THE RIGHT TO OWN GOLD

THE RIGHT TO OWN GOLD
Are We About To Lose It ... Again?

Dr. Franz Pick, the noted currency expert and author of The Triumph Of Gold, feared confiscation. He said: "I am afraid that one day the government will indeed call gold in. Gold bullion will be subject to confiscation. "

"Today there are some 49 countries which forbid ownership of gold by their citizens, but do allow holding gold coins for numismatic purposes. Even the Soviet Union and Eastern countries legally tolerate the acquisition of numismatic gold coins. For these are the only gold holdings that could be kept in your safe deposit box without any fear of confiscation."

This is one big advantage to numismatic gold, such as the Double Eagles. It's an idiosyncrasy of governments that although they may prohibit ownership of gold in any form, they are reluctant to touch collections of numismatic gold coins.

TRADING WITH THE ENEMY ACT of 1917 Still in Force

In 1917 the Trading With The Enemy Act was passed. This legislation is still in place. It's article 5(b) states:

* That the President may investigate, regulate or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange for the export, hoarding, melting, or earmarking of gold or silver coins or bullion or currency.

* With this awesome power, the President of the United States may do what he pleases with our money or with gold if he deems our monetary system to be in jeopardy.

* Section 5(b) was used by Roosevelt in 1933 to confiscate gold. President Carter used it to freeze Iranian assets during the hostage crisis. Will the President also use it when we take our money out of the banks and rush to buy gold or wire money off - shore? Don't bet against it.

Historically, governments have banned the ownership of gold prior to their citizens refusing to use that which they call money. Why should it be different here? It's already happened before. All that is required (because of the Trading With The Enemy Act of 1917) is for any President to issue a decree.

Read THE RIGHT TO OWN GOLD - 32 pages packed with the sound advice on how to protect your assets with privately held U.S. gold and silver coins.


What's so special about gold anyway? While a complete response to this question would encompase volumes of books, there is one thing I can tell you for certain - gold is the asset you want to hold in a crisis. After all, gold is real money. This fact was never more dramatically demonstrated than in Asia. Those who owned gold in Indonesia or Malaysia saw the price of gold explode when their local currencies collapsed.

If there is a major financial downturn or an oil shock, gold will be one of the best investments you can own. Gold has intrinsic value that no other investment can offer. It cannot be created out of thin air by bankers or politicians and is expensive to find. Tons of rock must be crushed to produce just a single ounce of the metal.

Gold maintains its purchasing power. The US dollar, the world's premier "hard" currency, has lost 95% of its purchasing power over the last century and will never recover that loss. If you were to price things with real money (or "constant" dollars, adjusted for inflation) over the long term, a high quality man's suit, or 300 loaves of bread, or 47 ounces of silver would have an average cost of about one ounce of gold. In 1900, an ounce of gold bought 300 loaves of bread. Several years ago, it would still buy 300 loaves, while today, an ounce is roughly equivalent to 225 loaves.

On the other hand, the dollar that bought 14.5 loaves of bread in 1900 buys only 3/4 of a loaf today. Five years from now, a dollar may buy only one slice!

Gold is money, not a commodity. For commodities to have value, they must be used and consumed. Thus, the value of a commodity responds to the fundamentals of supply and demand. If any commodity were to have an available inventory that even approached 100 years of annuallized production, that commodity would be worthless. As gold is highly valued and has an inventory base equal to 100 years of annuallized production, it is money.

Among the many attributes that single it out as a near perfect form of money is the fact that unlike all irredeemable currencies, gold has a long and successful history of being a store of value, a measure of value and a medium of exchange. It is acceptable, homogeneous, divisible, incapable of being counterfeited, durable, stable in value (over time), and portable. These qualities make up the definition of money, and over time nothing but gold has met the definition of money.

If gold is money, then its supply is a positive, not a negative. With four billion ounces in its "float," gold is man's most abundant single homogeneous tangible product. People have an interest in having gold, if not to spend, then to save. When an owner of gold decides to use it to purchase something, that act does not increase gold's supply. The same is true when someone decides to sell something for gold; that act does not reduce gold's supply. This is true even if the exchange involves gold for currency.

There are numerous reports that try to predict gold's value based on supply and demand. These studies are of questionable value. It is impossible to determine its value by trying to measure its ebb and flow as if its movement were supply and demand. Gold has a mountain of supply and a limitless demand, both of which enter the market from a large variety sources.

Nonetheless, gold's supply is rather small. Items traded for gold are usually in much greater abundance than gold itself. This is especially true of irredeemable currencies whose supply is literally limitless and continues to grow. Therefore, one should not worry about the supply of gold - worry about irredeemable currencies.
Click for a chart.

The best way to view gold is (1) as real money and (2) as insurance. However, it is not an investment; an investment provides a return. Gold is insurance against the blunders and the corruption of politicians. Since the beginning of recorded history, politicians have destroyed every currency ever created, and in due time they will destroy what's left of the dollar too (which is what they have been doing since the 1940s). The chart 1 (above) shows the purchasing power of gold and currencies from 1913 to 1998.

