This is an extract of an excellent article from zerohedge, which you can find here:
[begin extract]
In Asia, Vietnam looks set to tighten their gold legislation. Vietnamese and foreigners may soon be banned from taking gold bullion out of the country, and possibly even raw gold like nuggets and gold dust. Jewellery weighing more than 300g would have to be declared with customs and taxed.
Permits to remove gold would require 15 days for processing.
Vu Ngoc Lan, deputy director of the SBV's Legislation Department, said the circular (only a draft) will strengthen the management of gold bullion and raw gold to keep the market stable.
[end extract]
I personally think that this is a very alarming trend. Not only have China and Russia stopped exporting gold, buy they are also buying as much as they can get their hands on. I believe the reason for this is twofold. Firstly, these countries know that the USD is bankrupt and so they are reducing USD in their foreign reserve holdings and increasing gold bullion holdings and secondly, they know that if the fiat money system collapses, then it will be those holding the gold who will be the winners.
This is hardly new, in fact, throughout history, there have been many attempts by governments to sieze the gold of their citizens in order to prop up their paper currency. Here are a few examples.
Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States". The order criminalized the possession of monetary gold by any individual, partnership, association or corporation.
The order, signed during a time when there were mass bank runs as a result of the Great Depression, was rationalized on the grounds that hard times had caused "hoarding" of gold, stalling economic growth and making the depression worse.[1] The New York Times, on April 6, 1933 p. 16, wrote under the headline "Hoarding of Gold", "The Executive Order issued by the President yesterday amplifies and particularizes his earlier warnings against hoarding. On March 6, taking advantage of a wartime statute that had not been repealed, he issued Presidential Proclamation 2039 that forbade the hoarding 'of gold or silver coin or bullion or currency,' under penalty of $10,000 and/or up to five to ten years imprisonment."[2]
Posters were put up telling the people they had one month to hand in their gold.
Once the Gold was effectively confiscated from the People and was illegal to own. The Government raised the Value of Gold for International Transactions from the price paid to the people of $20.67 per troy ounce to $35 per troy ounce ($587 in 2010 dollars).
What this did was lower the value of the Dollar Instantly. While the International Value of Gold rose by +69%, it devalued the dollar by the same amount. The people found their dollars to be worth -69% less then when they accepted it. This made it even harder for the people to survive in what was already a Depression.
The seized gold was used to back the value of the US Dollar until the gold standard was abandoned in 1971 by President Nixon when it was realised that they did not have enough gold to fund the Vietnam War and thus the printing of the US Dollar as a fiat currency backed by nothing began.
The limitation on gold ownership in the U.S. was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373,[7][8] which went into effect December 31, 1974. Although, interestingly, it took another 3 years before it was legal to actually use gold as money, instead of a commodity of trade.
However, the Emergency Banking Relief Act of 1933 was never repealed, leading some people to believe that the US Govt could again begin seizing the gold of it's citizens if things get bad enough. Personally I think their model is to invade other countries and steal their gold, rather than taking it from US citizens.
An incredibly detailed coverage of this law is available in this essay by by David L. Ganz, J.D., which you can read here.
Among the fascinating things that i learnt from reading the above article is that the US Govt still values their gold holdings at $42.22 USD / Oz, which is the price it was set at by Nixon in 1973. Not only that, but because the Trading with the Enemy Act was never repealed, the President may declare the Federal Reserve a 'Legal Holiday' in the event of any kind of national emergency. This effectively allows the Fed to ignore the law completely. In case you think I am joking, here is the complete text.
