Confiscation of Gold

By Howard S. Katz, Goldseek

Things are looking good for the gold bugs these days.  September and early October saw the (long awaited) break above $1,000.  This past week saw the technical pull back to the breakout point, and Thursday was the turnaround day.  Friday saw some very bullish candlestick signals in many of the gold stocks.

But one thing has been bothering many gold bugs.  In 1933, the U.S. Government confiscated the people’s gold.  The Government even went into safety deposit boxes (in private banks) and took the gold out of them.  This was done once.  Perhaps it could be done again.

Actually, I find this fear to be alarmist.  There were special circumstances which led to the confiscation of gold in 1933, a special legal situation unique to American history and which made the confiscation necessary if the New Dealers were to achieve their objective of taking us off the gold standard.

First, let us go back to a key event in American history.  For those of you outside of the USA, this is still useful information because America was (and still is) the most wealthy country in the world, and its gold/silver standard played an important role in that accomplishment.  As Senator Daniel Webster wrote early in America’s history:

“Most unquestionably there is no legal tender and there can be no legal tender in this country, under the authority of this government or any other, but gold and silver….”  [as quoted by Chief Justice Salmon P. Chase, “Supreme Court Reports,” Legal Tender Cases, 12 Wall 586, Opinion of the Minority.]

The U. S. went on the gold/silver standard with the adoption of The Constitution in 1788.  This was compromised on a few occasions but basically led to a stable currency for the period 1788-1933.  This was the fastest growing economy in the history of the world.

The first compromise occurred during the War of 1812.  The Federal Government did not abandon hard money, but the private banks outside of New England suspended payment of gold and silver and were allowed to get away with it.  Essentially only New England remained on the gold standard for the duration of the war.  In relation to this, it is only the New England militia who refused to invade Canada in 1812, and it was this fact which led to the American defeat.

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