Marc Faber: U.S. Government Could Manipulate Gold Price Down, Make Illegal And Confiscate, Then Revalue At Much Higher Price
This morning, the Yahoo! Finance investing show Talking Numbers had Swiss-born investment adviser/fund manager Marc Faber on, and one of the topics discussed was gold. From the exchange between host Brian Sullivan and “Doctor Doom”:
SULLIVAN: Would you buy gold if it continues to fall? Are you buying gold right now?
SULLIVAN: Yes to both?
FABER: I bought gold at $1,400. I buy every month some gold. And I have an order to buy more at $1,300 because I want to keep an allocation towards gold- physical gold- and not stored in the United States at all times.
SULLIVAN: Now you were emphasizing outside the U.S. We’re a pretty safe country Mark. Why do you have to keep the gold out of here?
FABER: Well, “safe country?” I’m not so sure about that under the present government.
Later on in the interview Dr. Faber, who became famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash and for predicting the 2008 global financial crisis (among other calls), added the following:
What the government could do once again- and that is a possibility- they could artificially depress, manipulate the price down, and then say gold is illegal to be held. “We have to collect all the gold from the citizens.” Say, if they manipulated the price down to $1,000, they could collect it at $1,000. And then revalue to $10,000.
When asked if the above scenario was probable, the publisher of the monthly investment newsletter The Gloom Boom & Doom Report indicated it was not.
“Dr. Doom: The Government Can Take Away Your Gold”
Yahoo! Finance Video
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Things sure are “golden” here today on Survival And Prosperity. Recently, I was made aware that Santa Monica, California-based instructor of precious metals investing/bullion dealer and another of this blog’s advertising partners- GoldSilver.com- has a new product line of investment-grade bullion jewelry under the designation GoldWithoutBorders. From their website:
Gold Bullion Jewelry
Our bullion jewelry products include beautiful necklaces and bracelets that can be:
• Great gift for a loved one.
• Unobtrusive means of transporting wealth.
• Maintains a low profile when you are ready to sell.
I find those last two points about this bullion jewelry particularly interesting, especially in light of that last post about gold confiscation.
There’s a terrific informational video about this new product line on GoldSilver.com under “Buy Gold & Silver” along the top menu bar, then under “Buy Jewlery” in the corresponding drop-down list.
One can never have too many options when it comes to preserving wealth.
One thing that’s probably entered the mind of anyone who owns physical gold is the threat of government confiscation. I’ve read quite a few articles over the last several years about that danger, and what Adrian Ash published on the website of the world’s largest online investment gold service and Survival And Prosperity advertising partner- BullionVault- was one of the more informative pieces I’ve read in quite some time. Ash, who runs the research desk over at the London-based company, wrote on December 7:
When Governments Steal Gold – 7 December 2012
Three nasty examples of how people lost the gold they owned…
CHATTER in the trading rooms says some gold owners fear a punitive US tax hike in New Year 2013, writes Adrian Ash at BullionVault, with the Obama government targeting precious-metal investors.
Hence this month’s sell-off (or so the tittle-tattle says) – akin to the move by Japanese households to sell gold in late 2011 ahead of new reporting rules for precious-metals dealers.
In truth, such a US move looks very unlikely. Ahead of needing cross-party support to fix both the fiscal cliff and debt ceiling disaster, it would be clearly partisan. (Not all US gold investors are Republicans, but very few are Democrats in our experience.) And besides, gold already attracts the higher 28% rate of capital-gains tax in the US, since it is deemed a “collectible”. Easier to raise CGT rates across the board, and whack anyone trying to grow their savings in fair measure. It would raise far more revenue, too.
Still, this chit-chat does highlight a key point about gold – the fact that, within living memory, it got special ill-treatment from government everywhere. Western households were blocked from owning gold bullion for 30 years and more after the end of WWII. Over the 20 years previous, their gold had been variously nationalized, compulsorily purchased and stolen.
Not just investment-grade bullion. And not just gold belonging to private citizens either.
1935: Mussolini nabs 35 tonnes of gold wedding rings
The United States “confiscation” of 1933 is well-known (in fact a compulsory purchase, made at the then-price of $20.67 per ounce before the price was raised to $35.) But with gold still central to the monetary system, many governments were looking to acquire more. With a smile, of course.
December 1935 saw popular Fascist dictator Benito Mussolini appeal to the patriotism of Italy’s wives, urging them to swap their gold wedding bands for steel rings instead. Yes, really. On Wednesday the 18th, La Stampa gave over its entire front page to this financing drive:
• “The most noble rite of ‘faith’ joins all women in Italy in one heroic will” (‘fede’ meaning both ‘wedding ring’ and ‘faith’ – clever, eh?)
