Gold

[BK]

Your original statement claimed that it is currently illegal to buy and hold gold.
"Except that it is illegal to actually physically stockpile gold in the US."

Your original claim is false, as it is not illegal.

Well, I'm certainly not a lawyer or a judge, but I do play Bridge with a few of them...and as I understand it, in a declared state of National Emergency, "anti-hoarding" laws and various interstate compacts immediately kick in which make stockpiling lots of stuff...including "precious minerals" illegal.

I made a big mistake in responding to your assertion about the legality of buying and holding gold in the U.S.
Believe me, I won't make that mistake again.

 

[go2]

The Patriot Act in effect under the National Emergency Order noted by Guardian does not make ownership of gold bullion illegal. It does define gold bullion and requires dealers to comply with the Anti-Money Laundering requirements. That is all. There is a fear and misinformation campaign waged by such paragons of virtue as those responsible for the following links referencing the Patriot Act and gold confiscation and National Emergency Orders and anti-hoarding statutes.

_http://www.abovetopsecret.com/forum/thread452286/pg1
_http://forum.prisonplanet.com/index.php?topic=122032.0
_http://www.godlikeproductions.com/forum1/message516874/pg1

I assure you that gold ownership and possession is legal in the United States, even under the Patriot Act. The fear of future confiscation of gold bullion is based on the mistaken belief that nothing has changed since 1934. The real confiscation of our labor and blood is the continuous real time creation of trillions of dollars of debt money at near zero percent interest by a stroke of the key at the US Treasury and the Federal Reserve Bank. This confiscates our savings while we sleep.

The disinformation campaign against gold ownership inadvertently furthered in some of the above posts aid a psychological operation designed to conceal the on going confiscation of dollar denominated assets by the dilutive effect of debt monetization and to scare the uninformed from buying and possessing the one asset which cannot be confiscated easily. Confiscation of gold bullion would require the use of police power when dollar confiscation requires a stroke of the key. It is my opinion that we will experience the destruction of all dollar denominated instruments by Hyperinflation as the desperate government prints vast amounts of dollars in a destructive attempt to repeal the laws of mathematics and force Americans to pay for the chains that bind them.

Those who fear future confiscation of gold may be interested to read an essay which examines this question.

Guardian, I want to apologize for the sharp post above. We have the same concerns and we must take care to note the details in an increasingly complex and chaotic
situation. I have recently read William Patrick Patterson’s Voices In The Dark…Esoteric, Occult, & Secular Voices in Nazi-Occupied Paris 1940-44 seeking guidance on ethical and practical issues of life in war time from some of our ancestors in the Work and found the book insightful with respect to legality and black markets in wartime Paris.
Mr. Gurdjieff maintained a small teaching group throughout the occupation giving me a sense of what is real and what are the priorities.

Edit: spelling

 

[Guardian]

The Patriot Act in effect under the National Emergency Order noted by Guardian does not make ownership of gold bullion illegal. It does define gold bullion and requires dealers to comply with the Anti-Money Laundering requirements. That is all.

I never said it made owning gold illegal, I said it's definitions (combined with the Homeland Security Acts and various other laws and interstate compacts) made PHYSICALLY STOCKPILING gold illegal ...which I still believe to be true. Right now, the United States is under the LEGAL control of FEMA and various Presidential Orders, some of which are very old. We DO NOT have the same rights and privileges we enjoyed before Bush declared that a State of National Emergency exists.

_http://www.abovetopsecret.com/forum/thread452286/pg1
_http://forum.prisonplanet.com/index.php?topic=122032.0
_http://www.godlikeproductions.com/forum1/message516874/pg1

Oh don't worry hon, I don't even read those forums unless I'm looking for info about a specific predator.

I assure you that gold ownership and possession is legal in the United States, even under the Patriot Act.

