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On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. The United States had been on a gold standard since 1879, except for an embargo on gold exports during World War I, but bank failures during the Great Depression of the 1930s frightened the public into hoarding gold, making the policy untenable.
Soon after taking office in March 1933, President Roosevelt declared a nationwide bank moratorium in order to prevent a run on the banks by consumers lacking confidence in the economy. He also forbade banks to pay out gold or to export it. According to Keynesian economic theory, one of the best ways to fight off an economic downturn is to inflate the money supply. And increasing the amount of gold held by the Federal Reserve would in turn increase its power to inflate the money supply. Facing similar pressures, Britain had dropped the gold standard in 1931, and Roosevelt had taken note.
READ MORE: How Did the Gold Standard Contribute to the Great Depression?
On April 5, 1933, Roosevelt ordered all gold coins and gold certificates in denominations of more than $100 turned in for other money. It required all persons to deliver all gold coin, gold bullion and gold certificates owned by them to the Federal Reserve by May 1 for the set price of $20.67 per ounce. By May 10, the government had taken in $300 million of gold coin and $470 million of gold certificates. Two months later, a joint resolution of Congress abrogated the gold clauses in many public and private obligations that required the debtor to repay the creditor in gold dollars of the same weight and fineness as those borrowed. In 1934, the government price of gold was increased to $35 per ounce, effectively increasing the gold on the Federal Reserve’s balance sheets by 69 percent. This increase in assets allowed the Federal Reserve to further inflate the money supply.
The government held the $35 per ounce price until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard. In 1974, President Gerald Ford signed legislation that permitted Americans again to own gold bullion.
Franklin D. Roosevelt Day by Day – June
On June 6, 1944, the United States and its allies launched the greatest amphibious invasion in history on the shores of France. Over 150,000 soldiers, sailors, and airmen stormed the beaches of Normandy beginning a campaign that would end with the unconditional surrender of Germany in May 1945.
Franklin D. Roosevelt, as Commander in Chief of the United States Armed Forces during World War II, played an active and decisive role in determining strategy. In his ongoing discussions with British Prime Minister Winston Churchill and with the American Joint Chiefs of Staff, he steadily promoted the invasion of the European continent to liberate it from Hitler’s Germany that finally began on D-Day.
On the night of June 6, 1944, President Roosevelt went on national radio to address the American people for the first time about the Normandy invasion. His speech took the form of a prayer.
The date and timing of the Normandy invasion had been top secret. During a national radio broadcast on June 5 about the Allied liberation of Rome, President Roosevelt had made no mention of the Normandy operation, already underway at that time. When he spoke to the country on June 6, the President felt the need to explain his earlier silence. Shortly before he went on the air, he added several handwritten lines to the opening of his speech that addressed that point. They read: “Last night, when I spoke to you about the fall of Rome, I knew at that moment that troops of the United States and our allies were crossing the Channel in another and greater operation. It has come to pass with success thus far.”
Find more documents and photos from the FDR Library collections: (http://docs.fdrlibrary.marist.edu/04DDHOME.HTML)
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Introduction of the Gold Standard
When gold was found at Sutter's Mill in 1848, it inspired the California Gold Rush the following year, which helped unify western America. At the time, it resulted in inflation because the United States was already on a de facto gold standard since 1834, so the flood of new gold led to rising prices.
In 1861, Treasury Secretary Salmon Chase printed the first U.S. paper currency. The Gold Standard Act of 1900 established gold as the only metal for redeeming paper currency. It set the value of gold at $20.67 an ounce.
European countries wanted to standardize transactions in the booming world trade market, so they adopted the gold standard by the 1870s. It guaranteed that the government would redeem any amount of paper money for its value in gold, and meant transactions no longer had to be done with heavy gold bullion or coins, since paper currency now had guaranteed valued tied to something real.
This huge change also increased the trust needed for successful global trade, and it came with its own risks: gold prices and currency values dropped every time miners found large new gold deposits.
In 1913, Congress created the Federal Reserve to stabilize gold and currency values in the United States. When World War I broke out, the United States and European countries suspended the gold standard so they could print enough money to pay for their military involvement.
The Great War proved to be the first nail in the coffin for the international gold standard.
After the war, countries realized they didn't need to tie their currency to gold, and that it may in fact be harming the world economy to do so. Countries quickly returned to a modified gold standard after the war, including the United States in 1919. But the gold exchange standard was causing deflation and unemployment to run rampant in the world economy, and so countries began leaving the gold standard en masse by the 1930s as the Great Depression reached its peak. The United States finally abandoned the gold standard entirely in 1933.
Government Confiscation of Gold: It Happened Before — Could It Happen Again?
Our nation was founded with the sacred words, “We hold these truths to be self-evident, that all men are created equal that they are endowed by their Creator with certain unalienable rights that among these are life, liberty and the pursuit of happiness.” But in 1933, all that was shattered if by “pursuing happiness,” you chose to pursue gold.
The Foundations of the Great Confiscation
Confiscation all dates back to the Trading with the Enemy Act of 1917. That year, President Woodrow Wilson signed the “TWEA” into law, forbidding American individuals and businesses from engaging in trade with “enemy nations.” The world’s functional gold standard, which had overseen tremendous global economic growth in the early years of the twentieth century, was effectively halted by the outbreak of World War I, and the stage was thus set for the Great Depression and World War II.
Shortly after taking office sixteen years later, Franklin Delano Roosevelt signed Executive Order 6102 into law, prohibiting the “hoarding” of gold. Under this executive order, Americans were prohibited from owning more than $100 worth of gold coins, and all “hoarders” (i.e. people who owned more than $100 worth of gold) were forced, by law, to sell their “excess” gold to the government at the prevailing price of $20.67 per ounce.
Then, once the government had all the gold, FDR revalued the dollar relative to gold so that gold was now worth $35 an ounce. By simple decree, the government had thereby robbed millions of American citizens at a rate of $14.33 per ounce of confiscated gold, which is why most historians agree that the Gold Confiscation of 1933 is the single most draconian economic act in the history of the United States.
The Utilitarian Rationale Behind Confiscation
The reasoning behind the Great Gold Confiscation was, of course, the Great Depression, which had begun several years prior. After an inflationary run-up in prices and asset values, the stock market crashed in 1929, and the economy soon went with the crash.
Rather than responding to the situation with laissez-fair wisdom, President Herbert Hoover, often accused of being a proponent of laissez fair by those to whom the term is considered an epithet — instead raised taxes and erected new trade barriers, intensifying the misery. When FDR was elected, the people were willing to go along with nearly anything to try to alleviate the deflation that had gripped the country and strangled economic activity.
