In 1933, American President Franklin Roosevelt created the Emergency Banking Act, which stated that those who owned gold must turn it in to an approved bank. This did not include any personal jewelry, however.
Executive order 6102 was a Presidential order signed by Franklin Roosevelt that forbade the hoarding of gold coins, gold bullion or gold certificates. The reasoning behind the order was to try to combat the depression. Times had been tough, and the hoarding of gold only made economic growth stall further. In addition, the order was designed to help the Federal Reserve increase the money supply during the depression, because the Federal Reserve Act required the Fed to have 40 percent gold backing on notes that it issued.
The Executive order required all those who owned gold coin, bullion or gold certificates to deliver them to the Federal Reserve on or before May 1, 1933. The order did, however, exempt certain cases of ownership, such as in certain industrial uses, art and other professions. In addition, people were allowed to have a small amount of gold ($100 in gold coins) or recognized collectable gold coins. The government paid people $20.67 per ounce for their gold. The price of gold from the Treasury was then raised to $35 per ounce. The profit that the government realized on the gold was used to fund the Exchange Stabilization Fund which was part of the Gold Reserve Act of 1934.
Numerous seizures and prosecutions followed as some chose to try to hold their gold. Eventually, it became legal for citizens of The United States to purchase, hold, sell or deal in gold after President Gerald Ford signed a bill stating so in 1974. It took his signature, along with an act of Congress, to repeal the previous laws regarding gold ownership.
Based on what occurred in the past, many often wonder if their gold could be confiscated today. Some would argue that yes, in fact, it could, while others would say there is no way. This seems to be a question that does not have a right or wrong answer. Here, we will outline some of the information surrounding the issue.
The U.S. dollar continues to lose value. In fact, the U.S. dollar has been declining for years. The dollar’s status as the reserve currency of the world is being threatened and does not enjoy the same security it used to.
Fiat currencies fail. Over time, these paper currencies lose their purchasing power.
Some type of potential currency crises could possibly reinforce the government’s appetite for gold.
Some people question the U.S. government’s gold reserves and feel that the reported gold reserves in Fort Knox and other locations do not really exist or are significantly smaller than reported. Some claim that a lack of independent audits of gold reserves makes the reported amounts seem a little less credible.
Sovereign debt issues remain a concern in today’s society. The U.S. has a large amount of debt, as many other foreign countries do.
1933 was simply a very different time. The government was fighting deflation, not inflation. Because the dollar was tied to the gold standard, taking in gold was the only way to increase the monetary base. Today, the Fed can simply print more dollars if and when it deems necessary, because the dollar is not tied to anything.
Even if the government did confiscate all of the gold out there currently, it would not even put a dent in the U.S. debt. The fact is that confiscating someone’s gold would really not serve much of a purpose for the government at this point.
Gold is now traded on open markets all over the globe. The United States does not dictate the price of gold. Unlike in 1933, the government has no way to control the price of gold and, therefore, confiscation could come with potential price risks.
Some state governments are now legalizing gold and silver as legal tender or money. It seems unlikely that these steps would be taken if there was a possibility of the government confiscating gold. If gold is recognized as legal tender in some states, then confiscation would equate to the government confiscating your money. Needless to say, it does not seem very realistic.
Gold, silver and other precious metals are typically held by wealthy people, and it is these wealthy people that support governments through taxes, campaigns, etc. It also seems very unlikely that the well-to-do in this country that own gold or silver would allow the government to confiscate their metals. They would likely fight such a law with every legal means at their disposal.
There may be easier ways for governments to deal with economic or monetary crises. Look at Cyprus last year where the government placed a significant levy on deposit accounts over 100,000 Euros. They chose to do this rather than have the taxpayers bear the burden of the bailout due to the large amount of foreign investment in their banks. The point is this was likely much easier for the government to do rather than go hunting for people’s gold.
We live in uncertain times and in an uncertain world. One must acknowledge different possibilities. We do, however, face different obstacles today than we did in 1933. In addition, the economic system is very different. One can research this issue and draw his or her own conclusions; however, it seems that the notion of government confiscation of gold is a bit far-fetched in today’s world.