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Imagine living in a country where the government suddenly decides to make it illegal to hold a certain type of asset, and goes on a systematic process to relieve its citizens of such an asset? Such actions happen in wartime and by politically-corrupt regimes but how about private-asset seizure in the good old U.S.A.? Well, it has happened before. [The 64 trillion (in keeping with the times) dollar question is: “Will it happen again?”] Words: 585
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited [..] excerpts from Peter Hodson’s (www.sprott.com) original article* for the sake of clarity and brevity to ensure a fast and easy read. Hodson goes on to say:
In 1933 the United States was in the throes of the Great Depression, and the Fed needed to devalue the U.S. dollar. Since the dollar at the time was backed by gold, however, this created a serious problem. What better solution than for the U.S. government to change the rules to “save” the country by seizing all the private gold in circulation first, and then devaluing the currency? And that is exactly what happened!
On March, 1933, under Executive Order 6102, President Roosevelt declared it illegal for private citizens to own gold (in an amount exceeding US$100 belonging to any one person) and U.S. citizens were given less than two months to turn in all of their gold to the Federal Reserve Bank in return for US$20.67 per ounce saying, in part:
“Many persons throughout the United States have hastened to turn in gold in their possession [as previously requested] as an expression of their faith in the Government and as a result of their desire to be helpful in the emergency. There are others, however, who have waited for the Government to issue a formal order for the return of gold in their possession. Such an order is being issued today.”
Can You Afford to Have Faith in Your Government?
Once the government felt it had increased its gold reserves by enough, it devalued the U.S. dollar by 40%, and the price of gold was set at US$35 per ounce. Citizens were robbed of the 69% profit they would have enjoyed had they been allowed to keep their gold. [So much for having faith in the Government and being helpful in the emergency!]
The Act made it illegal to own gold from 1933 until 1974. At the end of 1971 the U.S. dollar was devalued again, by 8%, and gold was set at US$38 per ounce. Three months later it dropped again, and gold was set at US$42.22. In 1974 President Ford signed the law to make it legal once again for U.S. citizens to own gold. It immediately rose in value – and you know what it is doing these days.
Conclusion
It is not very likely that such a gold “seizure” would happen again because, since the U.S. dollar has no actual backing or value other than a promise, there would be no need for the government to take such action. That being said, there is a big lesson here – during a fiscal crisis, governments–even democratic, stable ones — can pretty much do whatever they want.
*http://www.nationalpost.com/related/topics/story.html?id=2973612
*http://www.sprott.com/Docs/ViewFromTheStreet/2010/05_01_2010%20Gold%20seizure%20teaches%20a%20lesson.pdf