The boom of the 1920s was largely an illusory creature of the still-new Federal Reserve’s gross ineptitude, and by the thirties when reality had caught up to the loose-money standards of the prior decade, the money supply quickly contracted, causing deflation.
Like inflation, deflation also begets more of itself, and as prices dropped, it became wiser for the possessors of money to hold it rather than spend it, since prices would be lower the next day — and even lower the day after that — ad infinitum.
Since no one was spending money, businesses went under and people were out of the work, thus making the situation worse. In response, FDR knew what needed to be done — prices needed to be stabilized. On this, few would disagree. The exception economists take is with the implementation the president chose to pursue.
First, as discussed, private ownership of gold was effectively barred. The only exceptions were coinage worth $100 or less, or collectible coins, industrial uses, and jewelry. Gold could not be “hoarded” as a significant investment, and all “hoarders” were made to sell their gold to the government.
The Federal Reserve itself — a private banking cartel more so than an arm of government — was not excluded from this requirement either, as made clear by the Gold Reserve Act of 1934. That legislation required the Fed to surrender all gold and gold certificates held, to the United States Treasury.
Finally, the dollar was revalued, and U.S. Dollars was then redeemable at a rate of $35 an ounce, as opposed to the old gold standard of $20.67. However, it’s important to note that only foreign bankers and international governments could redeem their dollars for gold — private gold ownership was still illegal in the U.S. until the end of 1974.
The effect revaluation had on the U.S. dollar was an instant depreciation of 41%. Thus, prices were pushed back up again, in nominal terms, at least. What the long-term effects of this action would have been in the absence of World War II will never be known, but within a few years, the U.S. war economy was humming.
Following the end of the second great war, the U.S. stood alone as an economic super power, virtually untouched by the Axis or Allies, while most of Europe lay in ruins. It all made Roosevelt’s coercive and unconstitutional acts look ingenious, but scholars from the left and right continue to debate whether they were truly wise or if the New Deal was bailed out by global externalities.
So, under legally dubious means, FDR and Congress passed a law outlawing the private ownership of gold in excess of $100. Millions of Americans were made to trade in their gold coins for paper dollars — effectively at gunpoint. Then, once all the coins were in the government’s coffers, FDR revalued the dollar from $20.67 per ounce of gold to $35 an ounce — a theft of almost forty-once cents on the dollar.
Gold ownership remained illegal in the United States until 1954. That year, the Treasury Department legalized the ownership of rare coins. What was a rare coin? Well, since the government had seized all pre-1934 coins, then by definition, all such coins were deemed “rare.” After all, these coins were so uncommon that those few in circulation were worth much more than their face value or the value of the gold of which they were made — the coins had numismatic value. They effectively were no longer “money,” and thus they didn’t pose a competitive threat to the government’s fiat currency.
Gold, Government, and the Law
In 1969, the federal government further clarified the 1954 ruling and officially exempted “rare coins” from any future government confiscations — but still reserved the “right” for the government to seize its citizens’ gold in the future. “The basic principles governing the administration of the Gold Acts and Orders,” said the Treasury Department in 1969, “are that gold, as a store of value, can be held only by the government and that private citizens and entities in the United States can acquire gold only for legitimate and customary industrial, professional, and artistic purposes.”
Two years later, in 1971, President Nixon “closed the gold window” and took the U.S. dollar off the gold standard — making it a true fiat currency with no asset backing or intrinsic value. Four years after that, President Ford legalized the private ownership of all gold — not just rare coins — and gold has continued to be fully legal for the past thirty-two years. Or has it?
Although laws prohibiting gold ownership have been repealed, the laws allowing the government to confiscate gold have not. Rare coins, however, are the exception. For the government to confiscate citizens’ bullion, all the government has to do is act on long-dormant laws. But for the government to confiscate rare coins, it would have to overturn fifty-plus years of precedent and shatter the legal system’s overarching ideal of jurisprudence. This may not be entirely impossible, but it certainly offers the holders of pre-1934 gold coins more protection than the owners of bullion.
Reinstating the Gold Standard?
But why would the government confiscate gold? Some argue it did so in the past in order to revalue the dollar relative to gold, and since the dollar is no longer on the gold standard, the government would have no reason to confiscate gold. This is a good point, but it also begs the counter-argument: Now that the U.S. dollar is not backed by gold, it’s only a matter of time before the house of fiat-money cards crumbles. When this happens — when the government’s printing presses are incapable of printing money with any real value, then the government will certainly look to do something, and conveniently, laws on the books allow it to confiscate privately owned gold. It’s likely that the government could do this ostensibly to reinstate the gold standard!
In such desperate times, would rare coins be safe? It is impossible to know for sure, but it is certainly true the coins would be safer than bullion or non-rare coins. After all, look no further than to the first Great Confiscation in which many “patriotic” Americans willingly turned over their gold for paper money. Certainly, some Americans would do this again, especially if it were in the name of reinstating the gold standard. The government would probably promise gold redemptions would be
reinstated “in a matter of time.”
And while certainly not all goldbugs would willingly turn over their gold, there would be far less resistance to government confiscation of commodity-valued gold than there would be to the seizure of rare, numismatic coins. The government would not want to be in the business of coin dealing, at least not at first, and it would undoubtedly go after the low-hanging fruit — especially when laws on the books allow it to be legally picked.
Gold Confiscation: Could it Happen Again?
Although the U.S. dollar is constantly under pressure, the U.S. government continues to stockpile debt, and impossible-to-fulfill entitlement commitments loom on the horizon, the idea that the U.S. government would try to confiscate citizens’ gold today or anytime in the foreseeable future certainly seems spurious at best. After all, the government did so in the past in order to recalibrate the gold standard, which we have not been on since 1972.
However, our government has become increasingly bold in its refusal to be restrained by the Constitution, and following the return to limited government (at least in rhetoric) by the Reagan administration in the eighties, the Constitution has been all but ignored by subsequent administrations and congresses.
The government might want to reenact gold confiscation, and most congressmen would feel no moral compunction about doing so, but logistically, it would seem virtually impossible in today’s globally interdependent and well-connected economy.
Investors might need to beware, however, if certain interest groups on the left and right get their way and begin building walls, both literally and figuratively, around the country in an effort to block that global interdependence. Protectionism and higher taxes led to the greatest depression in U.S. history, and along with it came gold confiscation. It would probably take a similar impetus for such a sequence of events to happen again.