I don't understand how you can make such assurances when some of the greatest legal minds in our nation disagree. It's NOT a simply issue, it's a legal quagmire where numerous archaic laws, federal regulations, Presidential Orders and Supreme Court decisions come into play.

I play in a Bridge Club with a husband and wife team who are very involved in the emergency war powers issue. She's an attorney, he's a retired judge, and our collective status as citizens in a state of National Emergency has come up more than once. I'll ask them for some detailed references when next we meet. It might be a month or so, it's about a 2 hour drive for me, and I haven't known these folks very long so I don't have their #'s, but Ill drag this thread back up when I have a list of specific legal precedents. :)

The fear of future confiscation of gold bullion is based on the mistaken belief that nothing has changed since 1934.

go2 I don't fear the confiscation of gold bullion because:

1) I don't have any
2) I don't want any

I invest money in one thing, and one thing only, land....and this is a personal moral decision which has NOTHING to do with economics and the great debate over what investments are "safe" or will yield the best return at any given time. I simply decided that I would not play the money game long ago. If I caught a leprechaun tomorrow, and he gave me a big pot of gold, I would immediately purchase more land, and create more affordable housing and more gardens for more people of like mind.

I believe that ALL physical wealth is an illusion. My "wealth" comes from being able to stand on my front porch and see a mountainside full of good people, safe and secure in their homes, drinking pure, unadulterated water, and puttering in their gardens. No violence, no crime, no predation, no hate. I have no gold, and just enough cash money to buy books, music, gas, and other luxuries, but I feel I am the wealthiest woman in the world. :D

Confiscation of gold bullion would require the use of police power when dollar confiscation requires a stroke of the key.

Yes, and the possession of gold stockpiles gives those "police powers" the right to kick in your front door whenever they choose. Technically, we don't even have the legal right to criticize the US government under our current legal structure. I could be arrested and thrown in prison, without legal representation or trial, just for what I've written to you in this thread.

Again, just because the PTB are not yet enforcing the UNLIMITED powers they've given themselves, doesn't mean they won't tomorrow.

Guardian, I want to apologize for the sharp post above.

No offense taken

 

[go2]

I wonder how many 1-ounce coins constitutes a "stockpile" or a "hoard"?

The U.S. mint sold 190,000 1-ounce American Eagle gold coins in May, the largest number since January 1999, and the most in any month so far in 2010, according to a spokesman for the U.S. agency.

In January 1999, the U.S. mint sold 208,500 gold 1-ounce coins, with only five other months exceeding May's gold coin sales since the program was launched in 1986, the Mint's spokesman told Reuters.

While in 2010 the U.S. Mint has sold only 1-ounce gold coins, in past years it has sold other coin sizes as well.

Comparing only American Eagle gold 1-ounce coins, the biggest monthly sale occurred in October 1986 with 609,500 coins sold, the Mint said.

Many investors, both retail and institutional, have sought gold as a safe-haven asset in times of economic uncertainty. Sales of the American Eagle coins increased by 214 percent in the month over April during a time when concerns about sovereign debt in the euro zone raised fears of a larger macro-economic effect.

The price of gold bullion reached a record high last month at $1,248.95 per ounce.

 

[seek10]

Confiscation of gold bullion would require the use of police power when dollar confiscation requires a stroke of the key.

Yes, and the possession of gold stockpiles gives those "police powers" the right to kick in your front door whenever they choose. Technically, we don't even have the legal right to criticize the US government under our current legal structure. I could be arrested and thrown in prison, without legal representation or trial, just for what I've written to you in this thread.

Again, just because the PTB are not yet enforcing the UNLIMITED powers they've given themselves, doesn't mean they won't tomorrow.

In Nazi Germany, rope over the Jews neck is not laid in one day nor tightened in one day. fluoride water, propaganda, false flags, branding of jews and others, limiting the rights what jews can do or not implemented over 2 or 3 years, how much they can own, how much gold they can hold etc. The laws exit only for the public's eye wash(consumption ). They mean nothing for psychopaths or their handlers. Simply , They always owned us. When they want to screw some body. they did it. No Logic worked. people who believed the law and constitution pulled their hair and break each others head to understand the motive and these psychopaths merrily laughed and did they want to do. We can't expect differently during the coming grand finale.