• “The Queen lays down her wedding ring upon the Altar of the Homeland”
• “The proud and moving offer of the women in Turin”
Italian women were so “encouraged” by this popular show of patriotism that, fifty years later, they were still ashamed at being forced to part with their wedding rings. Mussolini got 35 tonnes all told. He ended upside down, hung on a meat hook from the roof of a petrol station.
1939: Nazi Germany steals Czech gold in London
You didn’t need to be a private individual, nor keep your gold at home, to lose precious metals in the 1930s. Little-recalled today, the Nazis’ theft of Czechoslovakian gold reserves caused such fuss in the British press in mid-1939 that the public was fully prepared for war by the time Germany invaded Poland in September.
The Bank for International Settlement had been established in 1930 to try and manage the fast-collapsing international Gold Standard. Based in neutral Switzerland, it was supposed to be above politics, and although its senior staff were all senior central bankers in their home countries, they played by a “gentlemanly” code of mutual support and respect. Unelected both then and now, central bankers held themselves to be noble and independent from the dirty business of democracy or dictatorship.
So when, on 20 March 1939, just after the Nazis marched into Prague, a message was sent to the BIS apparently by the Czech National Bank, the BIS duly passed the message on. It asked the Bank of England (then, as now, the world’s premier clearing point for physical gold) to move the metal held in BIS account No.2 to a new BIS account, No.17.
Never mind that the Czechs had already sent word that any instructions would come “under duress” and must be ignored. Never mind that the British parliament had put a freeze on all Czech assets, to defend them against Nazi theft. And never mind that the Bank of England knew BIS No.2 contained Czech gold, and that No.17 was held for the German Reichsbank. Because the Bank of England’s governor, Montagu Norman, was also a director of the non-political BIS. And he’d do anything to protect the noble independence of central bankers, applying their “gentlemanly” rules and so appeasing the Nazis one last time, by feigning ignorance of whose gold sat in those two anonymous BIS accounts.
The transfer was done before anyone outside the central banks knew, and the gold was then sold in just 10 days. By the time the story broke in May, the £6 million in proceeds was long gone. (We can find no reference to the transfer, nor to the national scandal starting in May, in Norman’s spidery-writing in his personal diary.)
1966: Britain starts prosecuting gold-coin investors
Two decades after the war ended, and 35 years after Britain quit the Gold Standard, its politicians were busy meddling with gold investment. Because the Pound was falling on the currency markets. So people were buying gold, sending money overseas to buy it and so hurting the UK’s already terrible balance of trade. Thereby hurting the Pound yet again.
To try and stem the slide, the Labour government put a block on imports of gold coin, and banned private citizens from owning more than four gold coins. Anyone with a bigger collection had to tell the Bank of England, whose officers would then judge whether the owner was a true collector, or a speculator.
Speaking in the (very heated) parliamentary debate of 13 June, the Conservative MP for Worthing, Terence Higgins, asked why the Government was attacking gold. “People are holding gold because they have no faith in the Government’s policy on the stabilization of the cost of living and on curtailing the rate of inflation…Will it take action against other specific assets which are a hedge against inflation?” (Indian households might ask the same today.)
But too bad – the “rule of four” went through (as it became known by retail dealers). By June 1967 some 4,847 people had submitted themselves to the Bank of England’s scrutiny, and prosecutions had begun. Exchange controls on gold were finally lifted by the first Thatcher administration’s first budget, in 1979.
The moral of these tales? Because gold is no longer central to the world’s monetary system, so-called “confiscation” looks a very 20th century phenomenon today. But that may well change. Exchange controls such as Britain had in the 1970s (and which Italy didn’t lose until 1999) are more likely. Because people, like governments, want to own gold when they fear inflation, financial strife or political crisis. Holding it at home could expose them to theft or coercion. If they hold it safely at arm’s length overseas, even a secure democratic jurisdiction requires clear ownership if you are retain control.
Be sure to get it if you’re thinking about Buying Gold any time soon.
Adrian Ash, 07 Dec ’12
(Editor’s note: Permission to republish the above material granted by BullionVault)
Moving along with another “crash prophet,” “Doctor Doom” Marc Faber spoke to Betty Liu on the Bloomberg TV show In The Loop right before the weekend. The publisher of the monthly investment newsletter The Gloom Boom & Doom Report warned viewers:
I happen to believe that eventually we’ll have a systemic crisis and that everything will collapse…
The monetary policies of the U.S. will destroy the world.
The Swiss-born investment adviser/fund manager, who became famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash and for predicting the 2008 global financial crisis (among other calls), also shared his investment outlook for gold. Dr. Faber said:
I think the trend for gold prices will be steady, but the trend for the dollar and other currencies will be down. So in dollar terms, the price of gold will trend higher…
In my view, you ought to own some gold. But don’t store it in the U.S. The Fed will take it away from you one day.
“Faber: Fed Policy Will ‘Destroy The World’”
Bloomberg TV Video
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)
Christopher E. Hill, Editor
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