You may be familiar with the story of how the US government confiscated gold bullion and then made owning it illegal back in 1933.
Actually this event is more accurately termed a nationalization. Americans were forced under harsh penalties to sell their gold at an artificially low “official price.” If it were an outright confiscation, the government would have just taken the gold without giving anything in return. But no matter how you label it, the end result was the same: the theft of purchasing power.
Many have speculated that the US government could once again turn to gold confiscation/nationalization if it became desperate enough. These fears are not unfounded given the abysmal financial situation of the US government that only continues to get worse, coupled with a total lack of political will to cut spending.
But would the US government really turn to a 1933-style grab again?
I would argue that they wouldn’t, but that doesn’t mean the threat to your gold has diminished. Quite the opposite.
More Likely Than Outright Confiscation
Today only a tiny fraction of the overall US population owns gold. That wasn’t the case back in 1933 when the US was still on a variation of the gold standard.
Heck, I’d bet most Americans today have never even seen a gold coin, much less appreciate its value.
This is why I think it’s unlikely we’ll see a repeat of the 1933 ripoff. It’s simply not worth the effort. If the government is looking to confiscate wealth, they’ll likely go for the low-hanging fruit… like financial accounts, which can be plundered with a few mouse clicks. Or they’ll continue to ramp up the inflationary money printing, which is a way to confiscate from savers.
But that doesn’t mean gold owners are in the clear.
Instead there will be a new scam. And that scam is likely to be a windfall profits tax on gold.
A windfall profits tax on gold would be much easier for the government to administer than what they did in 1933. And thanks to the system of citizenship-based taxation, a windfall profits tax on gold could be levied on Americans no matter where in the world they live.
There’s precedence for this, too. In 1980 the Congress passed the Crude Oil Windfall Profit Tax Act, which taxed up to 70% of what they deemed to be “windfall profits” of domestic oil producers.
If gold were to explode to the upside (another way of saying the dollar crashes), we shouldn’t be surprised to see a bill like the Fair Share Gold Windfall Profit Tax Act get passed, which would levy a 80%, 90%, or higher tax on gold.
Fortunately, there are some practical steps you can take to protect yourself from a windfall profits tax on gold, which I believe is the most likely form of future confiscation.
Keep Your Hands Off of My Gold!
One way you can avoid a windfall profits tax on gold is to become a resident of Puerto Rico. You could also preemptively divorce the US government by renouncing your citizenship.
But these are drastic measures and out of reach of most people.
There’s a far easier solution that can be done from your living room and without having to turn in your US passport. It’s to own gold in a Roth IRA, preferably offshore gold.
A Roth IRA is like a tax-free zone. It’s funded with after-tax savings, and any future capital gains or income derived from investments in a Roth IRA are not taxable—if you wait until the age of retirement to withdraw.
While we can never know 100% for sure what the US government will do, it would be unlikely that gold placed in the tax-free zone of a Roth IRA would be affected by a future tax increase. That is, of course, unless the politicians start monkeying with the IRA rules. But that would produce a lot of screaming from tens of millions of people, most of whom are voters. If I were a politician, I would stay away from IRAs.
This is not to say that the US government doesn’t have its eyes on the juicy target of retirement accounts. As we’ve seen with the myRA scam, they most certainly do.
However, if and when an executive order is issued to convert a portion of your retirement savings into unwanted Treasury securities, it will likely apply only to the most susceptible retirement assets—those being accounts with the large, traditional IRA custodians. These assets are soft targets for the government. They could be frozen, confiscated, or nationalized at the flip of a switch.
Physical gold held offshore in a Roth IRA would represent a significantly more complex challenge for them to confiscate. It probably wouldn’t be worth their effort either, as only a very tiny percentage of Americans hold their retirement assets in physical gold overseas. It makes much more sense that they’d go for the sitting ducks at the large custodians.
In short, a Roth IRA with gold held offshore is the most practical way to protect yourself from the most likely forms of future confiscation—a windfall profits tax on gold and a forced conversion of retirement savings to Treasuries. It’s the ultimate retirement insurance policy and makes you a hard target.
It used to be very time consuming and difficult to own gold offshore in an IRA. For a lot of people, it simply wasn’t worth the effort.
Fortunately, that’s no longer the case—this solution is within reach of almost anyone.
All it takes is about 10 minutes to get set up, and it can all be done online without having to leave your living room. Find out how you can diversify physical gold in your IRA with offshore storage in our Going Global publication.
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