Gold confiscation- could it become a reality?

J

Johnnny

Frontiersman
Jun 8, 2007
9,388
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Third rock from the Sun
There is increasing worry that The U.S. and other governments may confiscate citizens' gold holdings and use them to help mitigate the Global Financial Crisis. Julian Phillips discusses
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Mineweb.com - The world's premier mining and mining investment website Gold confiscation- could it become a reality? - POLITICAL ECONOMY | Mineweb

Many of the leading fund managers in the U.S. and elsewhere are expecting that governments will confiscate their citizen's gold. This will not be for the same reasons used in 1933. It will be to facilitate loans, swaps lower interest rates, and shore up international confidence in the turbulent, stressed paper-currency world in which we live. Each nation issues paper as money, dependent on the trust that nation can engender at home and abroad. But is this going to be sufficient, moving into an ever more turbulent 2012?
TRADITIONAL USE OF GOLD IN RESERVES
When gold was deemed money in the world under the Gold Standard, money was issued against the stock of gold a nation had -this formed the basis of the money supply. In 1933 as the Depression wreaked damage to the U.S. economy, the government needed to expand the supply of money to the economy, dramatically. The first step was to confiscate their citizens' gold at a price of $20 per ounce. Two years later in 1935, the U.S. government devalued the dollar by 75% to $35 an ounce. This expanded the U.S. money supply by far more than 75% because of the additional gold in government vaults.
As U.S. influence spread abroad after the war, the need for a vast increase in global money supply and, in particular, the number of dollars outside of the U.S. (then limited to the amount of gold in U.S. coffers) the restraint on money supply was unbearable on the U.S., so it eliminated gold from its active role in the money system and replaced it with the USD, tied as it was to the oil price.
Thereafter, gold was relegated to the vaults as an important but passive, reserve asset. Now, we're led to believe that central bankers feel that the amount of gold they should carry is either 3-months' worth of international trade, or between 10 and 15% of total foreign exchange reserves -as though this is all it would take to resolve a crisis. Such formulae test credibility to the limit.
USES OF GOLD IN RECENT YEARS IN THE MONETARY SYSTEM
But in 2011, the use of gold to fund a Eurozone bail-out was raised. In a draft of the European Commission study on joint Eurobonds is the suggestion that gold could be used as collateral for them. It did not receive more than token recognition; the issue, however, was at least addressed in theory. Its use was not related to the expansion of the money supply -the suggestion did not imply any mobility as money at all. A new role for gold in official uses was starting to get recognition.
In 2010, gold was used by the Bank of International Settlements in currency swaps, giving little-to-no information as to the identity of the clients. Over 500 tonnes of gold were used in the currency/gold swaps. These did not relate to practical money raising, but to gold being used as collateral to facilitate cheaper and larger loans to the banks to provide liquidity where it was drying up. The stories came that gold was being used by commercial banks -who don't hold gold on their balance sheets-but the only place they could get gold from was from central banks. So was it a dire need by commercial banks for liquidity or was it an attempt by central banks to cap the gold price? We might never know...
But in 2011 these swaps were reversed, and the gold left the B.I.S. in the second half of the year [2011] gold lease rates dropped heavily into negative territory, telling us that central banks were lending gold again to banks at incredibly cheap rates -this coincided with the fall in the gold price from over $1,900 to current levels.
file:///C:/Users/Lawwill/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gifIrrespective of the reasons why, the most important feature of these actions was that gold came into use in the interbank monetary system yet again. And this happened at a time when European central banks had ceased selling their gold and the rest of the world began to steadily increase their central bank holdings.
Despite its passive role the U.S., Eurozone central banks hold nearly 20,000 tonnes of gold -worth nearly a trillion dollars; however and much to politician's angst, this gold is not available to fund government borrowing; it would contravenes the Maastricht treaty which founded the Eurozone. Gold remains far too important to use in such financing. It will only be used if the very national structure of its money is in danger or in support of making a nation's monetary system function internationally. But bullion could and is being used as collateral.
For prospective investors (no doubt including emerging market governments, sovereign wealth funds, and the like) the appeal comes from the likely hedge that gold would provide against an immediate default. If a country such as Italy were to default, most believe the price of gold (in Euros and in the USD) would skyrocket...
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taxslave

taxslave

Hall of Fame Member
Nov 25, 2008
36,362
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Vancouver Island
Only those of you foolish enough to buy certificates instead of having the metal delivered to your door. Like anything else that is registered eventually some government agent will come to steal it or tax it.
 
55Mercury

55Mercury

rigid member
May 31, 2007
4,272
988
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I don't think it will be. If they confiscate gold that would be the quickest way to devalue it. Who will want it if you can't own it?
 
damngrumpy

damngrumpy

Executive Branch Member
Mar 16, 2005
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kelowna bc
Who will want it? When the sh*t hits the fan the only thing worth having is gold, jewels and
pearls as it were. In the short term it becomes devalued but long term its desirable. I take
you back to the last days of Vietnam, when it ended the refugees had gold bars hidden in
their back yards and it was their ticket to freedom.
Besides when depression is on the doorstep governments are there to protect themselves
and the banks not the citizens and they will impose whatever measures they have to to
protect their own gold mine.
Most people don't understand, we are close to a depression and options are being discussed
at every level. New Years Eve saw the German and French Presidents saying the economic
situation in Europe is going to be worse in 2012, and in America things are improving but I
think they have a long way to go to be healthy. Canada, what a surprise we have coming.
The government of the day postponed the down turn but they did not prevent it and we are
going to feel a lot of pain before this year is over. Make no mistake, the governments are not
going to swoop in over night and take the gold and silver, however if the down turn hit the
no return point they will regardless of what happens to value, its not about value, its about
national survival and anything goes when that issue raises it ugly head
 
ironsides

ironsides

Executive Branch Member
Feb 13, 2009
8,583
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Those who have been buying and trading actual physical gold are the smart ones. The only things we will need for the future is gold (precious metals and minerals) and guns. All tradable items if and when the economy crashes.
 
petros

petros

The Central Scrutinizer
Nov 21, 2008
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Low Earth Orbit
ironsides

ironsides

Executive Branch Member
Feb 13, 2009
8,583
60
48
United States
Dirty water is just that dirty water. Having the means to pay/trade for the ability to clean water will solve your problem, gold and precious metals, tradable items will be important, unfortunately those who haven't planned for that eventuality will be stuck with beer. (Hmm I like beer :) )

 
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