 

[Voyageur]

Gold – Jumping back briefly in history, FDR signed the Gold Reserve Act in January 30 1930. According to Dr. Martin A. Larson in his book the Federal Reserve and Our Manipulated Dollar, on this date;

…came the final crushing blow. According to reliable testimony, the president never read the so called GRA4 –which carried no specific or personal authorship-but signed it because it was prepaired by men in whom he had implicit confidence. The Act abolished gold as domestic money; prohibiting its coinage; providing that all existing gold coin be converted into bullion; authorized the President to reduce the gold content of the dollar by not less than 40%; forbade the domesticated exchange of other forms of currency among private individuals for gold coin or bullion, but permitted foreign governments and central banks to buy gold from, or sell it to, the United States Treasury at $35.00 an ounce. The Act provided also that the actual ownership of all gold be turned over the Fed [you know who they are], which moved Congressman Louis T. McFadden to declare on the floor of the House: “this bill…shall…give the Federal Reserve banks legal title to the gold, and the United States Treasury will be …nothing more than a physical custodian…It is a fraudulent transfer.” Finally, the Gold Reserve Act authorized the Treasury to purchase or sell gold at home or abroad at any price deemed advantageous, notwithstanding any provisions in the law relating to the maintenance of parity.

Thus, in violation of the ART. I, Sec 10. 10, Par. 1, of the Constitution, the integrity of every domesticated contract entered into before that date of the Act was destroyed, since it became payable only in Federal Reserve notes redeemable in silver dollars, which then contained mettle worth about thirty cents. It has been estimated that this debasement of currency meant a loss to creditors of some $200 billion, taken without due process of law, in violation of the Fifth Amendment.

Further Subversion By Regulation

And there were other even more serious complications. While the Act itself authorized the Secretary of the Treasury to purchase gold at home or abroad at whatever price he deemed expedient, it also declared in Sect. 9 that he could sell it only to the extent necessary to maintain such currency at parity with the gold dollar. This, of course, meant foreign redemption.

In other words, the original Act placed no specific stricture upon the domesticated production, ownership, or sale of any gold except coin-which no longer existed anyway.

The moment Roosevelt took office, the public debt began rising sharply; during the twenties, it had been reduced by nearly $10 billion; however, in the eleven subsequent years of peace between 1930 and 1941, it increased from 16,185,310,000 to 48,961,444,000-almost double the highest total of WWI. In 1036, the personal exemption was reduced to a point where very few could escape income taxation.

The Bankers Make A Killing

The period immediately following the passage of the Gold Reserve Act were years of sever depression, when billions of currency were withdrawn from circulation. When the price of gold was increased from $20.67 to $35.00 an ounce, there was no increase in domestic prices-which FDR had proclaimed to be his objective-and, if anything, they continued to decline. The results of this devaluation are therefore most interesting and instructive to contemplate.

…The treasury continued to buy yellow metal at $35.00 an ounce in considerable quantities until 1952-53. This was, indeed, a boon to domestic mining industry, which increased its production…An infinitely greater bonanza, however, accrued to the international bankers and financiers who continued to obtain large quantities of gold from various sources at $20.67 or less an ounce, and resell it in the United States at $35.00.

And this continues to the next stage by the bankers to the unwitting Government Congressmen and Presidents.

Related by Solzhenitsyn in Russia by Larson;

It is indeed interesting to note that in 1929 the Communist government of Russia made it a crime for any Russian to retain gold in any form. Solzhenitsyn related (cf. Gulag Archipelago, 52-054) how literally thousands-even tens of thousands-were tortured, sent to Siberia, or shot, who were found in possession of gold, or who were merely suspected of hiding it. Tyrants know the value of gold.