Gold and Inflation

The American Institute for Economic Research (Great Barrington, MA 01230) published a report in March, 1998 titled "Stand Still, Little Lambs, To Be Shorn." This article presents the best overview of inflation in America that I have come across and I recommend that you subscribe to their fine monthly newsletter. In the following article, they discuss the "hidden tax" attributable to a depreciating dollar, and the inevitable result of inflating the nation's purchasing medium or money supply. Since this process is enacted without the consent of the people it might be more appropriate to call it "embezzlement." Here is the case they present:

Forms of Embezzlement

"The funds belonging to the nation's 'forgotten citizens' that are being embezzled by the dollar's loss of purchasing power are held principally in eight types of fixed-dollar investments:

  1. Savings and time deposits in the nation's commercial banks, mutual savings banks, savings and loan associations, and credit unions. In some years, the percentage depreciation of each dollar on deposit exceeds the interest earned during the year. Thus, the stated amount of the deposit may increase as interest is added, but even the deposit so enlarged will buy less than it would have at the beginning of the year.

  2. Investments in the reserves for insurance (mainly life insurance), private pensions, and annuities. The actual sum accumulated for insurance and annuity purposes is not the face amount of outstanding policies, but rather the reserves held by insurance companies for such policies.

  3. Trust funds held by various levels of government for old-age pensions, unemployment, disability and health insurance, railroad retirement funds, and veterans' life insurance.

  4. US Government debt securities. One specialist in depreciating currencies, Dr. Franz Pick, years ago coined the name 'certificates of guaranteed confiscation' for all government bonds issued without a gold clause guaranteeing repayment at maturity in dollars of the same gold weight and fineness.

  5. Debt securities of states and municipalities.

  6. Debt securities of corporations. These include US and foreign dollar-denominated bond issues and open market paper.

  7. Money market mutual fund shares.

  8. Currency and checking account balances."

What the Figures Show

"In the accompanying table (above) we show the amount saved each year in all eight principal types of fixed-dollar savings and investments held by millions of the nation's families. The first column shows the years; the second, the total of such savings and investments at the end of 1945 and the accumulation of each year thereafter (in then-current dollars) of savings accumulated that year that were 'embezzled' by inflation. To illustrate, of the savings (excluding accumulated interest) of 1950 totaling $71.39 billion in today's dollars, only $11.06 billion could be claimed. The $60.33 billion difference in purchasing power was 'embezzled' by inflation."
Click for a chart.

How Much 'Embezzled?'

"That such citizen-contributions to the 'success' of inflating a total of over 11 trillion dollars for the years shown in the table may surprise or confound some readers. To put the amounts claimed by inflating into understandable perspective, during the 10 years ending in December 1996, the loss to American savers from fixed-dollar investments was $3.6 trillion in 1997 dollars. Compare, for example, that amount to the $5.8 trillion in 1997 dollars that individuals paid in Federal income taxes during the same period. That is, the implicit tax from inflating during the past 10 years was roughly 60 percent of the total of explicit Federal personal income taxes paid.

"If this huge supplementary tax, this forced contribution, made the process of inflating successful in stimulating sound and sustainable economic growth at a faster rate than would otherwise be possible, the results might be worth the price. But there is no instance in the known history of the world when such was the outcome.

"In view of all the media and political bombast arguing the contrary these days, some readers may question whether the results are really as bad as the foregoing implies. After all, the prosperity of the postwar era of inflating has been real enough; most people actually do have more things to enjoy than they ever had before; the new cars and new homes are real. Mightn't we follow the lead of the politicians and the media commentators and sweep the loss of savers' buying power 'under the rug'? Might it not be worse?
Click for a chart.

"In some ways, the situation is worse. The amount of loss shown in the table is only part of the loss. Not only did America's 'forgotten citizens' lose that amount from their accumulated savings, they and others lost still more from their current incomes. All whose incomes increased less than did the cost of living still lost more, an amount difficult to ascertain but assuredly large. Those whose incomes were relatively fixed, those dependent on pensions, annuities, income from bonds, and on salaries or wages that were not increased as rapidly as the cost of living rose, all those many millions of individuals also were forced to contribute to the 'success' of prolonged inflating."

Is 'Inflation' Behind Us?

"Apparently, many people today believe that all of that is behind us now, that inflating has been curtailed, and that any 'embezzlement' of savings currently taking place is something that America's 'forgotten citizens' can live with.

"Anyone inclined to believe this view could benefit from a short course in human history: It is an inescapable fact that throughout known history, there has never, we repeat never, been a fiat currency that over an extended period of time has retained its purchasing power. All irredeemable currencies have in time become worthless, and (except for collectors' items or rarities) all paper currencies are today worth less than when they were first issued.

