pennies on the dollar), and they are doing it here in the USA right now.

Ok, they don’t think anything of killing people either. If they own all the assets, why should they use their assets to feed useless eaters? You know, the ones, those people that they don’t need to run things for them.

3 Peter June 10, 2009 at 9:40 am

“If you own the penny or nickel then why would you be prevented from doing whatever you want with your property so long as you do not violate another person’s rights or harm their legitimately acquired property?”

Although I agree with many things Trace says, this one is dead wrong. Because you do hurt all others by melting coins… they have to be made again at higher cost. Currency is a common good, so, common interest dictates that laws should prevent the melting of coins, at least in a fiat money system.

4 Jason June 10, 2009 at 8:31 pm

The U.S. makes $50, one troy ounce gold coins. Are the owners of these coins also restricted from melting their coins as well? Its value may have increased as well as gold prices rise.
When someone melts a fiat coin they are essentially converting the fiat-based coin into a commodity-based coin. They do this when the commodity value (metal) is higher than the fiat value (government decree). This sheds light on one of the major problems with fiat currency – the value the government assigns to the currency is arbitrary. Metal coins can be worth more than their face value and paper dollars can be worth less than their face value. In a commodity-based system, an ounce of gold/silver/nickel/copper is always an ounce.
These laws are enacted to protect the fiat monetary system, not the people. The government could just make the fiat coins out of a less valuable material – just like they started doing in 1965 with silver coins. The real problem for fiat currency when people start melting coins is that people start talking about intrinsic values (value of the metal in the coin) instead of fiat values.

5 Robert June 13, 2009 at 8:35 pm

Small denomination coins, like pennies, nickels, dimes and quarters, are very useful in economic transactions. They allow for a more accurate price determination which leads to more efficiency in transactions and less price inflation due to excessive rounding of prices. Because of this principal advantage, the federal government continues to mint pennies and nickels despite the fact that the cost of minting these coins is higher than the monetary value of these coins. For instance, it costs more than 2 pennies to produce one penny.

The melting of pennies on a large scale would indeed be counterproductive as this activity would rob the economy of small change which in the long term would decrease the efficiency of economic transactions. So the law against melting of US coins does have a rational explanation.

As a matter of habit, I always pick a penny whenever I see one on the street. The benefit of exercising my back by bending down is most likely more valuable in the long run than the penny in copper value which I pick doing so.

6 Robert June 13, 2009 at 8:51 pm

One more important point. When we receive coins or currency as the result of an economic transaction, it is a fallacy to think that these coins and bills are our personal property. That is not the case. We have the right to hold this money and to exchange it against other goods and services. The money is strictly speaking government property which we can hold temporarily. However, in no point in time do we have the right to own that money. For that reason the destruction of that money (the melting of coins for instance) is an illegal activity. The money flows through the economy and facilitates economic transactions. Nobody really owns that money.

The story is even more complicated than that. When exchanging money for food, that food becomes our property and we can eat it or throw it away. Nobody (except for god) does care. However, if the object purchased is large (like a house, a factory or a big truck), then the rights of the purchaser are limited. For instance when buying a house, we become subject to local taxes (which already indicates that our property rights are limited) and building codes and ordinances. We may not even plant the plants in our backyard which we want. Public law regulates the plants which we can plant legally. All of this indicates that the notion of property rights is not as simple as many think. Definitely, we do not own the currency in our wallet. That is government property on loan in our possession.

7 Dave Larson June 14, 2009 at 6:54 pm

Regarding, “Money and currency are unalienable humans rights”. I have a question regarding the pronunciation of ‘un-alien-able’ or whether it may be more appropriate as ‘un-a-lien-able’. Wondering whether the former pronunciation is favored, in order to avoid the discussion and clarification of a Right “upon which no lien may be placed”. The other pronunciation refers to a Right ‘from which one may not be alienated’. This sounds so familiar because of the common, widespread usage of alienated.. ..like one may be alienated from the love of a sibling or other relative. ..Perhaps this has been addressed in an earlier posting that I might have missed. Thank you

8 Trace Mayer, J.D. June 15, 2009 at 8:56 pm

Dave,

In this case I am intending to define unalienable human rights as fundamental rights which are rights which people can simultaneously claim without forcing anyone else to serve their needs.

For example, everyone can exercise their right to life without forcing anyone to serve their needs. But on the other hand everyone cannot exercise a right to food without forcing another to serve their needs by taking another’s food.

