Gold confiscation

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21

I agree with everything Chris wrote, but might have said it differently:

Many people cite the 1933 seizure of privately held gold as possible precedent for another similar event. The problem here lies in understanding what really happeend in 1933.

The action that Roosevelt took in 1933 was to substantially de-value the U.S. Dollar, not to seize privately held gold for the sake of the gold itself. Because the country was on the gold standard at the time, the mechanism necessary to de-value the dollar included seizing all the privately held gold, because otherwise the people with gold would have experienced a windfall (no devaluation of their gold) in comparison to other citizens whose non-gold monetary assets were de-valued.

In other words, seizing the gold was never the objective, but rather it was a necessary step toward achieving a different objective: currency de-valuation. Because we are now on a fiat money system, seizure of gold would not be a necessary step if the government again wanted to de-value the currency, which is an extreme tactic for fighting deflation.

I would argue that if you’re thinking about that 1933 event as precedent, the question on your mind should be, Will it come to pass that our government is eventually forced to markedly de-value the U.S. dollar intentionally, in order to combat a deflationary collapse of the economy? That’s a darned good question, and one that I believe bears careful consideration. But I don’t think that seizure of gold will be part of the process if this happens again, because it’s no longer necessary in order to achieve an equitable de-valuation across the board.

Erik

 

22

Kemonotsavvy,

The recurring boom and job destroying bust was created by fractional reserve banking practiced by private banks, then later centrally coordinated with the arrival of the Federal Reserve system in 1913. Not the gold standard.

 

Here is a question that we should be trying to answer:

How can the US economy create jobs without adding to the national debt, taxes, and inflation?

 

I also didn’t read any mention about the status of the gold FDR confiscated that is still being held at Fort Knox, built for the purpose. Melt into gold bars and stamped " Property Of The U.S. Government" I assume.

 

 

 

23

Good question Mike, and solid answer Chris (and Erik).

It is apparent that the preferred current route which the Gov would take, to pay the notional value of it’s current and promised debt, is an inflationary one - i.e., one where the $USD debt-currency is "devalued".

In 1933, the "fixing" of the FRN ($USD) against gold, by using a gold standard, actually allowed Roosevelt to enact a scheme of confiscation, and thereby achieve the desired "devaluation" of that period in "one fell swoop".

So even though the Gov at that time, had a continuous design for inflation (devaluation) through money-supply and interest rate manipulation, the gold standard, and consequently, gold confiscation, allowed for a large "step-wise" (mathematically discrete) devaluation, at an instant in time (actually over a weekend).

But what discrete-step (i.e., confiscation of a "standard") can the Government do under the current fiat-currency regime?

A step-wise "devaluation" would require that the fiat-currency $USD instantaneously change relative to it’s purchasing value - i.e., what you can trade it for. By precendent reference to 1933, this would occur through the confiscation of the specie "standard". That used to be gold, but not now, so now what?.

How does a Government "devalue" a fiat-currency for which there is no explicit "standard"? What does the concept of "devaluation" mean in a fiat-currency context?

a) Does it get devalued relative to how it trades against other currencies, and thereby admit that the US Government is relatively bankrupt to other sovereigns? or,

b) Does it get devalued relative to how it trades against hard commodities, and thereby admit that the $USD is just "paper"? , or

c) Does it get devalued relative to precious metals, and thereby admit that gold and silver are indeed, the "real money" in the world?

Wouldn’t any of the above require admission from the Government, that there really is a requirement for an explicitly defined (or de facto) "standard" basis of value for the generation of currency?

I would question that there exists even a single fiat-currency advocate (and likely recipient of it’s fraudulent gifts) that would pursue any of a) through c) above. Wars have been fought for less.

Instead, under the guise of "benefiting society", some "acceptable" approach to achieving the necessary "devaluation", in a relatively short time-frame, might be necessary, such as;

d) destruction of the $USD in a very short time-frame (months or weeks?), or perhaps;

e) a "currency replacement program", whereby a "new" currency replaces the $USD, allowing the $USD a fairly rapid death (this would be a "confiscation" of foreign wealth…).

I would like to hear others’ opinions.

It would seem that the current fiat-currency world regime has made it somewhat difficult to perform a "discrete-step" devaluation, through confiscation of some explicit "standard", and, as a result, are limited to some "continuous" (albiet over a relative "short-term") devaluation.

Or, perhaps;

f) through the "confiscation" of real estate (as is occuring at present…) the Government will "repeg" entitlement benefits to the value of housing in the US, and make housing a de facto "standard".

In summary, while no governments are throwing their gold away, it would be a giant blow to the current fiat-currency world regime, to "admit" to gold and precious metals as being, once again (as was in the US Constitution), the only "real money", as would be apparent in their confiscation.

 

 

 

24

Thanks everyone for the great discussion here. I am Mike, the originator of the question.