This chart shows the dismal record during this century of some major nations' experiences with paper currencies. (The experiences of most less-developed nations with paper currencies have been dramatically worse than those shown in the chart.) It should be noted that the currencies shown in the chart are plotted in terms of US purchasing power. For example, the upswings in some currencies' US purchasing power between 1985 and 1988 indicate a relative 'weakening of the US dollar against those currencies during that time rather than actual increases in purchasing power in the countries of issue. Moreover, the occasional short-term upturns cannot disguise the long-term erosion of purchasing power of each currency. The historical record is that the world's major paper currencies, in terms of what they will purchase today, are worth only from about 1/1000 to 1/4th of what they were worth in 1913. By contrast and despite short-term fluctuations, the purchasing power of gold is roughly the same as it was in 1913.

"To put the recent US inflationary experience in its proper historical perspective requires a closer look at the long-term US experience with a paper dollar. Chart 3 shows the purchasing power of the US dollar since 1792. The solid portions of the curve show periods when the dollar was redeemable into monetary commodities (gold or silver) and the broken portions are periods when redeemability into monetary commodities at fixed rates was impaired (1918, 1919, and 1933 to 1971) or suspended (1814 to 1817, 1837, 1838, 1862 to 1878, and 1971 to date).

"It is clear from the chart that the precipitous decline in the fiat dollar's purchasing power since 1933 (when the domestic gold standard was abandoned) has been interrupted briefly at several 'disinflationary' or deflationary junctures. These are indicated in the circled portions of the curve. But anyone who believed during those episodes that 'inflation' was permanently ended obviously was seriously mistaken. More recently, price inflation has averaged a relatively modest 2.6 percent annually for the past 6 years - a longer period than any of the earlier episodes of reduced price inflation. However, even this rate would halve the purchasing power of the dollar in 30 years. Alan Greenspan, the Chairman of the Federal Reserve Board, admits that price stability has not yet been achieved, and he recently said that many of the factors currently restraining price inflation 'are not necessarily long lasting.' In short, given the long-term history of the fiat dollar, it is premature to assert that 'inflation is dead' based on the favorable experience of the past few years.

"The question that should be asked of anyone who asserts that the dollar will retain its value is 'what have the authorities discovered that will enable them to manage fiat currency soundly'? Those who anticipate that price inflation will remain subdued are relying not only on the ability (unproven) of money managers to devise a successful discretionary monetary policy, but also on its consistent maintenance. As long as money managers are able to exercise 'discretion,' can they really be expected to withstand the pressures to inflate?

"Such pressures come from many sources, most obviously from debtors of all kinds who have misjudged the market. The many interests and groups that explicitly or secretly want more inflating include not only debtors and their bankers, but also producers who wish to increase or maintain the nominal value of their output. What they all have in common is a desire to evade market discipline. By far the largest offender in this regard is the largest borrower, the Federal Government.

"Although the federal budget is expected to run a surplus this year for the first time in a quarter century, the long-term fiscal outlook remains highly uncertain. The deficit has disappeared largely due to the strong economy, which has helped raise tax receipts to a historically high share of Gross Domestic Product. But early in the next century the proportion of the population entitled to age-based benefits is projected to increase rapidly. While future economic conditions could be better than currently expected and could ease the expected financing problems, this demographic trend is projected to make the tax burden required to pay for these entitlements more onerous than it already is. If taxpayers are unwilling to bear this burden and the politicians are unwilling to reform entitlement programs, the government will have little alternative but to borrow the needed funds. Large deficits would increase the pressure on monetary officials to inflate away the real value of the government's debt.

If one believes that price inflation will remain subdued, then one must also believe that the politicians will act responsibly to avoid the projected fiscal squeeze. To this point, they have shown little inclination to do so. Their counterparts in other countries confronted with similar scenarios for their bloated social programs also have failed to act. In short, to end the long-term erosion of the paper dollar's purchasing power would require a massive change in human political behavior as it has been observed throughout recorded history.

"Aside from fiscal pressures, officials at the Federal Reserve face other pressures to continue inflating. Political considerations have long entered into their decisions, and the Fed's policies are influenced by pressures to sustain business-cycle expansions, create jobs, avoid stock market crashes, assist financially troubled borrowers and lenders, and meet the exigencies of unexpected crises (such as turmoil in the financial markets, domestic and foreign). These goals are not always consistent with the objective of price stability, and there is no assurance that the Fed will make the latter its primary goal."

Where Are We Headed?

"Where will the trend of monetary inflating eventually lead? Are America's 'forgotten citizens' resigned to having their wealth taken from them? Are they blind to virtually the entire span of recorded human history and do they see only from one moment to the next? If so, they are but sheep to be shorn. And if you, the reader, act like a sheep by growing a new thick coat of 'wool' (long-term assets in fixed-dollar value) that can easily be shorn, in all probability you, too, eventually will be shorn like a lamb whether you like it or not.

"Only America's 'forgotten citizens' themselves can prevent this fate. Historically, the market solution to the problem of unreliable money has been a return to gold as the monetary unit. Politicians and their banker allies cannot create gold as they can bookkeeping paper-dollar entries. They thus cannot manipulate a monetary system based on gold as they can a fiat, paper-money system. Vigorous advocacy of a restoration of gold as the nation's monetary unit at the earliest practicable date would constitute, in our opinion, the only worthwhile evidence of an intent to stop inflating. Mere verbal assurances by politicians that the dollar will not continue to depreciate are not sufficient, and in our view can be translated thus: 'Stand still, little lamb, to be shorn!'"

