Sunday, December 6, 2009
Maybe I should be more paranoid as a Gold investor, but I'm not worried about Gold confiscation in the United States. The government has done such a good job of brainwashing the sheeple that I don't think it would be necessary or valuable. Gold investment flows to the paper Gold markets supplied by GLD and other ETFs, ETNs, and "pooled" paper accounts (a la kitco) is proof. I suspect money flows to paper Gold will continue to far overwhelm physical demand on the retail side. When that is no longer the case in the United States, my guess would be that the Gold bull market is just about over and it will be time to sell. Most Americans are convinced that Gold is just jewelry and/or a commodity and confused by its rise given that oil is not at all time new highs.
Too few people are interested in physical Gold in this country to make it worth the government's time to attempt confiscation. Back in the 1930s, the urge to hoard Gold was much stronger, because Gold was money at that time (by government decree). Gold is still money, but too many Americans put their trust in paper right now. I do think that any force majeure clauses invoked by our out of control corporatist/fascist government will be directed at paper Gold, since that's where the money flows are.
I actually would be much more worried if I were a Chinese citizen buying Gold. China is planning something, as it makes no sense for a government with a fiat currency to encourage their citizens to buy silver and Gold, the antithesis of paper money. I think at some point, Chinese citizens will be "encouraged" to part with their Gold for the good of the state. Talk about a great way to increase Gold reserves at a cheap price!
But for the U.S., I don't think a Gold confiscation is likely at all. Too few revenues would be obtained even if people complied with such an order. By creating artificial shortages of retail Gold (Gold Buffalos are done for the year, despite only coming out in October) and spreading misinformation through all the usual mainstream channels, the government is fighting this thing on the front end.
Those few hearty souls daring to venture into the physical markets are not the ones that the government wants to mess with, as they are already on the other side of the matrix. Keep in mind that a LARGE percentage of people back in the 1930s did not comply with the U.S. government order to turn in their Gold (smart folks!). Those who hold physical metal at this point aren't likely to hand it over to Uncle Sam anyway. And for those who envision military troops going door to door to "collect" Gold in a fiat world, the cost per unit of revenue gained (and per soldier lost) is not worth it.
I believe it is the paperbugs venturing into the paper Gold markets that may experience a confiscation and/or devaluation-like event. The paper Gold will simply be marked to market at some point and when their are 100 paper Gold claims for every 1 physical piece of Gold, a North Korean-style 99% devaluation of paper Gold seems the more likely route to screw retail investors in my mind. Alternatively, if such paper Gold instruments actually hold even a fraction of the physical Gold they are supposed to, why not just pick the low-lying fruit and take the whole hoard if you are a government in need of some Gold? If there is likely to be a real problem in the Gold markets, it will be paper Gold, not physical in my opinion.
I also think such a paper Gold disruption may be a perfect way for some larger holders to unload some physical Gold for a huge profit. Create a panic in the paper Gold market by exposing your intentional default at just the right moment, have the retail investors take a haircut on their paper Gold when it gets devalued by the market, then sell them some physcial Gold at a huge mark-up in the ensuing panicky scramble for real metal before the secular bull collapses on its own weight and comes to an end. Now you've screwed the retail crowd twice and you're back in the stock market just in time to catch the bottom! Sorry if this sounds a little cynical, but if you're going to engage in "what if" scenarios as an ant, you have to put yourself in the evil elephant's shoes. You can't get rich in a zero sum game by being nice.
I think the United States is very unlikely to have a repeat Gold confiscation as it did in the 1930s. There was a different monetary system then, as Gold was still officially recognized as money by the U.S. at that time. At this point in U.S. history, a gun confiscation would be much more beneficial to the "powers that be" given the economic turmoil that's coming (love to see 'em try that one...). Again, not saying I know what's going to happen but you have to consider the economic and political situation to help play the guessing game of what freedom will be restricted next.
What value is to be gained by a Gold confiscation? Back in the 1930s, Gold hoarding created increasing deflationary pressures, as Gold was money. Gold confiscation and re-pegging of the Dollar to Gold (Gold went from $20.67/oz to $35/oz. by government decree and the government made a 69% profit on their stolen Gold) created instant inflation. At this point in time, the unconstitutional, for-profit, private federal reserve corporation desperately wants to create inflation, but now it isn't tethered to Gold. No problem! The equivalent of throwing money out of helicopters has already occurred (and will need to continue), it was just passed out to the fascist corporate leaders instead of the masses.
In the long run, a rising Gold price is just one of many potential reflections of a currency depreciation. A rising Gold price, in the minds of most market participants and federal apparatchiks, creates rising inflation expectations. Real estate and the stock market are perceived as a good hedge against inflation in most time frames. Ben needs to bail out his buddies in the banking industry who are bankrupt because of a real estate collapse. Hmmmm, how can we possibly make real estate prices move higher or stabilize when there is no demand? You do the math. I am not saying the plan will work, but I am saying we're going to need a helluva lot of currency depreciation to make real estate look like a decent investment again. I wouldn't touch real estate with a 10 foot pole right now, but by 2012 it may make sense again as part of a diversified portfolio.
A Gold confiscation serves no useful purpose when the goal is to make a currency worth less (worthless?) and that currency is no longer tied to Gold. Just my 2 cents and I am by no means an insider with any proof of anything. And if I am wrong and a Gold confiscation is imminent, I just want any apparatchiks reading this to know that I lost all my Gold in a poker game last week...