Can Gold Confiscation Happen Again?
The next stock market crash could make the one of October 1929 look like a minor correction. This leads to the question: Can the gold confiscation happen again? You’re not alone if you have not heard of the gold confiscation of 1933. Indeed, most Americans remember Franklin Delano Roosevelt as the president that led the United States out of the Great Depression.
That is up for debate. Critics and fans can discuss the problems or merits of his redistributive economic policies at length. But, there’s something many don’t know about Roosevelt. Some accuse him of having perpetrated a coup through the Gold Confiscation Act of 1933.
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On that date, as part of Executive Order 6102, Roosevelt forbade the “hoarding” of gold, demanding that Americans return all gold coins, bullion, and gold certificates to federal banks by May 1, 1933, at a price of $20.67 per ounce. That was the gold confiscation and, given the right set of circumstances, it could happen again.
Also Read: The Gold Price Forecast 2018 Might Surprise You
Of course, 1933 was one of the worst years of the Great Depression. Many Americans suffered a shortage of jobs and opportunities. They would also end up enduring gold ownership restrictions. The goal was to restrict the possession of gold—in all forms—coins, gold bullion, and certificates or securities attached to gold. Offenders could be sentenced to a term of up to 10 years and fined $10,000 in 1933 dollars.
The Government Needed to Boost Banks and Stimulate Growth
Roosevelt intended to revive the banking sector. At that time, the gold standard was still in place. Therefore, to print more money to finance the New Deal, the government needed gold. In 1934, Roosevelt formalized the initial gold confiscation order, announcing the Gold Reserve Act. It was only President Gerald Ford who repealed the law in 1975. He did it because the dollar had been independent of gold for some years already.
Despite Roosevelt’s decree, many Americans continued buying and selling gold in the “alternative” market. The Americans who had the means and the understanding of gold’s power would probably have kept it in Swiss safes.
You may be wondering: Will gold be confiscated again? There is no clear answer. The laws now do not have any mechanisms from which to launch, for example, a gold confiscation in 2017. Barring absolutely exceptional measures, the same should hold in 2018. But, nothing is written in stone. And even when things are written in stone, erosion can alter their appearance to the point of illegibility.
Still, in case of a stock market meltdown, the U.S. government might resort to reviving some form of the gold standard to stabilize monetary value and prevent current Venezuelan levels of inflation. How gold confiscation will affect investors depends on what other holdings those investors have. But, if the next stock market crash is global and bad enough, it could kill the U.S. dollar. In such exceptional circumstances, gold would assume supreme importance.
Surely, if we got to a point bad enough where gold is confiscated, the economic situation has probably reached an apocalyptic level. The world, and not just America, would be experiencing a total eclipse of the system. Of course, given the recent revival of nuclear weapon one-upmanship and rising tensions, we are closer to a point of gold confiscation than we were a few years ago.