Win With or Without ‘Financial Armageddon’
Silver investors should be aware of the potential of another Great Confiscation. But, a diverse portfolio of stocks, bonds, cash, and precious metals has worked the best over the past thirty years, and will probably work the best for the next thirty. And, as part of a hedging strategy, holding some rare gold coins — in addition to bullion — is undoubtedly a wise decision. Just in case.
FDR's Gold Confiscation, 80 Years On
EXECUTIVE ORDER 6102, issued by US president Franklin Delano Roosevelt 80 years ago, on April 5th 1933, banned private gold ownership in the United States, forcing gold owners to take their bullion to a bank and exchange it for Dollars at the prevailing rate.
This order has become notorious among gold investors. Some fear a similar gold confiscation could happen again — that their government might seek to take away their bullion and ban “gold hoarding” as part of some trumped up solution to a “national economic emergency”.
Events in Cyprus, where at one point it looked like the state was going to levy a 6.75% on deposits below €100,000 — despite these coming under the deposit protection scheme — have only served to heighten fears that private wealth can, under certain circumstances, simply be appropriated. Governments change laws from time to time, and yes it’s possible that under the right circumstances some governments might try to confiscate their citizens’ gold. But it is important to realize that the motivation for confiscating gold that existed for FDR in 1933 has largely disappeared.
Back then the US was still on the Gold Standard (the UK had been forced off 18 months earlier. The rest of the world would follow by the eve of WWII, never to return). Gold was the foundation of the American currency and economy at the time of FDR’s order the Dollar’s value was tied to gold at a rate of $20.67 per ounce — the price at which the government offered to buy and sell physical bullion. Making private “gold hoarding” illegal, FDR in fact nationalized what had been private property, using the bullion turned in to the banks to boost Washington’s finances and imposing 10-year jail terms and $10,000 fines (almost half-a-million dollars at today’s gold price) for disobedience. Only one case relating to the confiscation ever reached court (and only then because the gold owner, Manhattan attorney Frederick Barber Campbell, sued for return of his property) but the threat alone pulled in 60% of privately-circulating gold bullion within six months.
Following 6102, Roosevelt was then able to devalue the Dollar against gold by raising the gold price, something the government could now do as it controlled the entire domestic supply, plus a big chunk of the international market, which now poured metal into the US in exchange for ever-more dollars per ounce. FDR was acting on the advice of Cornell agricultural economist George Warren, whose background observing commodity prices had left him with the belief that the best way of solving a deflationary depression was to inject some inflation and push prices higher. This was the reasoning behind devaluing the Dollar in the weeks following 6102, FDR and his advisers would sit at the breakfast table and decide what the gold price should be, nudging it higher a bit at a time until they settles on the $35 an ounce that prevailed until Nixon closed the gold window in August 1971.
So in a way, FDR gold confiscation and his raising of the gold price was a Gold Standard-era version of quantitative easing, a policy aimed at fighting deflation by raising asset prices at the expense of the monetary unit. Whereas today central banks can simply create the Dollars or Pounds necessary to do this, under the Gold Standard that was not possible. So Roosevelt instead confiscated gold and changed its price, the aim being to raise prices in the economy even though there was no additional gold to back the quantity of currency.
The situation that we have today is very different to that faced by Roosevelt in 1933. Gold is not the foundation of the world’s monetary system. Few people own gold — compared to (for example) real estate and regular financial assets. They also tend to own it in ways that make it relatively inaccessible to governments. The gains to a government from confiscating people’s gold would be much, much smaller than those that accrued to FDR.
Search and seizure of gold
A myth has gained credence over the years that the IRS executed a nationwide search of safe deposit boxes as part of the government's “confiscation policy”. The myth is supported by reference to portions of E.O. 6102. I’ve reviewed 6102, and the language cited by the mythmakers is not in the original. Moreover, there are no contemporary accounts of such searches and seizures. It’s hard to imagine they would have escaped press attention.
However, there are a few cases in which gold was, in fact, confiscated (without compensation). As far as I've been able to determine, all of these confiscations came as a result of criminal prosecution of people who had violated federal law. There was no widespread prosecution of individuals who simply owned gold. The cases brought by the government were typically against gold traders, dealers, and companies that failed to surrender large quantities of gold.
For example, the first case I found was brought against an individual who tried to withdraw from his bank 5,000 ounces of gold, worth $6.5 million at today's price. In the depths of the Great Depression, this was an enormous sum, even at 1933 prices. Since the withdrawal request had to be processed by his bank, and the bank was required by law to report such transactions, he was greeted at the bank by federal agents. Clearly, he hadn't thought it all the way through.
Another example: The government confiscated double eagles worth $12.5 million ($812 million at today's price) that a Swiss company had placed in the hands of an American business for safekeeping. I assume they fired their attorney.
There are other examples, but the point is that individual gold owners were not subject to search nor uncompensated seizure of their gold nor the vigorous enforcement of federal law. If your gold was confiscated, your violation of federal law was probably pretty flagrant and poorly executed and you probably held a lot of it.
One thought on &ldquo Franklin D. Roosevelt Day by Day – June &rdquo
June 16 will mark the 79th anniversary of the 100th day of FDR’s “First 100 Days” as president.
Those 100 days were a period during which FDR advanced and passed at least 15 MAJOR pieces of legislation to relieve the suffering of the American people, stabilize the banks, stabilize the country, and reassure Americans that there was a president in the White House who was creative, aggressive, caring and courageous.
We need to celebrate FDR’s wisdom, creativity, aggressiveness, caring and courage, without which we might be living in a very different (and worse) world today.
Here are some of the dates and programs from that “First 100 Days” of FDR’s presidency:
March 4, 1933
FDR inaugurated the 32nd president of the U.S. “The only thing we have to fear is fear itself.”
March 5, 1933
FDR issues a proclamation declaring a four-day “bank holiday” throughout the nation effective March 6. All banking transactions stop and embargo on exportation of gold, silver, and currency. Summons Congress to special session for March 9.
March 9-June 16, 1933
“Hundred Days” session FDR gets a willing Congress to enact many of the New Deal programs. This first day Congress passes the Emergency Banking Act, giving FDR broad powers over banks and foreign exchange. Bank holiday ends March 10–banks can reopen when they prove that they are solvent. Within three days, 1000 banks will reopen and national confidence picks up.
March 12, 1933
FDR gives first “fireside chat”.
March 31, 1933
Congress passes the Reforestation Relief Act, establishing the Civilian Conservation Corps (CCC) it provides work immediately for 250,000 young men (18-25) in reforestation, road construction and developing national parks. Work camps begin to spring up. By the time it eases in 1941, two million people have worked on its projects.
