A history lesson on the Great Depression and Gold confiscation

by David Finzer, Capital Conservator Group

Let`s take a trip back in time – it is the early 30`s, unemployment is at shockingly high levels around the world, food and jobs are increasingly difficult to obtain, people stand in lines for government hand-outs, potatoes are a valuable commodity, grown men fight over garbage cans while others cry in desperation …

The great depression was a severe economic depression which started in 1929 and continued into the late into the late 1930`s all over the world and is often used to illustrate the fragility inherent in the world economy and show just how far it can fall in a short space of time. There were multiple causes, but what turns an ordinary recession into a depression is not precisely known. Failure of the free market and, importantly, the failure of government regulation and policies relating to failing financial institutions and a number of other factors are generally accepted to be key areas of focus.

The start of the Great Depression is usually attributed to `Black Tuesday`, October 29 1929 – the Wall Street Crash. This crash was basically the sudden and devastating crash of U.S. stock market prices and led to a domino effect all over the developed world, those who had stock at the time would need to spend most of their life waiting for them to return to break-even point, or were simply left ruined. Effects of the depression included, but were not limited to, a sharp drop in international trade, falling export demand, downwards pressure on wages, political upheaval and dramatic unemployment increases.

Fast-forward to 2008 and some similarities will immediately become apparent. A recession which was more than evident in 2007 became a full blown crisis when the emergence of Sub Prime Loan losses exposed a huge amount of risky loan strategies and over inflated asset prices, especially in the housing market. The collapse of Lehman Brothers on September 15 2008 is often cited, as with Black Tuesday, as the starting point, but the seeds had long been sewn – the collapse acting as the trigger for widespread panic which led to a collapse in confidence, huge losses and bankruptcy for major U.S. and European banks and financial institutions. The resultant global recession has led to a sharp drop in international trade, falling export demand, downwards pressure on wages, political upheaval …. Sound familiar?

It is clear to many that poor regulation and lack of government control had again led to an economic crisis and that some lessons had not been (and maybe never will be) learned. There is, however, one factor which, maybe surprisingly, connects the two depressions and can still provide lessons for people now, and that is the individual possession and storage of precious metals, in particular – Gold.

Gold is, and always has been, the world`s most stable currency. In the past coins were made of gold, the weight of the gold determining the value of the coin and up to today Gold has been the choice of prudent investors as its intrinsic rarity means it will always hold its value over time. Gold used to equal money but inflation has left all currencies virtually worthless by comparison and means that gold no longer `backs up` the currency in any given country.

Many people are not aware of the value of owning precious metal, and gold in particular, but the benefits are vast and important. Gold can be used as a hedge or insurance policy against inflation or stock market crashes, so in these extremes, your wealth will be maintained. Gold is also a global commodity so it is a versatile asset and it also diversifies your portfolio.

So what is the connection to the great depression? Gold is linked to the great depression in a way that many people are not aware of and it is its intrinsic value which led to the confiscation of gold under Executive Order of the President at the time, Franklin D. Roosevelt.

On the 5^th April 1933, President Roosevelt authorized the harmless sounding Executive Order 6102, an order which criminalized the possession of gold by any individual within the U.S. The rationalization was that the `hoarding` of gold was stalling economic growth and making the depression worse, so it was made illegal to possess gold under penalty of an enormous fine or imprisonment. Individuals were forced to sell all but a small portion of their gold to the government at a price of $20.67 per ounce after which the government then revalued the dollar relative to gold so that it was then worth $35 an ounce – effectively robbing U.S. citizens at a rate of $14.33 per ounce.

In light of the current crisis it is wise to ask if the possibility exists of the government once again confiscating, or making it illegal to own, gold – an idea that sounds ridiculous to many, after all the U.S. is a free country right?, but looks ever more plausible when you start to look at the facts.

It is necessary to realize what the consequences of the global crisis are and how they are affecting the actions of governments throughout the world. In not-too-subtle attempts to disguise their own regulatory failures, the G20 – ably led by the Obama regime – have launched an unprecedented attack on the offshore banking industry, with established countries such as Switzerland suffering the most from this unjustified and morally dubious assault. The U.S. will claim it is attempting to seek parity amongst tax payers, while they shamelessly look the other way as Delaware and Florida operate to help individuals from other countries evade taxes with no questions asked, mega-companies such as Google avoid billions in taxes on a yearly basis and diplomats invariably pay no taxes whatsoever. The simple fact of the matter is that the governments of a large number of countries are simply using the crisis as justification to extend and abuse the power they create for themselves.

Under Obama, the U.S. Government has shown increasing boldness in its refusal to be restrained by the constitution, with The USA PATRIOT Act having been followed by the NDAA, the incoming FATCA and the globally unpopular SOPA and PIPA. With legislation being rolled out which limits the liberty of U.S. citizens – why would people doubt the government`s intent, or ability, to seize gold as it has done so before? In Europe, France and Austria have already indicated their intent to limit an individual`s ability to purchase precious metals, largely because they can`t control the value of it like they can other financial commodities.

All of this makes uneasy reading for anyone in possession of significant quantities of precious metal. If you are afraid that your own government is going to take an interest in your gold, the safest way to deal with it is to get it out. There are ways of doing this but the most recommended is to simply sell and re-buy in another place, although you will take an inevitable loss on your asset. More important than possessing the gold is actually the storage of that gold and in this example anonymity is the most important factor.

Governments hate anonymity as they hate offshore, and the drive for financial transparency is based on the fact that governments like the Obama regime cannot stand situations they are not 100% in control of. Financial transparency means that the government is able to tax the hell out of its citizens while they continue to extend their power. However, in the case of precious metal, anonymous storage is the key as your gold (or other precious metal) will hold its value, probably increase.

Capital Conservator offers one way of storing your gold anonymously and safely, by storing it in 100% secure, safe deposit boxes with other benefits such as encrypted communications as well as easy purchase and sale. The benefit to secure and anonymous storage is that the government where you are based will not have any legal right to seize gold in the jurisdiction where your gold is stored, as well as the fact that they simply will not know where it is. If you have any doubts about this topic just take a look at a few developments since 9/11:

-The USA PATRIOT Act

-Civil Asset Forfeiture abuse

-FATCA / NDAA / SOPA / PIPA legislation and the complete disregard for the constitution

-Attacks on the Swiss financial services and banks

The government may or may not decide to confiscate gold, but as with any asset protection or expatriation decision, it is vital to be proactive. If you wait for the legislation to be passed, it will be too late – it is necessary to expatriate at least some of your assets to give you a chance to expatriate yourself.

Editor’s Note: For additional information on this and related topics, see our new website: PremierOffshore.com.