 

[findit]

I read an interesting article by Jim Willie over at MarketOracle.com. He says that Germany has a plan and is already working on a new Northern Euro that would be backed by Gold and possibly Oil (?) but the point is, it could be ready by summer of 2011 and he says that if Russia doesn't join the Northern Euro they are also considering a currency backed by gold and China is considering the same for the Yuan...As far as I'm concerned the day can come when we use Northern Euros or the Yuan to trade in America and keep everything functioning. If the dollar doesn't sink by then, it will when this new currency is announced as the entire globe is waiting for a stable currency to come into effect. I also find it interesting that Angela Merkel said no more naked short selling and is doing everything in her power to set up a new stable currency. Germany will be letting go of Greece, Spain, Italy, Ireland, and Portugal...It will be interesting to see how this plays out over the next year.

 

[Vulcan59]

FWIW, the state of Kelantan in Malaysia is "introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire." The entire article can be read here. :)

 

[SilverJeep]

FWIW, the state of Kelantan in Malaysia is "introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire." The entire article can be read here. :)

I read that article too. Unfortunately if TPTB have been able to manipulate the price of gold for so long, they could squash this bug quite easily. Suspected terror cell or something like that would all they need to give them a dose of shock and awe democracy.

Don't get me wrong, I hope this takes off and gold is re-established as a basis of value instead of fiction-based fiat.

Regarding the legality of ownership and/or confiscation... all that anyone needs to know is that it was not illegal until they made it illegal. Therefore anything can be made illegal if they make it illegal. But that's never stopped the black market.

 

[curious_richard]

Regarding the legality of ownership and/or confiscation... all that anyone needs to know is that it was not illegal until they made it illegal.

Yes. It's funny how something can be good ("legal") one day and bad ("illegal") some other day. A simple person might be led to think that the elements of morality are somehow dictated by dates on a calendar. Of course, a less simple person would reject the notion that legality has anything to do with morality.

Therefore anything can be made illegal if they make it illegal.

Yes again. "Any excuse will serve a tyrant".

But that's never stopped the black market.

Yes again. The future will surely be interesting.

 

[Ca.]

I have heard that the IRS, is now requiring, documenting and monitoring the sales of hard gold transactions, by coin dealers and business that deal in the precious metals.

Gold IRS Reporting Requirements

Profits or gains made upon liquidation of an investment has to be reported to the Internal Revenue Service (IRS) the same year in which they happen. Reporting to the IRS is usually taken care of automatically by the stock brokerage, bank or other investment firm. The person who owns the investment must then file his or her gains on the regular IRS income tax forms. The same way, the IRS demands that gains investors make from the sale of certain gold bullion and coin items be reported too, as you will find listed below.
There has been and continues to be an immense amount of confusion about requirements of federal reporting when referring to the buying and selling of gold. Part of the dilemma results from the fact that it took the IRS an average of about seven years to publish regulations on gold reporting from the time the Tax required them. Equity and Fiscal Responsibility Act. Many gold brokers themselves have an incomplete understanding of the regulations and have given the wrong information to investors in gold. It took some years of negotiations between the Industry Council for Tangible Assets (ICTA) and the IRS to be able to publish the specific regulations.

Below are reportable items which are listed by the Internal Revenue Service. You will also see the threshold number of ounces that triggers the need to file a report to the IRS. Take note that the reporting requirement only happens when you sell, not when you buy.

Reportable Transactions

Gold bars: any combination 32.15 ounces or more
South African Krugerrands: 25 ounces or more
Canadian Maple Leafs: 25 ounces or more
Mexican Onzas: 25 ounces or more
Silver bars: 1,000 ounces or more
Pre-1965 US 90-percent silver coins: 1000 dollar face value or more
Platinum bars: 25 ounces or more
More than one selling transaction angered in for this purpose of circumventing the reporting laws will be treated as one single transaction. This includes transactions by two or more members of the same family. The report also demands the Social Security number of the seller. ICTA warns the following: “this information is provided to assist you and is not intended to be used by you as the sole guideline for complying with these regulations. You should consult your own tax professional... While a stricter interpretation of the regulations is possible, ICTA believes the above guidelines... fulfill the spirit of the negotiations and the intent of the Internal Revenue Service.”