April 19, 1933
FDR takes the nation off of the gold standard.
May 12, 1933
Congress passes the Federal Emergency Relief Act, which authorizes immediate grants to states for relief projects. Unemployment has reached 14 million-over one quarter of the nation’s work force.
Roosevelt signs the Agricultural Adjustment Act to provide immediate relief to farmers by setting prices for agricultural products and paying subsidies to farmers for curtailing production of certain crops that were in surplus.
May 18, 1933
Congress establishes the Tennessee Valley Authority (TVA) to construct dams and power plants along the Tennessee Valley electricity will go to residents, many of whom lacked it previously, and fertilizer will be sold.
May 27, 1933
Congress passes the Federal Securities Act to monitor and regulate stocks and bonds.
June 6, 1933
Congress passes the National Employment System Act.
June 13, 1933
Congress passes the Home Owners Refinancing Act to provide mortgage money and other aid to homeowners. It will go out of business in June 1936 after providing loans for some one million mortgages.
June 16, 1933
The final day of the “Hundred Days” session. Congress passes the National Industrial Recovery Act (NIRA) establishing the Public Works Administration (PWA) and the National Recovery Administration (NRA).
The PWA is authorized to supervise the construction of roads, public buildings and other projects while providing employment. Secretary of the Interior Harold Ickes is tapped to head the PWA.
The NRA’s goal is to stimulate competition and benefit producers and consumers by implementing various codes to establish fair trade. Compliance was to be voluntary those who cooperate received the blue eagle “seal of approval.” NRA is to be directed by General Hugh Johnson. It will be declared unconstitutional by the Supreme Court in May 1935.
Congress also passes the Farm Credit Act and the Banking Act of 1933 (which establishes FDIC).
The Gold Standard Throughout U.S. History
WHAT IS THE GOLD STANDARD?
Over the course of history, Gold has remained a medium of exchange longer than nearly any other form of currency. But in today's modern world, you are much more likely to encounter government-issued paper money. To understand the connection between the two, we must define the Gold standard.
Perhaps the simplest Gold standard definition is a system in which a currency's value can be defined in terms of Gold and currency can be exchanged for Gold. Many also define the Gold standard as a system in which a nation actively controls its money supply in order to maintain a set Gold price.
WHAT IS THE GOLD STANDARD'S ROLE IN AMERICAN HISTORY?
The United States' complicated history with the Gold standard can be broken down into five periods:
- From 1792 to 1862, the dollar was backed by a bimetallic system of both Gold and Silver.
- This period was followed by a fiat monetary system until 1879.
- The nation held a full Gold standard from 1879 to 1933,
- A partial Gold standard followed between 1934 to 1971.
- Finally, from 1971 to the present day, the United States again holds a fiat monetary standard.
ESTABLISHING THE BIMETALLIC MONETARY SYSTEM (1792-1862)
With the ratification of the U.S. Constitution in 1788, Congress gained the authority to develop a national currency. The Coinage Act of 1792 not only established the U.S. Mint, but also fixed the dollar to 24.75 grains of fine Gold and 371.25 grains of fine Silver. Congress instructed that the very first coins must include representations of both liberty and an eagle. Thus, the first Gold coins were minted in denominations of $10 Eagles, $5 Half Eagles and $2.50 Quarter Eagles. Silver coins followed in denominations of Silver dollars, half dollars, and quarter dollars. Each coin contained its actual designated weight and value in Gold and Silver.
Global fluctuations in the supply of Gold and Silver applied significant pressure to this system. As an abundance of Silver mined from Central and South America flooded the market, coin traders began buying Gold coins with lower-valued Silver. Later, as Gold supplies increased globally with mining operations from California to Australia, coin traders purchased Silver coins with lower-priced Gold. Congress adjusted the official Gold and Silver value of the dollar multiple times during this period. However, adjustments often came too late, after traders had already profited from taking coins out of circulation.
ABANDONING THE GOLD STANDARD TO FINANCE THE CIVIL WAR (1862-1879)
In desperate need of funding for the Civil War, Congress passed the Legal Tender Act in 1862. Paper currency was guaranteed only by the full faith and credit of the United States and could not be redeemed for Gold. During this time, the Union printed $450 million in paper currency and inflation rose by 80 percent. By the end of the Civil War, the national debt had reached $2.7 billion.
In response to hyperinflation, Congress moved to decrease the money supply by discontinuing the production of Silver dollars. Bank defaults and an economic depression ensued but the move successfully reined in inflation. With the hope of bringing renewed economic prosperity, public opinion swayed toward a return to the Gold standard. In 1875, Congress passed the Specie Payment Resumption Act, which ensured that by 1879, all paper currency could be redeemed for Gold.
RETURN OF THE GOLD STANDARD AND CREATION OF THE FEDERAL RESERVE (1879-1933)
Deflation continued with distinct winners and losers across the United States. Bankers and those with significant savings, many of whom lived in the northeastern United States, benefited from increased economic stability. Gold redemption for paper currency meant their money and holdings grew in buying power. But for farmers and laborers, namely those in the southern and western United States, lower inflation meant lower wages. They were forced to lower the prices they charged for goods and services, and their debts became increasingly difficult to pay off. Farmers struggled to afford the mortgages on their land.
Those struggling under deflation and members of the Democratic Party grew in political power and called for an expansion of Silver currency, which would have increased inflation and provided immediate financial relief to many lower-income Americans. Meanwhile, Republicans promised strict adherence to a Gold standard as a mode of ensuring long-term economic growth and stability. Republican President William McKinley prevailed and further cemented the Gold standard by completely discontinuing the use of Silver as part of the dollar&rsquos valuation.
The Gold standard further evolved with the creation of the Federal Reserve System in 1913. This allowed the Federal Reserve to print paper currency while maintaining that 40% of the currency&rsquos value to be reserved in Gold. While this temporarily strengthened the nation&rsquos financial system, it could not protect against the Stock Market Crash of 1929 and the Great Depression that followed.
FDR&rsquoS MOVE AWAY FROM THE GOLD STANDARD AND THE BRETTON WOODS SYSTEM (1933-1971)
In 1933, President Franklin D. Roosevelt used executive authority to make it illegal for citizens to privately hold Gold outside of jewelry. All Gold coins and bullion were ordered to be turned into the government for compensation at $20.67 per ounce. By 1934, a new Gold price of $35 per ounce was set and guaranteed indefinitely. Private citizens could no longer redeem paper currency for Gold. Buying Gold for investment purposes was forbidden. It could only be used in transactions with foreign governments. A national stockpile of Gold would eventually be stored at Fort Knox in Kentucky.