9 John Corbit June 19, 2009 at 3:59 am

You had an article discussing the wisdom of reporting goldmoney holdings on the IRS foreign accounts reporting form f90221 recently. I have been unable to find that page again. Your direction to that article and any others on the same topic would be greatly appreciated. You suggested submitting this form for each year of one’s relationship with goldmoney.com, which I did, after calling the IRS phone number in the directions for the form. I spoke to a very intelligent, patient gentleman, who advised me to file the forms for all back years. I have done that, but I must say that now the government knows the location of that stash of gold, which reduces the attractiveness of goldmoney, which I have held since 2006. I moved a recently added sum OUT of GM as a tiny capital gains loss. The rest I haven’t made up my mind about, but the enterprise is tarnished by this, especially since customer support not James Turk himself provided no suggestion that the form should be filed. In my opinion, if US taxpayers, and there are a lot of us who own GM, are liable to the penalties of up to $250,000 and 10 years in prison for each year the form has not been filed, then this should be billboarded on the web page of GM. It is a rather nasty surprise lurking there unannounced!

10 Trace Mayer, J.D. June 19, 2009 at 5:56 am

Hi John

Here is where I mentioned the FBAR recently.

I also included a part of it on the GoldMoney page.

Because there are over 200 countries all with unique and rapidly
changing laws therefore I do not think it is GoldMoney’s duty to
apprise customers on the applicable laws in each of those countries.
That would be unmanageable both logistically and economically and
customers can easily and much more efficiently hire legal counsel for
competent advice in their respective country.

I do agree that filing requirements reduce the attractiveness of using
GoldMoney and other offshore banking solutions but that is the fault
of American politicians and neither GoldMoney nor other offshore
banking situations. Like Hitler who demanded Swiss bank account
information from Jews who he then executed; the American politicians
have deliberately and intentionally attempted to make offshore banking
solutions difficult for their citizens and threatened death for those
who resist. Like Hitler and being the first major country to do so
since WWII the US has also implemented exit taxes. But if the FBAR
burden is too high then there is a simple solution: expatriate and
renounce United States citizenship.

There may be another less drastic solution for vaulting physical gold
(which does not need to be reported on the FBAR): http://dassafe.com/

11 John Corbit June 19, 2009 at 6:23 am

Thanks for the helpful reply to my post and putting the situation of GoldMoney in perspective with having clients of many nationalities and the impossibility of keeping up with all the various laws involved.

On the suggestion of expatriation, the has it’ s own problems as spelled out in the following link:

http://www.withersworldwide.com/news-publications/324/exit-tax-u-s-expatriates-to-become-law.aspx

Exit Tax for U.S. Expatriates to Become Law
28 May 2008
New rules will impose tax on expatriates and withholding requirements on trustees

The horror here, if I read the article correctly, is that a US citizen can not effectively expatriate now. He will be taxed at the border on any and all wealth held worldwide at the time of exit.

I happen to be a dual US/Canadian citizen, and I have lived in both countries for extended periods, but this law would impoverish the expatriate.

Also I read that, whereas the US has a tax treaty with many nations on just this point to avoid double taxation, now one will pay US taxes no matter where they live.

You are the lawyer. I would love to be proven wrong on either of these points.

12 Susan May 28, 2010 at 10:14 am

Thank you for speaking truth to power. Many of us today have been conditioned to be politically correct. Its time we call these things what they are. Political correctness is censorship. Open borders is ethnic and cultural cleansing and a forced balkanization. Left/right, democrat/republican paradigm are a tool for the Masters on the Potomac to maintain their Machiavellian positions and power over us… I could go on and on…

I agree with your assessment of Lincoln. Lincoln was a totalitarian dictator. His administration nationalized the nation’s money supply after a 70 year political battle. The Legal Tender Act 1862 empowered the secretary of the Treasury to issue paper money that was not immediately redeemable in gold or silver.
The National Currency Acts of 1863 & 1864 created a system of nationally chartered banks. This created a federal monetary monopoly for the first time in American history. So if there was to be counterfeiting, the U.S. government was determined to have a monopoly in it! The nationalization of the money supply helped tranform America from a constitutional republic to an empire. In the American republic, law is supreme. In the American Empire, the President is Law! Sounds like the presidents of modern times, imperialistic, and a purposely created fantasy.

13 Matt T December 9, 2010 at 6:55 pm

Hey Dave, I’m just a simple construction worker that has had an argument with his co-workers. I say currency is government property, they say the currency in their pocket is their money. Now I know this might be a dumb thing to argue about, but I need some backing from a higher up person than myself, or if I’m wrong I’ll back down and admit it. Thanks.

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