In this part of the series on the subject of Confiscation, we look at the realities that you face in trying to avoid your gold being confiscated should a Confiscation Order be issued in your country. But first we ask the question, is there really a danger of gold being confiscated? We believe that there is.
“Importantly, Central Banks and the Authorities possibly will not wait for the monetary system to crash before acting to ensure they have enough gold to keep the monetary system working. They will act well ahead of that time to make sure they avoid a collapse and attempt to engineer the event so as to catch gold investors by surprise, removing their chances of making any contingency plans. With their prime objective being to shore up confidence in the monetary and banking system, they could not afford to signal the market about their intentions beforehand. We are not just talking about the U.S.A. but many other countries that may precede or follow the U.S. in these acts. The trouble is that the gold they ‘acquire’ maybe yours. Wisdom demands that the banking crises we have seen since 2007 don’t happen again, because this time around they may well collapse. Prudence demands that investors don’t take that risk but act before they it is too late. The risks of not guarding against this eventuality are enormous and the rewards of guarding against it are massive. If it doesn’t happen then you lose little if anything. If confiscation does happen then you lose a lot. It’s a matter of risk and reward!”
We believe that the confiscation of gold for this purpose is a very real and present danger and have organized a way to protect against that eventuality.
Jurisdiction Is Everything!
Let’s look at the realities of what will happen when this comes about. One has to bear in mind that the Authorities have to target only their citizens over whom they have Jurisdiction. Nobody outside this Jurisdiction will be affected. More importantly your Authorities cannot impose their laws in other Jurisdictions. That’s good, I hear you say, but think on…
How will your authorities then act to get your gold? As we said in the last part of the series, they will target you directly, applying pressure directly. In the 1933 Gold Confiscation Order in the U.S. they threatened fines of $10,000 or 10 years in prison or both. So you have to obviate these threats. This involves far more than simply holding your gold overseas.
What will the Authorities do when they want your gold?
- The first thing they will do is to ask you if you own gold. Yes, the Tax form 1040 may not require you to own up to owning gold at the moment, but Authorities, realizing that so many people do own gold overseas will, as part of the Confiscation Order, institute a form asking you to declare if own gold or not. It’s at this point that you must decide to act inside or outside the law, assessing the risks/rewards thereafter.
- Secondly, they will then instruct you to hand your gold over to the nearest Federal Reserve or its office nearest to you.
- Thirdly, as they’re not fools, they will require all gold dealers to give them records of their clients and purchases and sales and whatever else is available to give them information on who bought and sold gold as well as confiscate gold dealers stocks of gold.
- Fourthly, they will require the banks to make their records available on who sent money out of the country and to whom. This will include records of money sent to foreign gold dealers and the like.
- Fifthly, just as you have to report your foreign financial accounts and foreign assets, so they will enlarge this to ask you to report foreign gold holdings.
In our experience of over 40 years of seeing Capital and Exchange Controls in action, we’ve always been amazed at the thoroughness of the Authorities in sourcing information about its citizens. When they act, they take such matters very seriously. It’s also our experience that they remain focused. If it’s your gold they want, then they won’t chase your cash or other assets unless they’ve discovered you have broken the law, then they go after you to, as the French say, “encourage the others”.
So you have to structure yourself now, so as not to be found against the law. It’s at such times that the Authorities claim the righteousness to their cause, it being, “in the nation’s interests”.
But where an organization is accessible through their branch inside the U.S., they will take on the U.S. branch, as we have seen in the case of foreign banks, i.e. UBS, so you don’t want to face such vulnerabilities. You need to use an organization that does not have branches in your country. As we said in the earlier parts, we believe that Switzerland is the most reliable and safest of havens internationally and has been so for more than 300 years. That’s why that’s a good country in which to build your defenses!
If you have structured yourself in such a way that you cannot comply with the law, despite your good efforts, the Authorities then have to decide whether or not it’s worth going outside their Jurisdiction to pursue the gold directly. In our experience they do not because such laws are not enforceable outside their Jurisdiction.