Gold's Performance in a Deflation:
Rethinking the Golden Constant

For many of you, the concept that the dollar in your wallet is just "paper" without substance is a difficult concept to grasp. Most of the FIAT currencies of the world are issued by governments filled with corruption and bent on political interference. Few have a solid long-term track record, and few are tied to real income producing capital goods. Most are entrapped by excessive debt. Headlines lead one to believe that our economy is the best it's been in decades. The latest consumer confidence surveys show that the consumer hasn't been this happy in 30 years! If this is really so, then why did personal bankruptcy filings soar by 19.5% in 1997 to a record 1.34 million? In the last 18 years, there has been an increase of more than 400% in bankruptcies. How can we justify this data with the lowest unemployment figures in a decade? What's more, credit card delinquencies are rising too, reaching the highest levels in 15 years. And this is in an economic boom. What will happen when the markets sink and we enter a recession? Yes, our economy is growing and some are enjoying the prosperity, but the wealth is heavily weighted to the top 20% of the population who own over 90% of all stocks. The lower half of the population, relying, heavily on credit cards, is seeing their standard of living actually decline.

Why buy gold in a deflation

"Bullion Goes Bust As Nations Weigh Precious Metal's Role," was the headline in the December 10th, 1997 issue of USA Today. For the last two centuries, central banks hoarded gold as "money" and were aware of its role as a store of value. Among its many virtues, it was easy to store, did not rot or corrode, was desirable, and of reasonably limited availability. Unlike currencies and paper assets, gold carries no liability. It is a pure asset - not a promise to pay - as are currencies and bonds.

Why buy gold in a deflation? Professor Roy Jastram, in his book "The Golden Constant", argues that "the evidence drawn from the English experience for 400 years is clear. Four pronounced price deflations took place in the four centuries recorded, with the three most severe occurring since 1800. In all four price recessions, purchasing power in the form of gold appreciated handsomely. When one sees that just by holding gold for 13 years from 1920 to 1933 purchasing power would have increased two and one half times, one realizes that gold can be a valuable hedge in deflation."

“One day precious metals will be the most important asset to own...despite my convictions that gold and silver will go lower at the bottom, buy it anyway; five good reasons;
1) The projected economic outcome "could be different."
2) Prices will fall less than other assets
3) Gold has fallen for over two decades, due to rise.
4) Gold will soar after the depression.
5) You'll have it - perfect wealth insurance.”
-Robert Prechter, Conquer the Crash, June 2002.

The more severe the deflation, the greater the gains in the purchasing power of gold. During the early years of America's Industrial Revolution, 1873-96, prices fell by 45%. Gold's purchasing power increased by 82%. From 1920-23, prices declined by 69%, but gold's purchasing power rose by 251%.

During the 1990s, central banks reversed a centuries-old policy of holding on to their gold. They are now selling this valued asset in a move that seems motivated by a need to gain more control over their economies and peoples. These bankers claim that holding paper investments is better than holding gold because gold earns no interest. Since when are central banks in the profit-making business? Their obligation is to provide "sound money." As people continue to lose confidence in fiat paper currencies as a store of value, the price of gold will rise.

All one needs to do is look at what happened during the recent Asian currency turmoil. The price of gold rose dramatically in contrast to the local currencies.

In Thailand, Malaysia and the Philippines, gold is one of the few widely-held investments that has increased in value over the last two years (in spite of huge central bank gold sales).

Don't be fooled by gold's drop below $280 in 2001. Gold is an asset you want to hold in a crisis. If there is a major financial downturn, terroist attack or an oil shock, it will emerge as one of the best investments you can own. Its lackluster performance is due to foolish money chasing the stock market mania, but in any down period gold offers a great buying opportunity.

Worldwide demand for gold is increasing rapidly, while the supply is shrinking. Each year more and more people in Japan, Asia, the Far East and India have the extra purchasing power necessary to purchase gold. They are buying gold at a record pace. Centuries of experience have convinced them that owning gold is a prudent way to preserve wealth. They also know that gold is the world's foremost form of "quiet money," money that can easily be hidden from prying eyes.

The global economy is sinking into a powerful deflation. There are excesses in manufacturing capacity and real estate around the world. Past excessive debt creation in southeast Asia, including Japan, has led to massive debt default, and deepening deflation. The possibility that this deflation will be "exported" to the US and Europe remains a real possibility, and as Jastram pointed out, gold is an asset that performs very well in deflation.

Confused? Which will it be - inflation or deflation? Richard Maybury says: "My long term outlook is for a short period of global deflation followed by a long period of global inflation. As the values of paper currencies fall, the price of most 'stuff' will rise."

