Not many Americans are still living who remember the day that President Franklin D. Roosevelt declared that the "hoarding" of gold and silver bullion by "subjects of the United States" constituted a "serious emergency."
To be exact, the date was March 9, 1933. And what to do in a serious emergency involving "hoarding" of gold and silver? Confiscate the offending "hoards," naturally.
To be fair, Roosevelt only ordered the partial confiscation of gold and silver bullion. When "subjects of the United States" (which included my grandparents) turned in their bullion, they received U.S. dollars in return, at the official price of US$20.67/ounce. Once the operation was reasonably complete, the confiscatory part occurred: the government unilaterally revalued gold at US$35/ounce.
The revaluation was possible because this operation occurred in the days before currencies traded on the open market. Currencies were fixed in value, generally in terms of specific weights of silver and gold. The U.S. dollar, for instance, had an official value of US$20.67/ounce, set in 1834, until Roosevelt devalued it 40% in 1933.
The question I’m often asked is, "could gold (and silver) confiscation happen again?" And, if so, "what can I do about it?"
The answer to the first question is, "yes, definitely." The legal authority Roosevelt used to confiscate your parents’ or grandparents’ gold and silver—the "Trading with the Enemy Act"—remains on the books. Indeed, in a remarkable letter written in 2005, the Treasury Department claimed that it had the power to confiscate gold, silver—and everything else. (Click here for details).
What might lead to a second gold and silver confiscation? President Roosevelt’s issued his 1933 emergency order when the U.S. dollar was still backed by gold. At that time, both individual citizens and foreign central banks could exchange U.S. dollars for gold. Today, no holder of U.S. dollars is legally entitled to exchange their dollars for gold at the U.S. Treasury. Indeed, only a small minority of U.S. citizens own precious metals in any form.
However, if a day ever comes where foreign countries demand that the U.S. Treasury pay its debts in gold—not in U.S. dollars—a second confiscation could occur. I don’t see a second confiscation as particularly likely, simply because so few Americans own any gold or silver bullion. The takings would likely be so slim it simply wouldn’t be worth the effort.
Answering the second question is a lot harder. Tune in tomorrow for my thoughts on this matter.
Copyright © 2008 by Mark Nestmann
