U.S. asset managers worried Obama could confiscate gold

[Kat Kanning]

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=106063&sn=Detail

Anecdotal evidence suggests some major U.S. asset managers prefer to hold gold outside the U.S. for fear of confiscation in an echo of Roosevelt's 1933 decree.
Author: Lawrence Williams
Posted:  Thursday , 10 Jun 2010

LONDON - 

Speaking at the FT Silver conference in London yesterday, lead-off speaker John Levin, HSBC Bank's Managing Director, Global Metals and Trading (HSBC is one of the world's top precious metals traders and its vaults in the U.S. and Europe hold huge holdings of gold and silver bullion) recounted conversations with some of the U.S.'s top asset managers controlling massive amounts of capital asking if HSBC had the capacity in its vaults to store major gold purchases.  On being told that the bank's U.S. vaults had sufficient space available he was told that they did not want their gold stored in the U.S.A. but preferably in Europe because they feared that at some stage the U.S. Administration might follow the path set by Franklin D. Roosevelt in 1933 and confiscate all U.S. gold holdings as part of the country's strategy in dealing with the nation's economic problems.

While in Mineweb's view such a move is unlikely, one needs to bear in mind that President Obama is a keen follower of Roosevelt's views and policies and that the very fact that some asset managers controlling huge volumes of money feel that such a move is possible is a significant factor - and one that is perhaps heightened by the huge amounts of money flowing into gold at the moment in both ETFs and bullion.

As a reminder to readers - Section 2 of Roosevelt's Act read as follows:  All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:

(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.

(b) Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.

(c) Gold coin and bullion earmarked or held in trust for a recognized foreign government or foreign central bank or the Bank for International Settlements.

(d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license.

At that time of course, the dollar was exchangeable for gold at a set value ($20.67 an ounce) so compensation for such a move would have been easy to calculate.  Roosevelt subsequently revalued gold to the $35 level which stood for over 30 years.   Nowadays that kind of process would be a little more difficult, but perhaps not beyond the means of a government, already versed in printing large sums of money to try and re-stimulate the economy.  Perhaps a figure of the average gold price over a 3 month period at a certain date would meet an initial compensation valuation, but in today's much more litigious society such a move might well fail anyway.

Indeed current economic analysis of the Roosevelt move suggests that it was not successful in helping drag the U.S. out of depression and indeed may have contributed to a recession within a depression - a pretty dire situation.  It probably took World War II to end the Great Depression.

Levin's presentation - a trader's view from the coal-face as he put it - contained much anecdotal material of interest and was a refreshing change from the usual analysts' viewpoints.  More of that in a subsequent article.

[Pat K]

I would be worried about a 401 k and pension grab too.

[Lloyd Danforth]

Back when they first started the 401 K it occurred to me that there would, at least, a 'special' tax on those accounts when one retired.

[KBCraig]

It's like NH and the (private) Joint Underwriting fund.
"Hey, we need more money for the state."
"Oh, look! There's some!"
"Quick, grab it!"
"But it's private, not ours."
"So? We 'need' it!"

[Russell Kanning]

sometimes I am reminded that there have been worse times

[Ron Helwig]

Back when they first started the 401 K it occurred to me that there would, at least, a 'special' tax on those accounts when one retired.

I always thought that the Roth IRAs were just such a trap. "Sure, you just pay the taxes now and we promise not to tax it again later" - suuure.

[FreelanceFreedomFighter]

There have been "rumblings" for a year that the government is considering various "changes" to the IRA/401K plans that would greatly hurt people's retirement. One such change would be a requirement that all IRA/401K plans have a major component invested in U.S. T-bills. This is believed by government "economists" to be needed because, as more money is printed causing the devaluation of the dollar, other countries such as China are slowing (and there is a real possibility that they will stop) their purchase of U.S. T-bills. The entire U.S. "house of cards" is supported (in part) by the ability to continue to issue T-bills as a means to "cover" the debt/deficit. If (when) they can't sell their T-bills anymore, then the house falls down. Sooooo, they are talking about making people buy them and the natural source (a very large source) for that money comes from U.S. retirement plans (IRA, 401K, pensions, etc)...

But... Please remember that they can only tax, regulate, confiscate (call it what you want... "steal" comes to mind) what they know you have. Obviously they know it if you have a pension/IRA/401K plan. For various reasons we don't have any of those any more. They have all been cashed out... penalties & interest paid... funds used for other things & in other ways. Many friends and family, for various reasons, have done the same thing. One person saw what was happening with the markets over the last decade before it hit and made the decision to cash out the retirement plans before things went bust. Again, all above board, penalties & interest paid, etc.

A similar thought process is possible for gold & silver. When it was confiscated in 1933, there was LOTS that simply "disappeared". It was rumored over the next decades that plenty of that gold was being utilized on a "black market" basis... but nothing was ever proven or shown to be anything more than rumor. However, note that when gold became legal to own, collect, invest in, again, suddenly there seemed to be quite a number of "found" gold U.S. coins/pieces from pre-1933 that were miraculously made available to "collectors". Despite the fact that FDR had ordered them to 1) be turned in, and 2) be melted into bullion & kept as collateral.

On that note, that is also a reason why the FULL "audit the Fed" must be implemented. It is believed by many, many people that the non-governmental "Federal Reserve" that was given the gold bullion all those years ago... has quietly "sold" (or otherwise transferred) it to foreign powers. IOW, there is little or no gold left!

But even then, perhaps the mere threat of gold confiscation scares many away. There are plenty of other things available to "invest" in...