Notable Quotes

The Relationship Between Gold And Currency: Art Rolnick, chief economist for the Minneapolis Federal Reserve Bank, was recently asked what the nation's central bank produces. His answer: "We make money the old - fashioned way: We print it."

Jim Dines says: "Gold ownership transcends profit seeking, and should be viewed as 'fire insurance,' your hedge in the event of a currency upheaval."

Strategic Investment says: "Don't be fooled by gold's drop below $280. It was over $400 within the last five years, and it will be back there soon."

"Now, I'm not a gold bug, but I do know gold is the asset you want to hold in a crisis, and a crisis is in the cards. If there's a major financial downturn or an oil shock, gold will suddenly be one of the best investments you can possibly own. Gold is the one place the world has always turned to hold value."

"Stocks will fall. Interest rates will rise. And gold will rise too. Partly because of increased demand from Asia. And partly because gold has always risen in times of financial crisis. Gold is the ultimate, safe investment: the crown of the investment world."

"And make no mistake - a financial crisis is coming. Whether it's from recession, a blow-off of an overvalued market, a crisis in confidence in a corrupt government, or from a loss of confidence in the US dollar by foreign investors. And when it comes, the US dollar will begin to act like the Mexican peso. Investors all over the world - from central bankers to small shopkeepers - will flee dollars, and move into gold."

History shows that currencies generally lose their value within one's lifetime. According to Ludwig von Mises: "Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless."

Dr. Franz Pick said: "We are living in a period of horrible confiscation of people's assets through inflation. The dollar is being destroyed. It is now worth between two and four pennies of its 1940 value."

Former Fed banker and money expert John Exter said: "I get a kick out of people who talk about 'smart' money. Do you know what smart money is? Smart money is watching -- as I did -- Aristotle Onassis buy 100 tons of gold at $35 an ounce in 1970. That's smart money. His cost was $112.5 million. Today it would be worth $1.5 billion. Unfortunately, he heeded the advice of an economist at the Bank for International Settlements in Basel and sold it in 1973 for $125 an ounce. That wasn't smart money."

A wealthy Englishman once sought a private interview with Nathan Rothschild, head of the English branch of that family. He expressed his great happiness at having finally amassing a fortune worth one million pounds sterling. He wanted nothing more than to preserve it intact. "How," he said, "can I be sure to have exactly that much to the day I die?" Rothschild reached into his desk drawer, took out a small pistol, and told his caller, "There is only one way: Use this right now." He could have just as easily told him to buy gold.

Who Wants Gold Anyway?

Fifty feet below sea level sitting on the bedrock of Manhattan Island in the basement of the New York Federal Reserve Bank sits the largest single deposit of gold in the world. Lets take a tour with John Rothschild (no relation to Nathan - from his book A Fool And His Money): "A tour had formed in the lobby and I was allowed to join it. We were herded past security, taken down the elevators, and led through a thick vault door into what looked like a typical New York basement storage. There were laundry carts and luggage racks, plastic bins and metal lockers, except these carts, bins and lockers were filled with gold. In all, they contained 960,000 gold bars weighing a cumulative 12,000 tons. The guide said the gold was worth $120 billion at the 'official price' of $42 an ounce, but the official price was an artificial reference point that had nothing to do with the actual price. At the actual price, of $350 an ounce, the gold was worth $1.2 trillion. One quarter of all the gold stored in the free world was stacked like cordwood in these bins.

"Apparently, each separate bin belonged to one of 86 different countries that used the Fed as their safe-deposit box. Some moved their gold here during World War I, others during various uprisings and revolutions. The guide wouldn't tell us which bin belonged to which country.

"When one country owed money to another, they paid it back as follows: Three people unlocked the bin, an auditor slit the seal, and a number of bars equal to the amount of the debt was removed from the stack. Then the bars were weighed on a giant scale, lugged to the bin of the creditor nation and added to its stack. All locks were relocked, seals resealed, and the debt was paid.

"This method of settling accounts was very arduous, and the gold movers used dollies and pulley systems to aid their efforts. They also wore special shoes and slick overalls so tiny gold particles wouldn't stick to their clothing. Otherwise, they'd have made a small fortune panning for gold dust in their washing machine at home."

Gold Is the Ultimate Form of Wealth

Gold still is the ultimate store of wealth. It is the world's only true money. And there isn't much of it to go around. All of it ever mined would fit into a small building (a 56 foot cube). The annual world production would fit into a 14' cube, roughly the size of an ordinary living room. Imagine this - if each Chinese citizen were to buy just one ounce of gold it would take up the annual supply for the next 200 years. A tiny wedding band for every woman in China would take all the gold mined for the next 10 years. These days China has an insatiable demand for gold. Remember, gold is the only asset that is not simultaneously someone else's liability. Gold can never go bankrupt because it has no liabilities against it. In a world swamped with debt doesn't it make sense to hold on to gold?