Even though gold coins are not listed in the Reportable Transactions, and are now exempt from reporting, we can not give you any guarantee that they will still be exempt in the future. As a matter of fact, since the intent of the law is to raise revenue, it is very possible that coins which are not on the list now will be added to the list in future regulations, especially if the price of gold goes up. It is also possible that the amount of coins required for the reporting threshold will be reduced as the price of gold rises for the same reason. Notice that from the point of view of the United States Treasury, this is an issue of revenue. Last, even though historic items like pre-1933 European and United States gold coins are exempted from the reporting requirement, that doesn’t mean you can escape paying taxes on your gains. You must still pay your taxes, it is your responsibility, whether the item falls into a reportable category or not.

To summarize, the laws and regulations on gold reporting are complicated and lengthy. If you have doubts, the most advisable thing to do is to always discuss the topic with a tax consultant.

 

[Ca.]

One last thought to those whom seek this as an alternative to hedge against the impending collapse. Be very guarded, and cautious about of your ambitions to possess this commodity. If there ever was a term of lose lips, sinks ships, this would apply to keeping this information quite, as means to fend off possible problem's.

Like guns and ammo, ownership will require it be kept under lock and key for your safety, and to maintain it's use for the future. And small pieces are better than large to barter with unless your are black smith and have the ability to break it down from larger increment's.

And lastly for those that pan for gold, stay where there are people in safe areas, and avoid solo adventures.

 

[SilverJeep]

One last thought to those whom seek this as an alternative to hedge against the impending collapse. Be very guarded, and cautious about of your ambitions to possess this commodity. If there ever was a term of lose lips, sinks ships, this would apply to keeping this information quite, as means to fend off possible problem's.

Like guns and ammo, ownership will require it be kept under lock and key for your safety, and to maintain it's use for the future. And small pieces are better than large to barter with unless your are black smith and have the ability to break it down from larger increment's.

And lastly for those that pan for gold, stay where there are people in safe areas, and avoid solo adventures.

Agreed. Don't count out silver too.

 

[go2]

It seems the Dollar Reserve system collapse is upon us. The future is here now and clearer to see. I will confine this short comment to economic considerations only and refer all consideration of other possibilities of change of planetary weather, extraterrestrial events, ideas, spiritual evolution or devolution, etc. to the evolving archive of knowledge on cassiopaea.org and sott.net. No matter the future, gold will exist as a asset, store of value, and uncorrupted measure of value in the mind of man.

The emerging gold trading in Asia and Europe is preparation for the collapse of the US Dollar Reserve system. The Dollar Reserve system has enabled the USA and its overlords to enslave and exploit the nations and peoples of the world by the mechanism of monopoly of money production. Yes, there is a free lunch, for the slave masters who own and administer the activities of the Federal Reserve Banking Cartel and the governments they own and control. This is how they finance the war machine. Remember, the money system is only a mechanism of control, more efficient than leg irons of the ancient world. The slave masters will shed this Dollar Reserve system like a snake sheds its skin. They now remove the chains which humanity perceives as their security. The removal of perceived security will traumatize the human population, the shock will be a window of time for the installation of new and more efficient system of control. A dangerous time for the overlords and for normal humanity caught in the crossfire.

