Can Gold Confiscation Happen Again?
This article will go through whether or not it is possible for the U.S. government to confiscate gold from its citizens in today’s day and age.
The United States is known as a country that gives freedom to its citizens and hopes of new opportunities to its newcomers. However, there was a time in history when the citizens of the United States had no ability to own gold coins, gold bullion, or gold certificates for investment or collecting purposes.
Advertisement
This gold limitation was enforced back in 1933 and would not apply to today’s environment. But considering the amount of debt held by the United States government and a lot of uncertainty about the economy, gold confiscation happening once again is a likely event.
Before getting into why it is possible for the government to confiscate gold, let’s take a look at the history of when the government was accumulating gold.
Also Read: What Could a Sudden Gold Confiscation Similar to 1933 Mean for Investors in 2017?
Gold Ownership Restrictions
From 1933 to 1945, Franklin D. Roosevelt was the president of the United States. In April of 1933, President Roosevelt signed an executive order known as Executive Order 6102. This strictly forbid the hoarding of any gold coins, gold bullion, or gold certificates within the United States, which included individuals, any joint partnerships, and corporations.
If any person or business entity was found with any form of gold, it would have been seen as a crime and would have resulted in imprisonment and/or a penalty. Roosevelt decided to put this strict gold ownership rule on U.S. citizens because he was focused on creating economic growth. This was a period right after the Great Depression and the economy was at a standstill with no future growth prospects.
Another reason for forbidding gold hoarding was to remove the power held by the U.S. Federal Reserve. The move would have prevented an increase in the money supply in the economy during the depression. The desired goal of this strategy was to have any notes backed by gold to strengthen the overall financial position of the United States.
When the government confiscated gold, it paid its citizens $20.67 per ounce. With more cash in their hands, the citizens starting spending more, thus driving growth in the economy. (Source: “Roosevelt’s Gold Program,” Federal Reserve History, November 22, 2013.)
Will Gold Be Confiscated Again?
When taking a look at the current economic environment, it is possible to see gold being confiscated once again by the U.S. government for three reasons.
The first reason would come down to the debt crisis in the U.S. Presently, there is more than $434.0-billion worth of debt on the balance sheet. The debt amount has been increasing over time. For instance, just since 2012, there has been an additional $100.0-billion added to the total amount debt. This is the exact opposite of what the government wants to see on the outstanding debt. (Source: “Interest Expense on the Debt Outstanding,” TreasuryDirect, September 7, 2017.)
Based on the trend, it seems the debt is just piling up along with the interest cost that must be paid out. As time passes, the U.S. just keeps digging itself into a deeper hole.
In the future, it could result in the United States not being the powerhouse that it is seen as by the rest of the world. This gives less flexibility to the government to spend on infrastructure and to offer new programs designed to help the U.S. economy grow.
The second reason would be because of the possibility of war. In recent months, North Korea has been telling the public and showcasing its rockets being tested and launched. If this trend continues, there is the possibility of North Korea accidentally (or perhaps intentionally) hitting the U.S. or one of its allies, which could start a war.
If a war were to start, then there would be an increase in the military budget. This would then result in the government spending less money within the U.S. Spending money on war could result in a recession. This, over the long term, would weaken the balance sheet of the U.S. even further.
The third reason for the possibility of gold being confiscated is due to President Trump being a political outlier. During the campaign trail, Trump’s top agenda item was to get the U.S. growing at a rapid rate. One move that was mentioned time and time again to get the economy booming was implying a tax holiday on large U.S. companies.
This one move would allow companies with U.S. headquarters to bring cash hoarded in overseas accounts back into the U.S. The result would be that there would be millions or billions saved by paying a lower tax rate. With the savings, it would result in more money being spent on growing businesses within the U.S. borders. This would include more Americans being part of the workforce, more factories and buildings needed, and more cash moving within the economy.
The Trump tax plan, although not yet in effect, is the third and final reason for seeing gold being confiscated. Trump, being the businessman that he is, may still come through with a new plan for the economy to keep growing. Since Trump is known for doing as he wishes, him looking at confiscating gold to attempt to grow the economy would not surprise me in any way.
All three of the reasons for seeing gold being confiscated should help boost the economy. This would be a form of government intervention, but citizens would have no choice but to give up all forms of gold held. This one action of confiscating gold, no matter the reason, would result in the U.S. going against its belief of being the “land of the free.”
Yes, it will create more debt for the government, but with more cash in hand, it should get consumers spending more and generating more tax revenue. Back in 1933, the price of an ounce of gold was $20.67. Now, that figure is trading north of $1,200 an ounce.
With so many unknowns in the economy and the future, the government confiscating gold again seems more likely as each day passes.