The Gold Confiscation of 1933

In his first "official" act in office, President Franklin Delano Roosevelt declared a banking "holiday" and issued the order to confiscate gold:

Executive Order: By virtue of the authority vested in me by Section 5(B) of the Act of Oct. 6, 1917, as amended by section 2 of the Act of March 9, 1933 ..., in which Congress declared that a serious emergency exists, I as President, do declare that the national emergency still exists; that the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well - being of the United States; and that appropriate measures must be taken immediately to protect the interests of our people.

Therefore, pursuant to the above authority, I hereby proclaim that such gold and silver holdings are prohibited, and that all such coin, bullion or other possessions of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price, in the legal tender of the Government. All safe deposit boxes in banks or financial institutions have been sealed, pending action in the due course of the law. All sales or purchases or movements of such gold and silver within the borders of the United States and its territories and all foreign exchange transactions or movements of such metals across the border are hereby prohibited.

Your possession of these proscribed metals and/or your maintenance of a safe - deposit box to store them is known to the government from bank and insurance records. Therefore, be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of the Internal Revenue Service.

By lawful Order given this day, the President of the United States. -March 3, 1933

Dollar devalued - Gold Price Rises

The report Gold Confiscation, Why It Can Happen Again states: "When Franklin Roosevelt was inaugurated on March 4, 1933, most commercial banks in the United States had already closed and the economy was in a death spiral, gross national product having fallen from $103.4 billion in 1929 to $55.8 billion in 1933.

"Wholesale prices had fallen over 35%, hitting debtors with a double whammy: as the value of their collateral diminished, the value of the dollars they used to repay their loans was increasing. Moreover, gold clauses in loan agreements permitted lenders to be paid either in gold or in currency, thereby protecting creditors against inflation or against actual devaluation of the dollar.

"President Roosevelt took care of the debtors' problems, fast. He devalued the dollar by 40%, permitting debtors to repay their loans in depreciated dollars. He confiscated gold and declared gold clauses unenforceable, preventing wealthy creditors from avoiding the impact of the devaluation. And he arbitrarily fixed the price of gold, which had been set at $20.67 per fine ounce for ninety-six years, at $35.00 per ounce, while ordering that persons surrendering gold to the government receive only the former price of $20.67 per ounce.

"Acting under the authority of the Emergency Banking Relief Act, President Roosevelt issued Executive Order No. 6102, which provided that all privately owned gold in the US. was to be confiscated by the government. As compensation, the owners would receive paper money, whether they liked it or not.

"However, the order specifically exempted gold coins having a recognized special value to collectors of rare and unusual coins. In a single stroke, Roosevelt created a gigantic redistribution of wealth from creditors to debtors. He had outlawed the export of gold coin and bullion and placed an embargo on all international gold dealings.

"Shortly thereafter, Congress, by joint resolution, voided all clauses in private and public contracts which required payment in gold, declaring such clauses to be against public policy. All voluntary, private agreements to pay and to be paid in gold - past present and future - were declared void. Gold was no longer a medium of exchange between private individuals.

"Roosevelt's primary reason for leaving the gold standard was to give himself the authority to devalue the dollar. Citizens who did comply were paid the 'official' price of $20.67 an ounce. Of course, after the confiscation the dollar was devalued and the new price of gold was set at $35 an ounce. This allowed him to bolster the balance sheets of financial institutions by increasing the value of assets held by them as collateral to secure loans. It permitted debtors to repay those loans in greatly depreciated dollars and to raise the prices (in dollar denominated terms) of farm products and raw materials that were traded in international commerce. He was also able to revalue the government's gold holdings in order to increase the government's assets and stabilize the economy.

"By devaluing the dollar, Roosevelt increased the wholesale prices by more than 33% by 1935, both increasing the value of the debtor's collateral and also permitting the debtor to repay his loan with $.60 dollars. The effect was to redistribute income from creditors to debtors and to get the economic machine cranking again."

More on Confiscation:

In The Great Reckoning, by James Dale Davidson and Lord William Rees-Moog, we are warned that confiscatory taxes, soak the rich policies, and other unhappy developments cannot be ruled out. Bank accounts could be frozen, as has been the case in Latin America and elsewhere. Political authorities may decide to unilaterally alter the terms of repayment for some Treasury securities, lowering coupon yields directly or through taxation, or converting short - term obligations into long - term or even perpetual obligations. Privately owned gold held by Americans within US. borders could be confiscated again as it was in 1933".

The Wall Street Digest, February 1993 said: "What if Congress enacts currency exchange laws which prevent Americans from moving US. dollars offshore to a Swiss bank? What if the President makes it illegal for Americans to own gold? President Roosevelt did, and it could happen again."

Ron Paul served in the House of Representatives and was a member of the Gold Commission. He was one of 16 people who worked with "gold" issues. He had this to say about the confiscation of gold and - he should know! "If it gets bad enough, they'll declare a national economic emergency. They'll take over the banks, all business and industry. They may even try to confiscate our gold. I served on the Gold Commission for eight or nine months while I was in Congress along with fifteen other members. I brought up the subject of confiscation. The power to confiscate gold is still on the books as the law of the land. I urged the full Commission to recommend Congress repeal the power to confiscate gold in an economic emergency. We pushed it to a vote and I was the only one that voted to recommend to Congress that we never again contemplate taking the gold of the American people. The fifteen other members voted it down. The power is still there on the books, and they can do it any time they wish."