I have been reading A Tribute To The Thoughts of Another and His Friend. The FOFOA blog is an examination of the anonymous thoughts of Another who has deep knowledge of history and finance. His contribution to available knowledge of the possible role of FreeGold in the future affairs of humanity is the focus . Another posted in the late nineties and is perhaps a European Central Banker, we can only speculate. His ideas and insights are a window into the inner workings of gold in history and its possible role in the future of humanity. The confluence of forces leading to FreeGold is a ray of hope that some limits may be possible on the capacity of those who would be overlords to exploit humanity. There are interests on this planet which diverge from those of the overlords. Perhaps, they are also overlords who do not trust others of their kind and role. I don't know. Their interests do align with FreeGold as the vehicle for transferring value of human labor and creativity through time and space. FreeGold is simply allowing the market to determine the price of physical gold in fiat. The overlords will be able to tax the fiat transactions of mankind, but not the savings of mankind which are consolidated in gold as a reserve asset. Confiscation or taxation of gold will end international trade within a geographic area. The world will no longer except "promises to pay" in exchange for oil or manufactured goods. The oil producers, Euro Bankers, and Asian manufacturers are using FreeGold in a currency war to destroy the ability of the US Dollar Reserve block to continue exploiting others. Is Another one of the others?

This is a complex topic. It is explored on an inter-net-work operating in a new space beyond the complete control of the overlords. I sense the FOFOA network is a benevolent impulse. It is moderated for pathology by maintaining the focus on the writings of the contribution to knowledge by Another and those whose attention has contributed to making possible these evolving concepts in a time of change.

I follow with today's announcement of the beginning of gold trading in Singapore on August 31, 2010 and some paragraphs from FOFOA on the subject of confiscation, fear of which may keep some from preserving capital via gold across the abyss into the future for our grandchildren.

I wish to express gratitude to those who give their attention and labor for the possibilities for our grandchildren, especially this forum which gives to me hope.

Singapore Mercantile Exchange to Start Gold, Energy Futures Trade Aug. 31
By Christian Schmollinger
Aug 17, 2010

Singapore Mercantile Exchange (SMX) will begin live trading operations on Aug. 31, offering both gold and energy contracts, according to an e-mailed statement.

The exchange will offer futures for gold physically delivered in the island city-state, Brent oil denominated in euros and financially settled West Texas Intermediate crude, the statement said. The bourse also plans euro-dollar futures.

“SMX’s launch is a step in the right direction as we leverage off Singapore’s unique position as a premier financial and commercial hub in the region,” Thomas McMahon, the exchange’s chief executive officer, said in the statement. “The launch will provide market players in Asia the flexibility to trade products generic to regional trade flows within the Asian business day.”

The Singapore Mercantile Exchange is backed by Financial Technologies (India) Ltd., which operates the largest commodity bourse in India. Other commodity exchanges in Asia include Singapore Commodity Exchange and projects in China, Tokyo and Dubai.

The Future

In order to logically deduce the future we must first understand the past. And the applicable history here begins in 1922 when dollars were first accepted internationally as official bank reserves, equal to gold.

After 1922 the US slowly discovered that it was possible to run a perpetual trade deficit with the rest of the world as long as it had enough gold to trade with the few bankers who preferred heavy gold reserves to light and less filling paper dollars. This meant that the US economy, you me and the guy next door, could, in aggregate, import a higher value of goods from overseas than we manufactured here and shipped back to them.

In other words, unlike everyone else in the world, we would never face a balance of payments crisis because we could buy foreign goods with our own currency. We didn’t have to exchange our currency for that foreign currency in order to import stuff, a process that normally would have put pressure on the dollar to either devalue or increase real goods exports whenever a trade deficit went on too long.

This is the very definition of the “exorbitant privilege,” a term coined by the French in the 1960’s as the Bretton Woods system was starting to show a few wrinkles. And it can only apply to a national currency in use as a global reserve. It cannot apply to regional reserve currencies or supranational currencies.

As time went by, the US federal government also discovered that it had the ability to run a perpetual budget deficit in its own finances. This was an unexpected result of the perpetual trade deficit. As net goods accumulated in the US economy, net dollars necessarily accumulated in our trading partners’ central banks. These dollars had to go somewhere. And as it turned out, a lot of them were given to the USG in exchange for the rights to the future tax revenue of its citizens, a no-brainer swap for any short-sighted politician.