I think the responses of Chris and Erik are particularly insightful in the A) gold represents a relatively small portion of the wealth of our nation, and B) attacking gold is not really necessary, at least right now.

As I ponder this issues, I also ask myself the question of the ability of the government to enforce a confiscation and the willingness of the sheople to comply. Although I don’t have the degrees that Chris does, I consider myself to have an academic mindset and the evidence presented by Chris and many others is overwhelming. If we accept the fact that "this is IT," then for me there is no question that gold will financially be one of the soundest investments. Pragmatically, I think we are in such a precarious political and resource situation now that I think something like a confiscation could actually be the impetus for a sort of rebellion.

Many people I speak with tell me that confiscation would not be possible "because we have the internet now." I agree somewhat. The free-est speech you can find is on the internet. Likewise, the internet is one of the most critical forms of infrastructure in the event of a widespread non-compliance. I think that a necessary precursor to effective confiscation would be additional regulation or censorship of the internet that would help to fracture the unity of the bloggers.

I actually can foresee additional attacks on free speech from an increasingly desparate government and I think that the attacks on free speech will come before attacks on gold. Also, bear in mind that attacks on "free speech" are often not direct assaults on the first Amendment. Today, they take the form of bogus government statistics, an entertainment focused media, and a near-fascist cooperation between the government and certain private sectors (defense contractors, the media, etc.).
In short, I think that good information and understanding is potentially more "dangerous" to the government than gold itself. My hunch is that we will see larger and larger distortions of reality before we see a direct attack on gold. Our government is less honest than it was in the '30s, but it is also smarter. It rarely attacks head on anymore but rather uses more subversive strategies to achieve its goals.

Mike

25

Mike, I personally think that your assesment is as good as Bodos!

26

GDon,

I’m intrigued by:

"f) through the "confiscation" of real estate (as is occuring at
present…) the Government will "repeg" entitlement benefits to the
value of housing in the US, and make housing a de facto "standard"."

Can you further explain your theory?

27

Chris,

With all the talk of gold and (a lesser amount about) gold confiscation, your post is timely. All the talk had put the questions in my mind: Is that even a practical possibility? and How would that work? The only answers I could come up with, and for the main reason you cite (the SIZE of the problem), were a resounding No! and No way no how!

I turned to your site hoping someone would be addressing the issue, and wow! There it is: a post on gold confiscation(Thanks Mike).

I was immediately reminded of that great movie, Broadcast News; specifically, the scene where James Brooks is home on the couch attempting to drown his self-pity with a bottle of Jack? and he calls in to the station where his arch rival, played by William Hurt, is doing a live broadcast. Brooks is talking to Holly Hunter, who is producing the live broadcast, and he makes recommendations as to what Hurt should be saying; thus, Voila! Brooks says it over the phone, Hunter relates it, Hurt says it live to the nation.

Brooks then falls back in the couch–as I remember it–ever more sullen, and says "I say it here and it comes out there (with that eloquent and precise voice that renders you a button on our "favorites" menu)…"

All that by way of saying: I think you’ve got your finger on the pulse; it may be a pulse that you’ve had a finger in creating (You touch it; it comes to life)…

Next time I’m pondering something, I’ll look to your site to clarify my thought processes.

NZO

P.S. Chris mentions $5K to $10K as a minimum threshold value (Gold kills dollars). My thinking is that, if one, then all, meaning that the only way I see a gold standard being reinstated would be for all fiat currencies (for obvious reasons) to be replaced or backed by gold equivalents; that begs the question, What is the value of ALL currency?, and the observation, Imagine the coordination mechanics of that!

P.P.S. Stream of consciousness begins here…I think… (<- this statement inserted after the ramble…)

Those thoughts leave me wondering about the "We have to return to a gold standard" pundits; I think we’re more likely to return to barter than to a gold standard–which is another way of saying: I think the gold bugs have the color wrong: There will be blood–everywhere! Gold just ain’t practical…

Given what wars have been fought for throughout history, I have to think that the leaders of nations who continue to buy U.S. bonds are the bureaucratic equivalent of "Generals with Temporary Heads ©" (I hereby copyright that expression, as it just came to me and Google says it’s never been said); every leader of every nation outside the U.S. should be considering the present situation with the teachings of Sun Tzu (The Art of War) in mind ("Every war is won before it is fought," etc."), as the results of this particular assault on the world’s wealth by the U.S. makes previous wars (and the spoils sought) petty by comparison (Consider America’s Own Private billion screaming chinese indentured servants et al); perhaps those leaders are…perhaps they have been for some time…

All great accomplishments–and killing of oppressive tyrants–require tactics, strategy, and time.

Were I the leader of one of the countries known more for wisdom than for greed–given the adolescent behavior of the American Association to Rape the Planet (AARP)–I would be slightly less than forgiving.