The Federal Reserve was mandated to maintain stability according to the set Gold price. During this time, American paper currency provided a reliable standard for international trade and investment. In 1944, President Roosevelt worked with leaders across the globe to create the Bretton Woods system in which nations agreed to restrict inflation to no more than 1%. The Gold price remained set at $35 per ounce in the United States until 1971.
ADOPTION OF A FIAT MONETARY SYSTEM (1971-PRESENT DAY)
In 1971, as the Gold stockpile at Fort Knox dwindled due to international transactions, President Richard Nixon announced that foreign countries could no longer redeem dollars for Gold. Moving forward, paper currency was ensured only by the full faith and credit of the United States and a fully fiat monetary system was adopted.
Demand for federal funds led to double-digit inflation into the 1980s. Some recommended a return to the Gold standard to rein in inflation. The Federal Reserve, however, gained support from President Ronald Reagan in its efforts to reduce the money supply and thereby reduce inflation without being restrained by the Gold price. In 1985, the U.S. Treasury began selling Gold coins to the public for the first time in more than 50 years.
CALLS FOR A RETURN TO THE GOLD STANDARD, HOW TO DEFINE GOLD STANDARD IN THE MODERN WORLD
As of 2019, no countries in the world are known to hold to a Gold standard. Returning to a Gold standard in the United States, however, is a frequent topic of political debate, even as experts struggle to define Gold standard in the modern world.
The main argument in support of returning to a Gold standard is its potential to tamp down inflation. This is because the money supply would be restricted by a largely static global Gold supply. Adopting the Gold standard would likely reduce government spending and debt because the government would not have the ability to simply print more money to fund its actions. Some experts believe this would drastically reduce needless spending in all areas of the government, ranging from the military to social programs. They also believe this would ensure balanced budgets, promote saving and set the stage for long-term economic growth and prosperity.
Despite its potential benefits, advocates have struggled to agree on a feasible plan for returning to the Gold standard nor have they determined a consistent Gold standard definition. Some define the Gold standard as a system where Gold prices can fluctuate according to the open market. Others believe Gold prices would need to be set artificially low or artificially high by the Federal Reserve in order for the Gold standard to be re-adopted nationally. In today&rsquos global economy, the adoption of the Gold standard would require cooperation not only from all sectors of government but also both political parties and a number of international governments.
Many criticize the Gold standard because it does not empower the Federal Reserve to easily increase the money supply during recessions, times of war or other emergency situations. For this reason, the Gold standard is often deemed outdated and inflexible when compared to a sophisticated technologically advanced and research-based Federal Reserve.
The Federal Reserve, for example, is largely credited with leading recovery efforts and restoring the country to low unemployment following the Great Recession beginning in 2007. Some experts also believe the Gold supply and Gold price are not as stable and reliable as some profess them to be. For example, the current Gold price fluctuates daily and has increased dramatically in recent years, notably during the Great Recession. Opponents also point to historical examples of how the Gold standard did not guard against the Great Depression or several bank failures.
Horns of a trilemma
Why do governments risk the bad publicity of restricting gold? This is linked to a cornerstone of macroeconomics known as the monetary policy trilemma. This states that countries must choose between two of the following and can’t generally do all three at the same time: (1) setting fixed exchange rates (2) allowing capital to move freely over international borders and (3) being able to independently set interest rates and print money (in other words, control monetary policy).
In the 1930s system, countries generally chose fixed exchange rates linked to gold, plus free capital movement and sacrificed control of monetary policy. The system came under more and more pressure because too many investors were trading in their money for gold. One way for the US to take enough control of monetary policy to print more money was to impose various capital controls, including seizing gold.
Today, the situation is different because western economies have free-floating exchange rates so they have control over monetary policy and can allow capital to move freely. This means that during a crisis, they can print money and cut interest rates without having to impose controls on the likes of gold.
In fact, any direct meddling by governments in the gold markets today would likely be counterproductive. It would increase investor anxiety and encourage them to rush to other assets with similar properties such as silver or other precious metals. Those who hold gold are therefore probably safer than they might have been in the past.
There are alternatives open to governments besides outright gold nationalisation. For example, when the UK left the international gold standard in 1931, the devaluation of the pound put pressure on other currencies such as the Dutch guilder. In response, the Netherlands imposed a variety of restrictions on gold that stopped short of confiscation.
Again, this kind of move is unnecessary in today’s era when countries control their own monetary policy. Gold will probably remain a safe haven on the sidelines – unless countries felt they had to sell their reserves aggressively for some reason, say to reduce debts. Even in the current crisis, that’s not on the horizon. But the one lesson from history that all investors need to bear in mind is that in times of crisis, anything goes.
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Going Off The Gold Standard Halted The Great Depression -- Or Caused World War II?
The prospect of a Federal Reserve Board nominee in Judy Shelton has led to all sorts of commentary about how kooky the gold standard is. Judy Shelton has said favorable things about gold and the monetary system, and on have come the charges that no serious economist advocates gold, gold limits flexibility in a crisis, gold is not modern, gold-standard people are "goldbugs," gold played a major role in causing the Great Depression, etc.
We just had to fight WWII. Washington DC, USA.
About that last point. Is it ever a verity in contemporary economics. Yet as Nathan Lewis has shown, prior to the mid-1980s, the view that there were gold-standard causes of the Great Depression had no adherents, including across the mass of progressive academia. Things changed with work of once-of-Harvard economics professor Barry Eichengreen that charted how adherence to the gold standard in the 1920s and 1930s correlated to the degree a country fell into the Great Depression. Today at places like the National Bureau of Economic Research, it is au courant to point out that on Franklin D. Roosevelt's suspension of the gold standard in 1933, the nation grew like never before.
Bash, bash, bash. Economists surveyed by the University of Chicago—such a top place, and how rigorous it is!—found zero support for a gold standard. As John Tamny beautifully pointed out, even John Cochrane of the Hoover Institution had to show to progressive academia that he's no kook by broadcasting his opposition to gold. Here comes tenure.
Big happy professional consensuses have one nasty collateral intellectual effect. They lead to stunning complacency about important issues. Take history, in fact the central events of the 20 th century, the Great Depression and World War II. The consensus on gold has done major harm to our understanding of these events.