...............................

Fact: Back in 1933 when physical gold was still plentiful within the system and circulating through the banks as a currency equal to dollars, the USG was only able to “confiscate” 500 tonnes. There were no “jackboots” going door to door grabbing gold coins. This has never happened. And it never will outside of total war where pirates (soldiers) grab coins for their own personal bounty.

If the USG (poorly/suicidally) decides it wants to steal some gold in the future, it will ONLY go after soft targets, like bullion bank accounts (most probably unallocated since there is no direct claim) and funds (like hedge funds, ETF’s, and other publicly reported/traded large hoards). It will also go after the gold mines to which it issues digging permits and therefore retains control. And it will not outlaw the physical gold trade. More on this later.

In the same way that bankers fear bank runs more than anything, governments and politicians fear civil unrest more than ANYTHING ELSE. Everything they do is to keep the public calm and sedate. And there’s no faster way to arouse your worst nightmare than ordering your underpaid forces to turn on their friends.

At the peak of the US-administered gold exchange standard, the US had 22,000 tonnes of physical gold. The 500 tonnes “confiscated,” at a time when it was easy because gold was circulating through the banks and could simply be swapped for paper dollars, was only 2% of that hoard. Any “jackboot confiscation” today would net much less than that. And it would carry significant (deadly) political risk.

Additionally… having New York City on US soil, those fancy funds holding OPG (Other People’s Gold) make a much softer target.

No. The US will NEVER confiscate physical gold directly from its citizens again.

Fact: There is plenty of gold at the right price. At the right price, there is no shortage of gold. At the right price, there is no profitable risk/reward calculation under which any major global entity would decide to steal someone else’s gold, especially its own populace. The risk would be much greater than the potential reward.

And if that “right price” is a FREE price, a FLOATING price, then there will NEVER be a shortage of gold to keep the gears of global trade lubricated. And as long as they are lubricated the USG will have international trade that can be taxed.

Fact: There can be no “money shortage” in a purely symbolic fiat currency regime that doesn’t fix its currency to gold. There can only be too much money, and/or a shortage of “asset valuations” if that currency’s debt-assets are mismanaged.

........................................


Fact: The purpose of the confiscation and revaluation of gold in 1933/34 was to weaken the US dollar; to stop deflation and to cause inflation. The confiscated gold was then used to pay off a few of the trading partners with a balance of payments surplus. This cycling of real goods into paper currency into gold only happens centrally (at the CB or Treasury) while the reserve currency is functioning.

A country or zone’s total reserves include international liquidity held anywhere within that zone by any entity, public or private. The official reserves are only part of the total reserves. The official reserves are the first line of defense in a balance of payments emergency. The total reserves are the last line of defense. The official reserves are effective in defusing a crisis as long as the international fiat currency system is still functioning. When it stops functioning, there is no longer a mechanism for funneling the international demand for international reserves into the central authority. At that point the demand must be met “where the rubber meets the road.”

The “gold liquidity” described in Julian Phillips’ piece is paper gold liquidity. He seems to be suggesting that countries running a trade surplus still prefer Treasuries over paper gold in a balance of payment function. This is the centralized decision of the CB’s. These CB’s still have this decision-making ability because dollars are still flowing to local exporters and then working their way through the local banking system into the CB. But when the dollar loses its global status this process will end.

Exporters “where the rubber meets the road” will require either their own local currency or acceptable international liquidity which at that time will be physical gold. This is the automatic and uncontrollable decentralization of the payment balancing mechanism. And this is the major flaw in most of the economic thinking today.

International liquidity schemes like the SDR only function at the centralized CB level. They still require a functioning international transactional currency like the dollar or the euro to cycle control of reserve composition from the marketplace back into the central authority. Without this mechanism the reserve par excellence will be decided by the marketplace. So let’s look at the possibilities that could unfold.

