The chart below,
which is a time series showing the total "Gold
Held by the US Treasury and the Federal Reserve" (which for
all intents and purposes are interchangeable), demonstrates vividly
the moment when the US government enacted Executive Order 6102,
aka the "forbidding the Hoarding of Gold Coin, Gold Bullion,
and Gold Certificates within the continental United States"
order which criminalized the possession of monetary gold "by any
individual, partnership, association or corporation."
But
not the government of course. Spot the moment after which
gold confiscation by the US government (also known as USD devaluation)
from its citizens was legalized.
The actual
April 5, 1933 order, which in the coming years will make a repeat
appearance with absolute certainty, is below.
What was the
point of Executive Order 6102? It was two fold.
- First, in order to make the confiscation legitimate, the US government required the delivery of all gold coin, bullion, and certificates to be concluded by May 1, 1933 in exchange for $20.67/ounce. Several months later, the new, official gold exchange price (which however was merely the government's bid as nobody could actually buy gold at this price) became $35.00, which remained until 1971 when the last trace of the dollar's pseudo convertibility into gold was wiped out by Nixon. In effect, what FDR did was to devalue the USD by 70% overnight.
- Second, not only did the government remove the incentive for ordinary citizens to hold gold by establishing price and criminal controls over possession, it also changed the rules in the middle of the game allowing it to build up a massive gold hoard of over 8000 tons today which is maintained at Fort Knox, and is, to the best of our knowledge, unauditable by any mere mortal. Critically, it made the US government the sole source and monopoly agent of gold purchases, using reserve fiat currency it could print with impunity, beginning in 1933 and continuing through 1974 when the limitation on gold ownership was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373, which went into effect December 31, 1974. In summary, the US government, which is now the largest official holder of physical gold in the world, had 40 years of uncontested zero cost gold accumulation in which it could build a gold inventory that was second to none.
As for the
process the government had in place to deal with those who refused
to voluntarily hand over their gold quietly, curiously there was
only one case of prosecution, which however should make it very
clear that holding gold in "authorized" bank safes is about the
dumbest thing one can do the next time the US government decides
to devalue the dollar, and change the rules.
The circumstances of the case were that a New York attorney, Frederick Barber Campbell, had on deposit at Chase National over 5,000 troy ounces (160 kg) of gold. When Campbell attempted to withdraw the gold Chase refused and Campbell sued Chase. A federal prosecutor then indicted Campbell on the following day (September 27, 1933) for failing to surrender his gold. Ultimately, the prosecution of Campbell failed, but the authority of the federal government to seize gold was upheld, and Campbell's gold was confiscated.
The fact that
the custodial bank of the 5000 ounces of gold is the bank that would
subsequently become JPMorgan is not lost on us.
Finally, to
those who have some gold ETF certificates in a brokerage account,
which by law are the possession by DTCC's Cede & Co. –
a bank owned institution – we wish the best of luck to anyone
hoping to preserve of even recover any of the invested wealth in
such instruments.
And remember:
when in doubt, recall Bernanke's immortal words: "gold is not
money."
Reprinted
with permission from ZeroHedge.
August
28, 2012
JS
Kim is the Founder and Managing Director of SmartKnowledgeU, a fiercely
independent research & consulting firm that concentrates on
providing guidance in using the Precious
Metals of Gold & Silver to preserve and grow wealth with
a greater mission of fighting for the re-establishment of a sound
monetary system worldwide. The SmartKnowledgeU
Crisis Investment Opportunities newsletter has returned a cumulative
positive yield of +155.57% from its inception in June, 2007 to June,
2012 despite the massive volatility and banking cartel manipulation
of gold and silver. In the meantime, from 2001 until June 2012,
the S&P 500, when priced against gold, has lost 84% of its value.
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Source: What 40 Years of Gold Confiscation by the US Government Looks Like by Tyler Durden