The first point in the consensus is that the major nations' going off gold through 1933 curtailed the Great Depression, which was at its most severe from 1930-33. The United Kingdom, for its part, went off gold in September 1931, at the very moment the Japanese, with the invasion of Manchuria, began what would develop into World War II. Mere correlation? The former president of the American Historical Association, Akira Iriye, has written the following concerning the early 1920s Washington conference of the powers relevant in East Asia:
"All the Washington signatories were linked to one another through their acceptance of the gold standard….[T]he mechanism called upon nations to accept gold as the medium of international economic transactions, to link their currencies to gold, and to maintain the principle of currency convertibility. Through such devices, it was believed that commercial activities across national boundaries would be carried out smoothly for the benefit of all."
A trade-dependent nation witnessed the elimination of the agreed-upon basis of international currency convertibility and right away took untoward steps. Preliminarily, it appears that going off gold touched off the first stages of World War II.
As for FDR, to Iriye he "showed a willingness to give up the principle of international co-operation to preserve the gold standard in favor of a more flexible policy that would enable the nation to act unilaterally to regulate the price of gold and the rates of exchange between America and other currencies. Roosevelt was determined to focus on domestic recovery and showed little inclination for becoming bogged down in international issues."
The largest foreign war the United States ever fought was against the Empire of Japan, 1941-45. What was it that led to such an antagonism? The United States under FDR maintained indifference when not hostility toward consistent currency convertibility, whose main hallmark had long been the gold standard. Japan responded by strengthening its geopolitical hand in the progressive invasion of China, yet found no willingness to compromise on the part of the United States.
Could a grand bargain in favor of re-instituting gold in the 1930s have forestalled World War II? The case is intriguing. What is clear is that currency convertibility symbolized by gold underlay the Japanese attitude of cooperation prior to the Great Depression, FDR was adamant in limiting his embrace of gold, and the Japanese did not like it and took extreme, fruitless steps to get the U.S. to soften its position. And the war came.
The other academic chestnut is that World War II ended the Great Depression. We have to appreciate the obvious implications here. Then the New Deal did not? Surely a major reason FDR violated Washington's precedent and made a bid for a third presidential term in 1940 is that he knew history would remember him, if a two-term president, as the one who was supposed to solve the Great Depression but failed to. If we believe the war solved the Great Depression, did not FDR suppose as much as he contemplated war and reelection in 1940?
Yet FDR also went off gold. The war proved necessary to clean up the mess of 1933-40, of a country thoroughly convinced as of December 1941 that hard times had not really gone away. The correlation is simple. FDR went off gold, and two terms later he found himself needing a war to save the economy and his reputation very badly.
The professors and intellectuals opposed to the gold standard are academic gym rats, like the people who can pump iron and buff their muscles and look in the mirror but can’t play a sport outside to save their life. The anti-gold cognoscenti make a point of broadcasting their degrees, affiliations, top-journal publications, and paper-of-record quotations while distorting history (let alone economics) as a consequence to such a degree that immense questions of the first importance to this nation's and the world’s development are left poorly treated and thus wide open and functionally unaddressed.
It is telling that Brad Delong, one of the biggest wannabe academic bullies against gold, once said that after reading Iriye, he was still befuddled about how war came in East Asia. If the pseudo-intellectuals could get over their gold prejudice, they might get a clue.
Gold confiscation may sound preposterous to investors used to securities or real estate. But it’s happened in the past enough times to make it a reasonable concern for those uneasy about unsolvable debt levels, runaway government spending, and continual central bank money creation.
When a grab is made for people’s savings, governments don’t bother to confiscate instruments like stocks and bonds and savings accounts—those can be wiped out by simply devaluing the currency. But when times are really tough, governments have “requested” citizens turn over their gold—the one asset they’ve historically been unable to control, since it’s not someone else’s liability.
When a gold confiscation happens, there unfortunately aren’t a lot of viable solutions. If your government declares it illegal to own a meaningful amount of bullion, you’d have little choice but to comply. Either that or play the role of a fugitive—with the prospects of financial penalties, forcible confiscation of your metal, and even jail time waiting for you.
Many investors believe gold won’t be confiscated today because it’s not part of the monetary system like it was during the U.S. nationalization in 1933, under Roosevelt. While it’s true we’re not on a gold standard today, if the crisis gets bad enough any and all viable solutions could be on the table. Debt in all developed countries is unpayable, for example, especially when you add in unfunded liabilities… where could the government get funds to service it all? One source could definitely be gold.
The sober reality is, while lower than in the past, the risk of a gold confiscation is not zero. The world today can be an uncertain place, and what were once “local” issues can rapidly escalate and have global consequences. This does not mean, however, that we are suggesting a gold confiscation is imminent or even probable simply that it could happen if one or a series of events having significant worldwide implications occurs. Without official gold-backing on most major currencies today, the specific motivation to “confiscate” gold that existed during many previous confiscations barely exists today. But as you’ll see, even that hasn’t stopped modern government’s without a gold standard from doing the same, ostensibly as a form of currency controls to slow down market-driven devaluation.
The “Solutions” to Confiscation Risk
There’s lots of speculation floating around the Web about what one might do if gold was confiscated again. Unfortunately, the majority of the most common solutions don’t hold up to much scrutiny.
Some investors assume silver would be exempt. That’s usually because past confiscations mainly focused on gold, since silver wasn’t part of the monetary system. However, what many investors don’t know is that a year after the 1933 confiscation order, President Roosevelt signed Executive Order 6814 that “required the delivery of all silver to the United States for coinage.”
Many dealers claim numismatic coins would be excluded, since there was an exception made for rare coin collectors in 1933. But as history will show, during past confiscations the onus was on the investor to prove they were a coin collector and not a bullion buyer. Unless you owned a substantial amount of rare coins, you were automatically deemed a bullion owner, not a collector.
The uncomfortable truth is, no one knows exactly what form a confiscation could take, or how new laws might be enforced. And that’s part of the problem. As Mike Maloney said well in his best-selling book, Guide to Investing in Gold and Silver:
“Confiscation all comes down to this: the government makes the rules, changes the rules, and enforces the rules. Though it lacks the moral right, it can create legal authority. Though it lacks the constitutional empowerment, it can turn a blind eye to the Constitution… The Constitution did not stop the government from taking people’s gold in 1933.”
Political leaders can and will do whatever they deem necessary at the time. In any way they see fit. For as long as they think it’s needed.
When the gold investor considers the number of ways a confiscation could take place, how long it could last, how easily the government could change the rules and how deeply it could reach—all against the backdrop of an economic or monetary crisis—it underscores the need to put a viable strategy in place.
What’s really viable is a lesson best learned by the mistakes and successes of the past…
Why Gold Confiscation Could Happen – It's Happened Before
Since 1933, there have been a few notable gold confiscations around the world.