Having lived in Asian countries for a decade, I think we (Paulson and Bernanke and their posse of Idiot Idiots (as opposed to idiot savants, which would leave us in awe for a reason turned 180 degrees)), are, shall I say, "complacent" in our (their) view that intelligent, education-respecting beings, who work a factor of 10 times harder than do we, are going to just continue to bend over, smile, and say "Oh baby! Ram me with that big red, white and blue *%!~ of yours one more time Uncle Sammy!"

We may be in for a shock; it may not be far in the future; it may be tomorrow–which will turn out to be yesterday last year?..

 

Final P.P.S. It seems obvious to me, given that almost every real product is proportional to and can be equated to the energy resources required to create it (simplified, but more reasonable than alternative IMO), the "backed" currency that should have been created from the very beginning (and I think this parallels and objectively quantifies Chris’ thought on money being a claim on labor), is one based on BTU’s or its twin brothers (of course this implies a thorough life-cycle analysis of "things"–and exposes The Wall Street Mafioso for the energy-consuming Black Hole that it is).

 

 

 

28

I generally agree with all that Chris has said. Gold can no longer serve the role of money in the global economy. Look for a new form of "electronic" money, in which a near majority of industrial nations participate in. The US will likely lead the move before the dollar entirely collaspes.

 

29

I don’t want to be too much of a Malthusian, but I personally think that the "global economy" is going to be forced to switch gears very quickly. As population soars and resources decline, the gap between supply and demand will open up very quickly. I’ve done extensive research into conventional and alternative energy technologies and I personally see absolutely no evidence for alternatives even coming close to replacing fossil fuels at the rate they are likely to be declining.

I think people will find the greatest prosperity in smaller, more localized communities. As much as the politicians pander about "global solutions" we have to realize that many countries (most prominently the USA) are put at a greater risk precisely because of their dependence on other countries. If we truly had energy independence in America, we would be a lot less involved in foreign wars (which waste a bunch of resources anyway).
The hard and fast truth of it is that while we perhaps need the entire globe to deal with these issues at the same time, the best solutions are likely to emerge at the local level. Trade will, of course, continue but we are more likely to be trading strategic resources rather than iPods, cars, and computers. If we don’t end up fighting more wars over oil, I see trade being largely focused on things like oil, coal, uranium, copper, and the like. Food might play into this somewhat, but importing oil to grow crops here just to export them or convert them to ethanol to burn again strikes me as terribly wasteful.
The politicians seem to see no end in sight to the increasing linkages caused by globalization. But I remain a skeptic. I believe the global economy will gradually unwind to a large extent as we become more and more focused on basic needs and less and less focused on consumerism. These changes will be imposed by fundamental limitations, not simply by an act of policy.

30

Yes, this is the Orwellian nightmare that we are silently sliding into.

There is a way out - we can choose now to bend the Matrix by transitioning to healthy sustainable farming and to purchase the same at a grassroots level.

We are battling to protect our net worth by choosing gold. However, isn’t farmland farmed sustainably inherently more valuable? Especially in a future where fossil fueled agriculture is no longer economical?

Hmmm…

Thanks Redshift…Sounds pretty good to me.

All the best,

James

31

Excellent post Mike.

This emphasizes for me the importance of making Chris’ message as widely communicated/understood as soon as possible. It isn’t necessary for everyone to understand the message - what is necessary is a broad grassroots movement that can lead others in the steps of the Framework for Action. We must work together but there is more obligation on those of us that have had the benefit of earlier awareness of the issues and more time to take action.

Are we taking action?

All the best,

James

32

Another excellent post Mike.

Have you read Deep Economy:The Wealth of Communities and the Durable Future by Bill McKibben? The author provides an illustration of the local level solutions.

By the way, we can’t continue to farm by growing crops using fossil fuels - we’ll run out of soil (estimates I’ve seen range from 42 to 84 years assuming current mainstream agricultural practices are continued). This makes me think of Jared Diamond’s book Collapse where he wonders what was going through the minds of the Easter Islanders when they cut down the last tree so that they could move their stone monuments…and were left without the means of building new boats for fishing or escaping from the island. Some of the Easter Islanders did survive but there was terrible violence…

Fortunately we can reverse course and rebuild soil - the Grow Biointensive method claims that using their cold compost method and holistic gardening practices an inch of topsoil can be created in eight years - which would take nature 500 to 2000 years to produce. This method is very labor intensive so it is a solution in the developing world - the developed world has more resources with fewer people so sustainable farming will be suitable.

Never before have our problems been so great…or our solutions so available.

All the best,

James

33

James, and others: If you haven’t already seen the "Power of Community: How Cuba Survived Peak Oil" I highly recommend it. It shows the changes the Cubans were forced to make when the USSR collapsed and they lost the bulk of their oil imports. It is a priceless case study, and can give us many clues as to what we will need to do.

See here

Enjoy!