Should You Worry About Gold Confiscation?

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Are you worried about the government coming in and outlawing private gold possession again? After all, it wouldn’t be the first time they had done so — the same was done by the FDR government, back in the Great Depression. As the global economy gets worse, and as private capital flows to alternative currencies such as gold and silver, there are rational reasons to believe that the government may try to pull the same move, again.

FOFOA, however, has some arguments on why gold confiscation may be less of a worry this time around:

There is a purpose for highly valued gold in Freegold. It has everything to do with the savers (net-producers) in the economy, and little to do with mining companies. Miners will become tools for the state, much like the printing press is a tool today. Only the gold already in the hands of savers will be revalued to the benefit of private parties. Gold in the ground will be viewed much like oil in the ground in 1980. As it comes out of the ground most of the substantial difference between production cost and price will be captured by the hungry collective. But before we talk about windfall taxes on gold savings, there’s something you really need to understand.

The Gold Must Flow

The bottom line is that private gold needs to flow as a fertile member of the balance of trade. There will be no advantage for the USG to confiscate or tax above-ground gold this time. Gold may be utterly “useless” to the present debt-based economy, but it will be absolutely vital in the Freegold economy. (Here’s a comment I wrote last April about the importance of privately held gold.) This seems incomprehensible when viewed from within the current paradigm which is why you must try to put yourself in the next one to see what I’m talking about. I can try to help you see what I see. It’s not easy to explain, but I’ll certainly give it a valiant effort once again.

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Now we can talk about windfall taxes and confiscation (related topics). Hopefully you were able to absorb the above concepts. The human Superorganism is revaluing gold vis-à-vis not currency, but everything else, for a purpose: the gold must flow. Again, the Superorganism is revaluing gold in real, not nominal, terms. (It is also devaluing the US dollar in real terms, but that’s a separate subject for a vastly different post.) And going into Freegold, physical will start out in the strongest of hands, meaning people like you and me who know what it’s worth in international terms and Giants who don’t need to sell during suboptimal conditions.

But before I get into taxation, I’d like to discharge the confiscation meme once and for all. Physical confiscation only makes sense if you are going to confiscate the gold and then, and only then, nominally revalue it yourself hoping that your currency is strong enough that a nominal revaluation actually delivers you a real windfall (see: 1934). But as I said earlier, the human Superorganism is revaluing gold this time, not FDR or the USG. So taxation is the only option. That said, I would not leave my gold where it, or my capital gain, could easily be automatically absorbed during a short-lived government misstep, which is why I recommend personal possession or at least the closest thing to it.

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Let’s ignore hyperinflation for now and talk in constant dollars. Gold now has the purchasing power of $55,000 in 2012 constant dollars. Your gain per ounce is roughly $53,500 and the government wants 90% of that money, or $48,150 leaving you with only $6,850 worth of purchasing power for every coin you choose to sell. Meanwhile, those strong hands in other Freegold countries have $55,000 in purchasing power for each coin they choose to sell.

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So if the gold in private hands in the US doesn’t flow in sufficient amounts, given that US debt has been discredited through the Freegold phase transition, the government will have no choice but to continue printing money in its vain attempt to support the US trade deficit and its own status quo as Uncle Sugar to the people. And in a last-ditch effort to support its own failing currency, it will have to ship Fort Knox gold overseas. FOA mentioned something about this: “…the US will find itself shipping ever higher priced gold to defend an ever lower valuation of dollar exchange rates.”

In this scenario, the need to continue printing in the face of an ongoing currency collapse will obliterate any miniscule gain that comes from the few shrimps who actually decide to sell their gold in an untimely way and pay the tax. The US has precious little gold in private hands as it is. And it will need that private gold to flow. It needs you to sell your gold to your dealer so your dealer can export it to our trading partners. That’s how trade flows will resume under the new paradigm, with savers choosing to let their gold flow because of the amazing purchasing power it delivers.

And with international trade flowing again, the government will have much more economic activity to tax than it did when it tried to tax real capital in its purest form based on the silly notion that the hungry collective deserves a windfall nine times greater than the gold investors who kept gold inside the zone through a turbulent transition. The bottom line here is that I do not know if the USG will try to tax the windfall profit that comes from Freegold. What I do know is that, if they do, it won’t last very long.

I greatly enjoy reading FOFOA’s thoughts on gold, and would recommend you head over and read more.

So what if the government does end up confiscating gold? Well, it might be easy for them to confiscate shares of GLD or SLV, or the gold pool at your local dealer, but it will be a little bit harder for them to confiscate physical. Here are several ways that you can protect your hard-earned wealth from the greedy collective:

• Keep it in the backyard, or hidden in places around your home that are obvious to you, but hard for others to guess. Because there are advanced X-ray scanners and things like that, you ideally want to keep it somewhere that would be harder to detect, like near a pipe or other metal source. It’s not likely that federal agents are going to actually scan your home for gold, and if you are that high on their radar you might be screwed, anyways, but these precautions will also protect you against home robbers and sophisticated criminals.
• Keep some offshore, in a safe place. Is GoldMoney safe against confiscation? I don’t know, but it should be a bit safer than a paper certificate. Since it is visible, it is less safe than something in your backyard, but on the other hand, it is insured against private theft and loss. It is worth considering as part of your diversification strategy.
• Keep some as a sacrificial lamb. It might be worth having a bit to give up to the government or private thieves, to protect your family savings and heritage.

I don’t know if the government will resort to confiscation, but if we are to have a vibrant and sound free market monetary order, it may be in the government’s best interests to let the gold flow, and tax a healthy economy, rather than scare everything underground.

What are your thoughts? Do you fear gold confiscation? Private robbers and thieves may be a more real threat, and defending against them a more practical concern.