Echoing the views of other well known precious metals analysts like the late Howard Katz, Jason Hommel, and Jerry Western, economist Alasdair Macleod says that while the possibility exists, confiscatory gold policies similar to those enacted by Franklin Roosevelt during the great depression are improbable because of the way gold is used today and the sheer complexity of taking such an action in today’s globally driven gold marketplace:
…the situation today is very different from that of 78 years ago. At that time, gold was the primary currency, the dollar being tied to it at $20.67 per ounce. But today, the Fed and European central banks strongly deny that gold has any monetary role at all, and argue instead that it’s just a hangover from the past: “that barbarous relic” as Keynes called it. Its confiscation would be an embarrassing admission that gold, after all, is money.
Nevertheless, as paper currencies continue to lose credibility, the temptation for any government to seize its citizens’ gold to enhance official holdings must be growing. Americans today, however, are unlikely to meekly accept confiscation the way they did under Roosevelt. And nowadays, you may be American, but your gold is not necessarily held at an American bank: it is just as likely to be in London, Zurich or Hong Kong.
The wording of a compulsory order is all-important. Confiscation requires the gold itself to be surrendered, which presumably would be the objective if a government is to add to official holdings. If gold ownership is merely banned, it is a different matter. A bullion bank holding gold in an unallocated account would almost certainly be unable to deliver physical gold if required to do so by the American government, but it would be able to close out the account for cash. And there is the thorny question of derivatives, which hardly existed in the 1930s. All futures and options trading would cease, and contracts for forward delivery would be cancelled, possibly with serious financial consequences.
The international nature of gold would probably require all G10 or even G20 members to agree to similar actions against their own citizens. It seems unlikely that all governments would agree to this, unless they all had their backs hard against the wall.
Mr. Macleod suggests that even if gold were to come under attack, silver is held in greater volumes and by more people, making it a less likely candidate for confiscatory actions.
Howard Katz, well respected for his economic analysis, made a similar argument for why the government coming after your gold is not a very likely scenario:
Quite frankly, it is unlikely that a modern government would do the same thing for the simple reason that they do not need to. We are already off the gold standard. Remember that paper money is theft. There is always a group (the paper aristocracy) who wants to steal wealth from the people by arranging things so that they are the beneficiaries of the printing of money. Now the paper money system is well established and firmly in place. There is no need for measures which will alarm the general public. At the present time, it is only the gold bugs who realize the evil of paper money and who are acting to protect themselves. But we gold bugs are only a small minority. (Notice that the one time that both prices and pro-gold sentiment were increasing sharply, 1979, the establishment turned off the money spigot and suffered through a period of tight money and credit (1979-81) in order to prevent the gold bugs from becoming more popular.)
So you do not need to worry about the Government stealing your gold. They don’t need to. They already steal the wealth of the naive (anti-gold) majority. This majority believes their lie that the Government is robbing from the rich to give to them. They keep getting poorer and poorer, and they can’t figure out why. And they keep re-electing the politicians who victimize them.
Jason Hommel of Silver Stock Report responded to earlier rumors that confiscation of gold would take place when the precious metals touches $2000 in a February 28, 2011 article, providing a similar take to Mr. Macleod’s, especially with regard to talk of silver confiscation:
If the USA confiscated silver, they would only get about 1% of the people’s silver anyway, or less than $200 million, that’s how much was voluntarily turned in during the last confiscation.
The US government can’t confiscate silver! Why not? Because the people are not using silver as units of account in their bank accounts!
Confiscation makes no sense today.
Source: Silver Stock Report
Likewise, Jerry Western, author of Got Gold? Get Gold!, doesn’t subscribe to the idea that a specific directive will be enacted to confiscate physical holdings of precious metals:
So, will it happen again? I’d have to say overtly, probably not. Never say never, but I believe that covertly it has already begun.
…there’s the matter of gold and silver Exchange Traded Funds. Many of these funds, including the largest, are thought by many informed individuals, not to hold the metal they are purported to. At some point, if they don’t have the metal, they will default on their obligations to shareholders. Those shareholders who thought they owned gold will not…They will have had their gold taken from them. Confiscated.
The final implementation of confiscation will probably be in the form of confiscatory taxes. If taxes rise to 90% on any profit I must report, then it will be discouraging and not worth the effort to hold the metal.
Given how our government has behaved thus far, it is much less likely that gold will be confiscated in physical form, and much more likely that “confiscation” will be covert, as has been suggested.
Of course, as Mr. Macleod pointed out, it is possible (though a low probability event), especially if most of the G10 / G20 nations have their backs to the wall and the monetary system of the world starts falling apart. If such an event were to play out, we have no doubt that the value of gold would be astronomical compared to today’s prices and purchasing power – thus even in the worst case, you’d be sitting on extremely valuable assets.
For those concerned with the unlikely possibility of confiscatory action by government we continue to recommend, as we have done previously, that you obtain a shovel – and dig deep. Confiscation is a purely speculative proposition at this time, and we strongly believe that gold and silver remain some of the best investment assets in today’s uncertain world.