The specific circumstances varied, but there was one common thread to all of them: they all arose out of a financial crisis. As government coffers dwindled and reached emergency levels, politicians didn’t hesitate to grab the net worth of private citizens. And in many cases it was portrayed as patriotic your country is threatened—help save your nation!
Here are some gold confiscations that have occurred within the past 80 years…
United States Gold Confiscation—1933
Labeled Executive Order 6102, President Franklin Roosevelt signed on a law on April 5, 1933 “forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.”
It basically meant that private owners were required to take their coins, bars or gold certificates to a bank, and exchange them for US dollars at the prevailing rate of $20.67 per ounce.
Why did he do this? The US was on a gold standard at the time, so hoarding gold (i.e., money) was seen as a threat to the stability of the country’s financial system. Remember how bad things got… banks were shut, unemployment soared, bread lines formed, civil unrest grew, and the government couldn’t make its debt payments. Roosevelt desperately needed to remove the constraint on the Federal Reserve that prevented it from increasing the money supply the Great Depression was already four years old and wasn’t showing any sign of abating.
Within nine months after making gold illegal to own, the president raised the official price to $35 per ounce. The dollars those ex-gold owners received in exchange had just been devalued by 40%, overnight.
And the US government was serious about you not hoarding gold. As Wikipedia reports…
“Under the Trading With the Enemy Act of 1917, as later amended by the Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up to $10,000, up to ten years in prison, or both. Numerous individuals and companies were prosecuted.”
Worse, the ban on private ownership of gold in America—the home of the free—lasted over four decades. Not until January 1, 1975 could US citizens own more than $100 in gold again.
Australia Gold Confiscation—1959
The Australian government similarly nationalized gold.
The law, part of the Banking Act in 1959, allowed gold seizures of private citizens if the Governor determined it was “expedient so to do, for the protection of the currency or of the public credit of the Commonwealth.” In other words, they made it legal to seize gold from private citizens and exchange it for paper currency.
The country’s Treasurer stated in a press release that followed, “All gold (other than wrought gold and coins to a limited extent) had to be delivered to the Reserve Bank of Australia within one month of its coming into a person's possession.”
The law also said you weren’t allowed to sell gold, except to the Reserve Bank of Australia (their central bank). Nor could you export any gold (send it outside the country) without the bank’s permission.
While it is unclear whether or not the country moved ahead with active seizures, or just how many citizens complied, the law still destroyed the local private gold market overnight.
Like the US ban, this rule wasn’t short lived either. Reports indicate it stayed on the books until 1976, a full 17 years, before being “suspended.”
Great Britain’s Gold Ban—1966
Ever since Great Britain went off the gold standard in 1931, their currency had been falling. As the decline stretched from years into decades, many investors began to store gold overseas, worried their country might never recover. Who could blame them? Their standard of living was threatened.
To stem the decline in the Pound Sterling, in 1966 the government banned private citizens from owning more than four precious metals coins. It also blocked imports of gold coins (a common move to keep currency from being exported, similar to modern day tariffs on gold imports in places like India).
The only exemption to owning more than four coins was to prove you were a collector. You were required to apply for a license, and then an officer from the Bank of England would determine if you were a true collector or not. If not, we’ll take your bullion, thank you very much.
The important distinction about this gold ban is that it occurred when Great Britain was not on a gold standard. In other words, we have historical precedence that gold was confiscated without it being part of the monetary system. Gold is not part of the monetary system today, either.
Like most confiscations, this law lasted a long time—until 1979, a full 13 years.
See Any Patterns Here?
These three gold confiscations have some things in common. They all…
1. Were imposed by Western governments. These were advanced societies, among the richest countries on the planet. And yet they all confiscated gold.
2. Arose out of economic crisis. Each government had abused its finances so badly that it eventually nationalized privately held gold from citizens.
3. Lasted for a LONG time. Of these confiscations from advanced economies, the shortest was 13 years.
4. Completely forbid any type of hoarding of bullion. Only true collectors were exempt, and only those pieces that were truly classified as rare. And you had to prove it. Interestingly, gold jewelry was not part of any of these confiscations.
Unfortunately, there are some nastier gold confiscations from history. These involve…
History of Gold Confiscation: It's Surprisingly Common
It won’t surprise you that in nations ruled by an oppressive regime, gold was a natural target to grab funds for the government…
Italy’s Gold “Donation”
Benito Mussolini—Italy’s prime minister turned dictator—tried to fight a nasty recession by introducing the “Gold for the Fatherland” initiative in 1935. He “encouraged” the public to “voluntarily donate” their gold rings, necklaces, and other forms of gold to the government. In exchange, citizens received a steel wristband that bore the proud words, translated, “Gold for the Fatherland.” It’s said that even his wife Rachele donated her own wedding ring in a show of solidarity.
The gold was melted down and made into bars, then distributed to the country’s banks. The government netted 35 tonnes (1.23 million ounces) from citizen “donations.”
Germany’s Confiscation of Czech Gold
Hitler’s Nazi party pulled a tricky scheme in 1939… after the invasion of Czechoslovakia the year before, the Bank of International Settlements, chaired by Bank of England director Otto Niemeyer—a German no less—instructed the Bank of England to transfer £5.6 million of gold from the Czech national bank to the Reichsbank.
Even though the gold belonged to Czechoslovakian government, and even though English authorities had been warned of the possible transfer, it went through without a hitch. To mask the theft, Germany’s central bank understated its official reserves later that year.
Saddam and Fidel
The madman of Iraq and the communist oppressor of Cuba both confiscated gold, art, jewelry, etc. These brutal dictators took whatever they wanted, at the point of a sword or gun.
As you might surmise, citizens were not compensated when their holdings were seized—unless you count remaining alive as compensation.
Based on interviews I’ve conducted with two large gold bullion dealers in Russia, the old Soviet Union has historically viewed gold and silver as a matter of national security. Therefore, private ownership in any form—except jewelry and numismatic coins—was strictly forbidden. People went to jail for owning a gold bar.
And in spite of the Russian central bank being one of the biggest buyers of gold since 2008, those old laws are still on the books. It is illegal to buy or sell bullion bars except at a bank that has a precious metals license (and very few have them)… it is a criminal offense to buy or sell a gold bar from a friend or relative… transporting bars has strict rules and can send you to prison if you break them… it is illegal to take bullion bars out of the country… buying and selling foreign-made bars is also illegal.
These laws are not as strictly enforced today, but they remain on the books and thus could be easily activated again. You can buy gold coins, but they’re not abundant and are in poor quality.