Dan Rosenthal, former editor of Silver & Gold Report said: "I keep hoping that confiscation of our gold will never happen again. But I operate my private life as if it could. I hold my gold and silver myself. I don't think a bank vault would be a suitable place to keep it. I also think it's risky to hold gold coins strickly in an IRA account, where a bank trustee keeps the coins for you."

Dr. Franz Pick, the noted currency expert and author of The Triumph Of Gold, feared confiscation. He said: I am afraid that one day the government will indeed call gold in. Gold bullion will be subject to confiscation. This is one big advantage to numismatic gold, such as the Double Eagles. It's an idiosyncrasy of governments that although they may prohibit ownership of gold in any form, they are reluctant to touch collections of numismatic gold coins. "Today there are some 49 countries which forbid ownership of gold by their citizens, but do allow holding gold coins for numismatic purposes. Even the Soviet Union and Eastern countries legally tolerate the acquisition of numismatic gold coins. For these are the only gold holdings that could be kept in your safe deposit box without any fear of confiscation."

Trading With The Enemy Act of 1917

In 1917 the Trading With The Enemy Act was passed. This legislation is still in place. It's article 5(b) states:

  • That the President may investigate, regulate or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange for the export, hoarding, melting, or earmarking of gold or silver coins or bullion or currency.

  • With this awesome power, the President of the United States may do what he pleases with our money or with gold if he deems our monetary system to be in jeopardy.

  • Section 5(b) was used by Roosevelt in 1933 to confiscate gold. President Carter used it to freeze Iranian assets during the hostage crisis. Will the President also use it when we take our money out of the banks and rush to buy gold or wire money off - shore? Don't bet against it.

Historically, governments have banned the ownership of gold prior to their citizens refusing to use that which they call money. Why should it be different here? It's already happened before. All that is required (because of the Trading With The Enemy Act of 1917) is for any President to issue a decree.
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1933, 1934, 1954, 1984 and Tomorrow

Roosevelt justified his executive authority because of the national emergency. He empowered the Treasury to maintain complete control over all transactions in gold, silver and foreign exchange. On April 5, 1933, an executive order was issued demanding COMPLETE SURRENDER OF GOLD COINS, GOLD BULLION AND GOLD CERTIFICATES still in possession of individuals. The owners had 25 days to turn their gold into a Federal Reserve Bank. FAILURE TO COMPLY WAS PUNISHABLE BY A FINE OF $10,000 OR 10 YEARS IN PRISON OR BOTH. One exemption was authorized which permitted the holding of gold under special license for use in industry, certain professions and RARE AND UNUSUAL COINS WITH A SPECIAL RECOGNIZED VALUE TO COLLECTORS. (Silver also suffered the fate of gold. On August 9, 1934, a Presidential Proclamation ordered all silver bullion surrendered to the Treasury within 90 days and a 50 percent tax was levied on any profits from the sale of silver. The sellers were paid all of 50.1 cents per ounce.)

In 1954, The Treasury Department amended the Gold Regulations of the original Executive Order to enable the continuance of the exemption of rare coins from the gold confiscation provisions, and they expanded the definition of "coins" with a recognized special value to collectors of rare and unusual coins to include "gold coins made prior to April 5th, 1933" (Federal Register 4309, 4312 1954, as codified in 31 CFR Section 54.20).

The proposal subsequently failed and has yet to become law.

The Eminent Domain Clause of The Fifth Amendment

This clause states, in part...nor shall private property be taken by the government for public use, without just compensation. The government paid the "official" price of $20.67 per ounce in 1933. Why did Roosevelt exempt gold coins "having a recognized special value to collectors of rare and unusual coins"? His Executive Order did, after all, call for the confiscation of "all gold coin." What would a "just" price be for "numismatic" gold coins? To administrate the grading and pricing of each individual coin would present a monumental task. Look at the wording here. Also exempted from the surrender requirements were the "owners" of rare gold coins, not the "holders" of them, nor persons who "possessed" them, nor even "investors". On the contrary, the order specifically focused on an individual's motives for having rare gold coins, exempting just one classification: "Collectors."

A clear distinction was made between the "collector" and the "investor". A collector's primary interest in rare coins is enjoyment, for historical, aesthetic or cultural reasons. An investor's interest in rare coins is financial, to make a profit. Roosevelt clearly intended to exclude only the collector. As a result of FDR's decree, most of the gold was now in the hands of the government, which increased their holdings from $4 billion to $7 billion and foisted "paper money" on the citizens in exchange.

This was a sad day for freedom in America. What ever happened to the laws laid down by our founding fathers? As they stated in the Constitution of The United States of America, Art.1 Sec. 8 and 10: "THE CONGRESS SHALL HAVE THE POWER...TO COIN MONEY, REGULATE THE VALUE THEREOF, AND OF FOREIGN COIN, AND FIX THE STANDARD OF WEIGHTS AND MEASURES...NO STATE SHALL MAKE ANYTHING BUT GOLD AND SILVER COIN A TENDER IN PAYMENTS OF DEBTS."

