Congressmen Discuss Gold Confiscation

Editor's Note: There’s been quite a spirited debate over the last while about whether the US and other Western governments could eventually force their citizens to give up their gold holdings at a set price as FDR did back in 1933.

Even if you believe this is unlikely to happen in your home country, it’s still best to be prepared for the worst case scenario by diversifying your finances as best as possible.

For now though, hopefully this fictitious discussion between two congressmen will shed some insight into how a bureaucrat’s thinking process might proceed.

Will the US government confiscate the gold held by its citizenry at some point, as they did in 1933? Will other countries, particularly the EU countries, follow suit? This subject is a particularly thorny one. There are strong arguments both pro and con. Most of us - even those who have followed the issue for years - are inclined to say that it’s too soon to tell.

Most of the arguments, both pro and con, are ones we have heard from businessmen. And of course they offer businesslike reasoning for their opinions. The trouble is, politicians do not think like businessmen. My dealings with politicians of numerous countries over many years have revealed that they are a breed apart from those of us in the business world. Both their perspective and their priorities are decidedly different. It’s something that seems to be fairly universal regardless of what part of the world they come from, namely:

Politicians the world over are driven more by the preservation and

increase of their own power than any other interest. As a major byproduct

of this drive, they distrust both independent thinking and economic power

in the electorate and seek to limit both as much as they can.

Most of us recognize these traits in our politicians, but it took me years of working with them to understand just how indelible these traits are and to what degree they drive our legislators.

In attempting to look into the crystal ball and see if we can guess what politicians will do regarding confiscation of gold, it may be a useful exercise to imagine a conversation on the topic from the (U.S.) politician’s point of view rather than from our own.

Senator Rep: Well, I’m glad we got that budget discussion over with.

Senator Dem: I don’t really see the point. If we want more money, we just create a new tax. …Now, I know you’re going to say that those Tea Baggers are giving you guys hell about taxes, but you know the drill. We both want to raise taxes, say, 4%, so our party says we say we need 8%, your party says no new taxes, we hem and haw and we settle at 4%. Then you and me each get the tax level that we’re after and our voters are happy that each one of us got a compromise out of the other.

Senator Rep: Look, I’m not complaining. It’s a screwed up system, but we’ve made it work for us congressmen for generations. Trouble is, this time we’re pretty deep in the hole and we’re going to have to find some new ways to extract money from the taxpayers. It’s gonna take more than we can squeeze them for anytime soon.

Senator Dem: Well, some of the others have been talking about this gold thing. Confiscate all the gold like FDR did in ’33.

Senator Rep: I’ve heard that going around, but I don’t completely get it.

Senator Dem: Look, let’s face it. If we need more money, all we have to do is print it. The real reason we tax is to sheer the sheep. We can’t afford to let them get too wooly or we lose our control of them. We have to keep them dependant on us or we lose our power base. Now, this gold thing is becoming a problem. More and more people are getting rid of dollars and buying gold. We can’t let that happen.

Senator Rep: Well that’s a point. But we can’t just take it. What did FDR do?

Senator Dem: He announced the Emergency banking Act that made it illegal to own gold.He gave people less than a month to turn in all their gold other than jewelry to the banks. They were paid the going rate - $20.67 an ounce. Then he revalued gold at $35.00 an ounce, devaluing the currency by 69% overnight.

Senator Rep: That’s fantastic! That devaluation alone could solve our international debt problem. The Fed’s method is taking years…. Hang on, though, people are already angry at us. If we pull a stunt like that, they’ll go through the roof.

Senator Dem: Nah. The guys who are holding gold will go nuts, but we can handle them. They’re only a small percentage of the population. We just have to use the old “greedy rich” spin. We get the newsmen to say, “An increasing number of wealthy Americans have become involved in hoarding gold, which has done visible damage to the economy, particularly the middle class, making it impossible for the government to pull us out of the recession. As President Roosevelt did in 1933 when wealthy businessmen did this, Congress has passed legislation to cease this destructive practice.” Then we go on TV and act indignant. We say, “If we had not stepped in quickly, I hate to think what would have happened to the average family that’s already having trouble making ends meet.”

Senator Rep: You’re right. That would work. And the few whose gold we take would be afraid to speak up, for fear of being tagged as the greedy rich. It wouldn’t matter if some of them just had a few coins – they’d be tarred with the same brush… But hang on, there’s talk of some kind of gold mania, in which the majority of Americans start buying gold, if only an ounce or two. This idea won’t work for us if the majority of Americans oppose it.

Senator Dem: Hmmm. That’s true. What that means is that we’d want to head off the mania. Confiscate now, before everybody and his dog has bought gold.

Senator Rep: Maybe we can do better than that.We’d want to scoop up as much as we can. After all, we’d rather be holding gold than the Fed’s worthless paper. So, here’s what we do. We pick a point at which the bigger buyers are already in. They do all the work for us by buying up gold wherever they can. We don’t wait for gold to hit $5000 because then the mania’s already underway. We pick a point to confiscate – say, $2000. We write up the legislation now, get the speech writers to get our sound bites ready and, when gold hits $2000, we move. Do you think the others in Congress will go for it?

Senator Dem: Are you kidding?

Senator Rep: Okay, stupid question. Do you think we should work with the EU on this – you know, get them to do the same thing so that we tie up all the gold in the free world in one go?

Senator Dem: I hadn’t thought of that. I’ll have to weigh the pros and cons. Anyway, we agree on confiscation?

Senator Rep: We’d be stupid not to.

Editor's Note: It’s an interesting hypothetical situation that may or may not happen. What do you think? Is gold confiscation on the horizon for the US? What about other countries? We'd love to hear what you have to say.

If you want to read more about Jeff’s comments on gold confiscation, you’ll likely enjoy his article, The Greatest Threat to Gold Ownership.

Tags: gold, confiscation,