“India announced it was resuming its ban on the export of silver. India is believed to have the largest silver hoard and the government there freed exports earlier this year as a means of earning taxes levied on overseas sales. However, most silver dealers minimized the significance of India's move yesterday. As one dealer explained, 'Smuggling silver out of India is so ingrained there that the ban will have no effect on the flow. It never has. Indian silver will continue to ebb and flow into the world market according to price.’”
• The difference in gold confiscations between the plunderers vs. those from advanced economies is that the plunderers were more oppressive about the confiscation, typically took more than just gold, and of course were more brutal in carrying it out.
There’s another crucial distinction. Except during times of active persecution, there is no historical precedence of gold jewelry being confiscated. If a nation operated under the rule of law, seizing jewelry wasn’t part of the government’s strategy.
The reality is that in a crisis, we could potentially face a lethal combination: a desperate government, with your assets ready for the taking.
The point to all this isn’t to predict that there will be a gold confiscation. The idea is be aware of the risks and to have a viable plan in place to combat one if it occurs.
But is there really such a strategy?
On the surface it would seem that short of renouncing your citizenship and moving out of the country, there are precious few options to protect against such a draconian act.
But there are a couple strategies that have historically been effective in combating a gold confiscation…
Out of Jurisdiction
Storing gold and silver where a government is less likely to be able to reach it quickly and easily is smart buffer to put in place.
First, as many have noted before, keeping it outside the banking system is a good step. Many references cite how banks have been known to hypothecate gold, i.e. lend it out to someone other than its rightful owner, putting it at systemic risk. Just as importantly, during the modern “bail-ins” we’ve seen in debt-stricken countries, banks were often working hand in hand with governments to seize assets long before citizens found out what was happening. The threat of being cut-off from central bank liquidity is an existential threat to banks, and thus they are not known for going to bat for consumers in court to block overreach like an independent vault provider hopefully would.
Another step further removed is storing overseas—also in a vault outside the banking system. It puts your assets one step further out of reach. Less low hanging fruit, as they say. Without the ability to take quick possession, you have more time and distance to fight such an order.
But even this is not bulletproof. A desperate government could just as well declare all personal gold holdings be repatriated, regardless of where they’re stored. It’d be a spinoff of the old tax joke, “How much gold do you own. Give it to us.”
If the company holding your metal is a domestic entity, they might be forced to comply anyway, at least in reporting your holdings so they can be taxed in lieu of surrender.
Some suggest you should instead do business with a foreign company. But that adds a different risk, and one that comes with a dubious level of added protection. First, you give up access to the local rule of law. If a vault in Singapore swears your gold is there, what will you do if it ends up not being the case? When dealing with a domestic company, at least you can turn to the court system.
Second, a foreign company can be compelled to cooperate with a big enough foreign government, like the US. As investors using private banking services in Switzerland discovered in recent years, the threat of being cut off from banking with the US will quickly convince a company, or its host government, to comply with a confiscation order at least by reporting holdings.
Even if it does not relent to pressure from abroad, the foreign entity would almost certainly refuse to deliver, buy, or sell precious metals in a jurisdiction where authorities have issued a confiscation order, leaving you only with the option to relocate elsewhere—hardly better, and often much worse than using a domestic provider you have real recourse against.
Bottom line, while not risk free, private foreign vault holdings, whose affordability surprises many precious metals investors, stewarded by a company based in a nation with a historically strong rule of law, can be one of your best lines of defense if confiscation is a concern.
The Elizabeth Taylor Solution
You probably know that the queen of the silver screen loved jewelry. Her collection fetched over $156 million after her death. She even wrote a book about her jewelry. Indeed, it’s hard to find a picture of her without gold, diamonds, or pearls draped over her neck or wrists.
You may also know that Elizabeth Taylor traveled a lot. At various points in her life she had homes in Beverly Hills, London, and Switzerland, among other places. She even traveled to Iran a few years before the Iran Hostage Crisis.
And here’s an interesting fact about her travels: she always took some jewelry with her—and walked right through customs with it. No messing with customs forms, no requirement to declare a financial asset.
This circumstance remains true today. You likely know that when crossing borders, travelers are often required to complete customs paperwork and declare large amounts money they are carrying, anything over $10,000 for travel to/from the US for example. The new rules specifically mention gold, and also that the price of the gold determines if you are at the reporting limit (not the face value on a coin). That means 7 ounces of gold would be the maximum you could carry at $1,300 gold. You’d be at risk with 5 coins when gold reaches $2,000/ounce.
Since gold jewelry is not considered a financial asset under US law, it does not require reporting. Nor have we discovered any country where it’s handled differently, though always be sure to check the laws along your itinerary.
You and your loved ones can employ your very own Elizabeth Taylor solution.
Consider the advantages you’d possess if you wanted to transport some gold outside the country… it would be a lot easier to hop on a plane wearing a few necklaces or bracelets than carrying a stack of gold coins or bars. Consider the hassle you could avoid passing through customs, as well as the threat of your bullion coins being questioned or seized.
But what about confiscation? As history has shown, in the developed world, gold confiscations have targeted monetary metals, like coins and bars. Jewelry was spared. Only in oppressive nations, ruled by dictators, was it a target. In other words, the resident of a developed nation that owns gold jewelry has an asset that is far off the radar of appealing assets to grab.
Which is why we believe that bullion-grade jewelry is one of the most unique and important asset classes to own if confiscation is a concern…
Gold Without Borders: GoldSilver’s Investment Grade Gold Bullion Jewelry
The problem with most “gold” jewelry sold in the West is dilution. It’s often made with cheaper alloys that contain only a fraction of gold, and is very expensive relative to the actual precious metals content. Mark-ups are easily two and three times the gold value, and it’s not hard to find it four or even five times higher.
That takes gold jewelry far from its roots, when it was a form a wearable wealth, meant to keep assets close at hand. Traditionally in Europe and Asia, gold jewelry was a more portable alternative to art, heirloom furniture, and land as outside-the-bank assets that held their value and were easily passed between generations. Today in India, China, Thailand and elsewhere the tradition remains—the Thai currency, Baht, for example, is even named for a common jewelry style that pre-dates it.
And that’s exactly what we’ve recreated with our exclusive Gold Without Borders jewelry line.
These investment grade 22-carat (91.6% gold, same as an American Eagle coin) and 24-carat (99.99% pure gold) pieces are an affordable alternative to the mostly costume jewelry you find in today’s stores. Classic designs that provide much more bullion for your money.
And of course, they’re beautiful.
Bullion jewelry is a real asset that is both portable and practical—you can wear it, transport it, and a confiscation order is likely to bypass it. Discreet, wearable wealth.