Let's take a look at Title 12 of the United States Code, Sec 95:
Sec 95. Emergency limitations and restrictions on business of members of Federal reserve system; designation of legal holiday.(a) In order to provide for the safer and more effective operation of the National Banking System and the Federal Reserve System, to preserve for the people the full benefits of the currency provided for by the Congress through the National Banking System and the Federal Reserve System, and to relieve interstate commerce of the burdens and obstructions resulting from the receipt on an unsound or unsafe basis of deposits subject to withdrawal by check, during such emergency period as the President of the United States by proclamation may prescribe, no member bank of the Federal Reserve System shall transact any banking business except to such extent and subject to such regulations, limitations and restrictions as may be prescribed by the Secretary of the Treasury, with the approval of the President. Any individual, partnership, corporation, or association, or any director, officer or employee thereof, violating any of the provisions of this section shall be deemed guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000 or, if a natural person, may, in addition to such fine, be imprisoned for a term not exceeding ten years. Each day that any such violation continues shall be deemed a separate offense.(b)(1) In the event of natural calamity, riot, insurrection, war, or other emergency conditions occurring in any State whether caused by acts of nature or of man, the Comptroller of the Currency may designate by proclamation any day a legal holiday for the national banking associations located in that State. In the event that the emergency conditions affect only part of a State, the Comptroller of the Currency may designate the part so affected and may proclaim a legal holiday for the national banking associations located in that affected part. In the event that a State or a State official authorized by law designates any day as a legal holiday for ceremonial or emergency reasons, for the State or any part thereof, that same day shall be a legal holiday for all national banking associations or their offices located in that State or the part so affected. A national banking association or its affected offices may close or remain open on such a State-designated holiday unless the Comptroller of the Currency by written order directs otherwise.
Of course, the US was not the only country to pass such laws, In Australia part IV of the Banking Act 1959 allowed the Commonwealth government to seize private citizens' gold in return for paper money where the Governor-General "is satisfied that it is expedient so to do, for the protection of the currency or of the public credit of the Commonwealth."
The law was repealed January 30, 1976.
The bottom line is that bullion confiscation could definitely happen again, especially since we are in a situation at the moment so similar to the Great Depression. When the USA breaks out the Amero, they are going to need gold to back it, and there is much speculation as to how much gold the USA actually has, since much of it has not been audited for years. Also, in case you think the Amero is some kind of conspiracy theory...
Of course, the notes could be faked, but I think a North American Union makes alot of sense from an economic perspective. When the USD is at parity with the Mexican Peso, they could just confiscate a bunch of gold from the people as well as the governments of Mexico and Canada and use it to back the Amero.
Bottom Line, I guess, is that if you are going to keep your bullion somewhere, keep it in Switzerland, since their neutrality and banking laws make it highly unlikely they would ever pull such a stunt, since capital flight would crush the country into the ground. As far as invasion, every Swiss citizen does military service and every household is required to keep and maintain an automatic weapon, which means if you tried to invade, you would be essentially up against a standing army consisting of the entire population. This, combined with their mountainous terrain and their position of neutrality has kept the Swiss safe from invasion for many hundreds of years.
I would personally recommend http://bullionvault.com , which is a bailment company, not an ETF and has vaults in London, New York and Zurich. Bailment is very different to owning a derivative, in a situation of bailment, the company is expected to hold _your_ property. They cannot lend it out or do anything with it apart from store it safely. They also have a duty of care for your goods, meaning you can sue them if they take your gold, unlike the situation if a Bank backing an ETF collapses. Also, bullionvault publishes a daily audit of all the gold they have on bailment.
See, one thing many people do not realise is that gold ETF's like SPDR are in effect just fractional reserve banks using gold. If they take in 1kg of Gold, they can lend out 9kg, in the same way that banks lend out more money than they physically possess. So as you can imagine, in the event of a bank run, there is nothing left. Bullionvault on the other hand has a 100% Tier 1 Capital Ratio. Which is to say that if every customer wanted to withdraw money from them, they would have the gold to cover it.
My god this has been a long blog post. Anyway, I hope the information has been useful to you.
Best of Luck.
Christopher Carrion.
I'm surprised you received no comments. Nice post. Do you have any more information that is similar in nature and more current?
ReplyDelete