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The Confiscation Zombie
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(October 12, 2009) Talk of gold confiscation is the imaginary monster that frightens otherwise rational adults, and refuses to die. Dire predictions abound that the Feddle Gummint will, inevitably, some day, come to seize John and Jane Q Public’s pile of the shiny stuff. Why we think it's baloney.
Fear is a great motivator, and fear of gold confiscation in the United States of America has motivated many a misguided investment decision. In the great echo chamber of the Internet, confiscation always makes for a good story even in the absence of facts.

And since it is so rare to find any rational commentary about the subject, we were delighted when one of our friends directed us to Jesse’s Café Americain, a blogspot we had never encountered before. There we found this October 9th 2009 post which touches on what happened in 1933. Furthermore, it pretty much sums up our skepticism about the gold confiscation scare:

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The question of confiscation reappears every time gold rallies, from those with enough history to be able to throw out a few facts and sound plausible, but not enough grounding in history and the law to actually place them in any sort of reasonable context. Below is a 'reprise' of a blog entry we posted early this year on the topic.

The Feds acted on gold because at the time it WAS the currency of the country, and the government had some proper claims on it. When the US left the gold standard it relinquished all such claims, as gold became purely private property. Except perhaps if you are holding gold American eagles, which bear the patina of 'currency.'

It should also be noted that the sole action of the government was to ask for the gold, to withdraw convertibility of gold notes from the domestic public, and to monitor the activity of safe deposit boxes taking certain categories of gold, and essentially nothing else. There were no investigations, searches, or even active prosecutions for non-compliance.

The purpose of the confiscation was to prepare the way for a formal devaluation of the dollar while it was still on the gold standard.

Could the government try to confiscate the gold from private citizens again? Certainly. Although unless it is part of a return to the gold standard with adequate recompense, it would be little more than the theft of private property.

The government can also ask you to place an RFID chip in your head before you can buy anything or drive a car, ask for your children and place them in youth camps, bind you over to your creditors in indentured servitude, ask you to house homeland security troops in your home with no payment, and request your presence on a freight train for relocation to New Mexico.

There is a wide difference between what *could* be done, what is likely to be done, and what people might consider to be unreasonable enough to resist.

Talk of confiscation invariably occurs when gold rallies because it is a way for those who rode the rally to climb the wall of worry and those who missed the rally to feel better about their lost opportunity.

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Fears about gold confiscation would not take root without paranoia and historical ignorance, as cited by Jesse above. But you have to wonder exactly how these rumors get started. After all, the monetary recall of gold was 76 years ago, and not very relevant today. So why do people investigating gold today hear so much about it?

“Follow the Money” is often a useful approach. To trace these confiscation rumors, the first question is, Who exactly would profit if potential gold investors avoided the purchase of gold bullion?

If some people can be scared out of buying gold bullion, what else could they buy that would be round, made out of gold, and not bullion?

Could it be something like the old numismatic gold coins, the very ones that were recalled in 1933? Perish the thought, but are there numismatic salespeople out there who would exploit the ‘confiscation’ issue in order to sell collector coins to people who are not coin collectors?

Can it be true that some potential bullion investors are being prodded to take up an expensive hobby, out of the greed of the seller, and the fear and ignorance of the buyer?

Rather than end another sentence with a question mark, let me just say – yes it is.

The confiscation bogeyman is a great part of the sale tool-kit employed by those smooth-talking sharpies that you reach when, curious about gold, you dial an 800 number that you saw in a newspaper or magazine.

They will poo-poo the idea of buying gold bullion as if it were the worst thing you could do. Not only will they allege that gold bullion will probably be confiscated someday, but they will also tell you that its purchase is ‘reported’ to some state agency, that it is ‘registered’ in a big book somewhere, and that it would put your 'financial privacy,' (whatever that is), at risk.

All sales-talk malarkey, of course, and the shame of it is that these lies have scared thousands of investors out of a timeless monetary asset, one which increased in price some 320% during the most recent Republican administration, and is already up some 23% since Mr. Obama's inauguration.

So the next time you hear about gold ‘confiscation,’ remember that you are either hearing it from someone who is just a little confused, or just about to pick your pocket.

-Richard Smith, October 12, 2009

 

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