Certainly in the case of Switzerland the Swiss will be deeply offended at a foreign government trying to chase its citizens in its Jurisdiction.
So you need an organization that has control over the repatriation of your gold but no other control over it. That’s what Stockbridgemgmt does. We know of no other structure that does this.
How will you use your gold if it is illegal to own it?
You wake up one morning on a Monday, most likely and see the news that a Gold Confiscation Order has been imposed. You can do nothing about your situation. If you haven’t done anything you must decide to hand your gold over, or hold your gold illegally.
No doubt your intention for owning gold in the first place was to be able to use it when push came to shove. But that’s why the Confiscation Order was put in place. You want to be able to sell it a bit at a time, to cover your needs as well as ensure that as the value of money fell the value of your gold rises. And it does.
Your gold dealer is likely now out of business because he’s not allowed to deal in gold and has given all client information to the government who has taken his stocks of gold too. He knows that he would court tremendous personal danger if he continues to deal in gold, so he’s off elsewhere to make a living.
Who do you go to? If it is possible to find a buyer likely he would want to do a one-off deal and get out of sight quickly. He won’t want to be vulnerable to you informing the Authorities that he has bought your gold. What would he do with it? If he smuggled it out of the country he could get rid of it for sure. But that’s quite a risk. Suddenly the entire gold business has gone to the dark side.
I can only talked from my experience of being involved with Capital and Exchange Controls in the various countries over the last 40+ years and helped tackle similar problems within the law. I can only say that in those countries, when people had to choose between accepting the nation’s requirements and safeguarding their family’s futures, they chose their families and almost inevitably left the country with their funds. But in a world where the Confiscation of Gold is now a reality, several countries will be doing the same. It’s like a war, where other countries are dragged in. Most likely people will not be prepared to leave their country, so a solution must be found to accommodate this.
In the U.S., your home, where your friends and family will remain, that option is nowhere near so easy. Also the resources and ability to penetrate your life in the U.S. is considerably greater. The U.S. is where people would want to go as it is the ‘tree trunk’ of nations. Will Canada, likely a branch on that trunk be able to act independently of the U.S. on this subject if their currency continues to relate so closely to the U.S. dollar? What about other countries? We would expect something of a ‘domino effect’ to follow a nation like the U.S. confiscating citizen’s gold.
How many countries can stand with their currency independent of the monetary system? We have seen a recurring trait of competitive devaluations in the most economically solid nations fighting for their trade competitiveness showing the interdependence of nations around the world. That’s precisely why we think that if a large developed nation confiscates its citizen’s gold others will follow. The exception will be Switzerland whose very financial structure requires it to guard foreigner’s assets within its borders.
Will a ‘Black Market’ in gold work?
If a ‘Black Market in gold does spring up in a country where gold is confiscated it will be very different to one where a ‘Black Market’ in gold already exists. In a normal ‘Black Market’ there is two-way traffic. As in India there already exists a culture of opposing government and using a gold ‘black market’ that already serves to provide a ‘shadow’ banking system. But in the developed world where financial visibility under the eye of government is the norm, such ‘Black Markets’ are rare and small, if they exist at all.
In a developed country where confiscation has already taken place, one cannot see a two-way market. The most telling difficulty you will face is that that a ‘black’ gold market will be one-way. Most people who are breaking the confiscation law will be sellers. So, who will your buyers be? As we said above, where there are questionable characters prepared to buy your gold then, they will want large one-off deals to make it worth their while and then move out of sight.
Would it be realistic to think that they would be prepared to take the risks of being drip-fed small amounts of gold and face the attendant risks? And if so at what price? Do you think that you would get a decent price in such a buyer’s market? Apart from that the emotional stress you face would be destructive to you and your family’s health?
The only way to achieve these ends is to place your gold in a structure that leaves you inside the law, in a place where you are free to sell your gold, at the full international market price, in the amounts that you need to give you a drip-fed source of cash. This would likely exclude the international banks.
Is it enough to hold your gold outside your country?
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