You're the Target Because You're Where the Money Is

By stripping our money of a gold backing, we created the seeds of inflation. The government was free to create money at will without restraint. Politicians quickly learned how to "buy votes" with borrowed money - called deficit spending these days. The unavoidable result was massive government debt. We are now facing a debt crisis, one you could argue was caused ultimately by the confiscation of gold. And it is aimed at us!

Dr. Gary North says: "The accelerating debt crisis is aimed at four identifiable targets: (1) the successful professional, (2) the upper-middle class investor, (3) the retired person who was productive enough in his working years to escape becoming dependent on Social Security, (4) holders of US. government debt. These people will be called on by the government to make 'necessary sacrifices' to save the system from bankruptcy. And when I say 'called on,' I mean compelled by law."

In providing a defensive strategy, North astutely points out that: "the economy is now trapped between the deflationary pressures of defaulting institutions that have been guaranteed by the federal government, or institutions that cannot be allowed to fail, even though there are no legal guarantees (such as the insurance industry), and inflationary pressures created by the need for liquidity. It's a case of the looming implosion of collapsing liquidity vs. the need for an explosion of fiat money to avoid the implosion's bankrupting effects."

"Every investor in the United States is caught between these two pressures. He cannot avoid them. He has to make a decision: Which force is more powerful in the long run? He also must decide: Which force is more powerful over the next part of the business cycle?

The Outlook for Gold

The decade of the 1990's has seen stocks bask in the spotlight and gold fall out of favor. Good! Its just a golden opportunity to buy "real money" at discount prices. Check out the downside on gold and compare it to the downside on stocks.

Starting in 2001, gold ownership has been rising worldwide. The stock market crash of 2000 has left many investors looking at alternatives like gold and numismatic gold coins. Both offer protection as a hedge, but over the long term, quality numismatic gold coins have performed best.

So What Do I Do?

Allow for a sizable portion of your dollar assets to be held domestically in numismatic gold. Since gold is like an insurance policy for investors, doesn't it make sense to keep your "policy" in a form that is unlikely to be canceled or recalled? That's why owning gold in the form of a numismatic collection makes sense!

In rising gold markets certified (PCGS or NGC) numismatic coins offer considerable profit potential. They also insure your status as a "collector" and since the legislation of 1933 and 1984 separate the "collector" of gold coins from the "hoarder" of bullion, they offer the double advantage of profit and protection from a future gold confiscation.

Start salting away a "variety" of pre-1933 US gold coins. Let your broker create a collectors portfolio of $5, $10 and $20 gold coins. For the advanced collector there are 12 different gold coins to collect. Apart from the "insurance" and profit motives for owning US gold, many have found that collecting coins is great fun.

The top qualities to look for in a gold and silver brokerage firm are: longevity, integrity, service, fair pricing, and a solid buy-back policy. Over the past 20 years Swiss America has earned respect by meeting all of these criterion. In this market place you need expert advice, and the staff of experienced and knowledgeable brokers at Swiss America can help you in this regard.
Call today at 1-800-289-2646
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GOLD OWNERS: Put Your Gold to Work!


ALL GOLD DOES NOT PERFORM EQUALLY!
Over the past 30 years, many United States rare coin values have grown dramatically -- while gold and silver bullion prices have gone sideways or down. The reason is simple: Quality, investment-grade U.S rare coins often grow in value primarily based on the law of supply and demand, rather than a perceived financial/economic crisis, which often drives gold bullion prices up temporarily. This has resulted in the lower end of the numismatic market remaining ‘flat to lower’ over the last decade.

The good news is that Swiss America has developed a strategy to help investors who have bought gold, silver, platinum bullion (or lower-end numismatic gold) as a hedge against economic chaos to take full advantage of this ‘golden discrepancy’ right now.

PORTFOLIO SHIFT: GROWTH & PROTECTION
Based on history, it appears that the high quality, investment grade U.S. rare coins will continue a pattern of growth while the ‘generic market’ (bullion, AU, MS60-62 Liberty gold, MS 60-63 Saint Gaudens) gold may have limited growth potential -- therefore, a shift is recommended.

Starting in 2000, many gold investors began shifting their strategy -- from a portfolio of strictly protection to a more aggressive posture with a focus on both growth as well as protection. While their bullion and low-end coins have dropped as much as 20% in recent years, the higher-end coins resulted in 20% growth (a 40% differential). If previous market highs (1989) are achieved, this disparity can be as great as a 500% difference.

Unless gold is held strictly as a hedge, and growth is not a factor, there is little reason to hesitate on a conversion. Market conditions seldom warrant a shift in directions, but holding gold that offers protection, privacy and growth is significant incentive. Let your bullion and low-end gold work for your benefit while the timing is right. For further explanation, call your SATC broker now, before market conditions make this strategy too costly.

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