Possibility 1: Physical gold becomes the only acceptable international liquidity for a while. This is decentralization in extremis. And this is Freegold in extremis. It would likely be a transitory stasis followed eventually by possibility 2 or 3.

Possibility 2: Only local currency is accepted in international trade forcing all trading zones into a foreign (FOREX) currency exchange like I described in "Bondage or Freegold". But without the anchoring metric of a global currency like the dollar, this exchange would have to find a market-driven currency price discovery mechanism. And the logical (market) winner is the price of physical gold trading in each currency inside that currency’s zone to set the value of that currency.

This would be an extremely reliable and relatively foolproof mechanism due to the currency arbitrage that would happen whenever gold was underpriced in a currency. For example, if the US tried to keep the price of gold down, all the gold inside the US would flow out of the zone (purchased with higher offers). And if the US tried to prevent this outflow of gold, its currency would be ostracized on the global exchange. This would make it extremely difficult to trade for ANY real goods, including oil.

So the US will have the incentive to encourage a vibrant physical gold market within its zone with little or no restraints (like a VAT or sales tax) to increase the credibility of its printed fiat currency on the global FOREX exchange. If you add a VAT to gold it simply raises the price of gold in your zone relative to other zones without a tax, which lowers the value of your currency on the global exchange.

Possibility 3: A new international currency that embraces a free floating gold price for maximum international liquidity (no more money shortages) will replace the dollar when the dollar finally fails in its role as international liquidity provider par excellence.

This is what FOA meant when he wrote:

All of the many items ThaiGold posted today about government control of gold pertains to past policy in a different ""gold is official government money era"". The use of gold through that era is riddled with failure. In the future (see my latest Gold Trails) currency reserve competition will require a country to keep gold free for private trade. Making price discovery a physical affair only. This will come about in a completely different atmosphere from today where gold is still manipulated as a world "official currency" asset. Mostly now manipulated by a failing IMF/dollar system. The next reserve currency, the Euro will not compete with gold and will require it to find its FreeGold value level. The US will have absolutely no incentive to controlling gold to defend its currency in that era.

Price discovery will be “a physical affair only” because the dollar’s reserve status and the paper gold market are like conjoined twins sharing all vital organs. Their fates are inseparable. Once one of them goes, so does the other. And at that time there will be no incentive to control the price of gold like there was in 1933. In fact, the opposite will be true. There will be the ultimate incentive all over the planet for physical gold to quickly find its equilibrium price in each zone’s currency so as to alleviate the shortage of international liquidity that will follow the dollar’s demise as internationally liquidity provider par excellence.

At the right price, there is plenty of gold. When there is plenty of gold there is no good reason to seize gold. And with the right currency, there is plenty of money.

Sincerely,
FOFOA

 

[Gonzo]

While I appreciate the historic record of gold's value, I don't think any of that history involved a total wipe out of all infrastructure where humans, regardless of wealth eventually become equally poor and focused on survival.

If such a catastrophic event, or series of events were to happen, gold might have widespread value initially, but once the average person is starving, there would be few places gold would have any value.

At that point, there still would be the well heeled and the well connected, hoarding gold in their wishful thinking, but the average person would be so out of the loop, they would have a hard time trading the little gold they managed to save.

The only people interested in buying or trading gold, would be the few extremely wealthy who remembered their history lessons and who, through their wishful thinking, plan to be even more wealthy once society rebuilds.

However, the wealthy will only be able to survive on their material wealth for so long. Once they run out of food stores and have to start scavenging just like the few poorer souls who managed to survive, their gold will be worthless.

After an ice age, commetary bombardment, earthquakes, volcanoes, flooding and increased solar radiation,
There will be no rebuilding, there probably won't be any rebuilding and there certainly won't be any wealth, at least not by standard definitions.
Gonzo