There is suddenly a lot of interest in the idea that the federal government
will make holding gold illegal, an example of which is "Is the Confiscation of
Gold by Certain Central Banks Likely?" by Julian D W Phillips of
GoldForecaster.com.
He reminds us that "in 1933 the US government banned the ownership of gold by
US citizens and purchased all but rare gold coins from the US public. They did
this, at $20 an ounce. Two years later they revalued gold to $35 an ounce, a
75% revaluation" that instantly gave the government a lot of new, but still
100% gold-backed money to spend!
What a blatant, brazen theft! And nobody says anything! But let me take a few
bucks out of the employee pension fund, petty
cash drawer or the coffee jar, then it is some kind of "big deal" around here
and everyone wants me to get fired! What kind of crap is that, huh?
Anyway, so how much gold are we talking about? Well, the total amount of gold
above ground that you can put your hands on is estimated to be about 140,000
tonnes, which is approximately 90% of all of the gold that has ever been mined,
which is estimated to be 160,000 tonnes.
Added to that, there is an annual mine production of roughly 2,500 tonnes of
gold, but which is becoming harder and more costly to find and mine.
Perhaps it is all this talk of confiscation of gold that has Doug Hornig of
Casey Research’s Gold & Resource Report commenting that when FDR made
private ownership of gold illegal in 1933, the dollar was on the gold standard
and thus 100% backed by gold.
The difference between then and now is that "we have long since abandoned the
gold standard, and Obama doesn't face FDR's constraints on monetary inflation"
which is (insert sound of trumpet fanfare) the winner of the coveted Mogambo
Award For The Understatement Of The Week (MAFTUOTW).
It wins for two reasons, the first being that is so terrifyingly true! There
are no constraints on the government getting the Federal Reserve to create as
many dollars as it, or anyone, needs or wants, and thus it is beyond ludicrous
to even compare the 1933 gold-backed dollar against the pathetic piece of
almost-worthless fiat money that the dollar has become, to which Mr Hornig
alludes when he says that Obama has it easy, as "However much money is needed
to finance his New Deal Redux, he can have it. All he has to do is rev up the
printing press or turn an unlimited number of bits and bytes into electronic
cash."
And he is, alas, absolutely right. Unlimited amounts of money can be created
just by asking for it. In fact, no one has ever disputed that fact, as it is
the whole reason behind having a fiat currency! Hahaha!
In relation to the prospects for a confiscation of gold, he asks, "Given this
kind of clout, what does he need gold for?" which is exactly right! If you can
print money to spend, why do you need gold to sell to get money to spend?
Hahaha!
Unfortunately for Mr Hornig, he does not go on to the Mogambo Bonus Round (MBR)
because I must deduct points from his score since he is grammatically incorrect
to end a sentence with "for", as in his "need gold for?"
Instead the sentence should have properly read, "Given this kind of clout, for
what does he need gold?" which IS grammatically correct, so you can see the
crucial difference!
And perhaps it is this "correct grammar" thing that makes the colossal
incompetence of the Federal Reserve even more terrifying when adding that
undertone of grammatical precision to the nightmare that the Fed created so
much money and credit that it allowed the dollar to lose so much purchasing
power since 1933 that gold is now almost $1,000 per ounce, up from the
$20-to-$35 per ounce rip-off that financed the whole New Deal for a decade!
Grrrr!
Of course, I would love to go on and on from there, waxing evermore
contemptuously lyrical and angrily ever-louder about why I despise the
un-constitutional, un-holy Federal Reserve and everything for which it stands,
which is summed up in the Mogambo Big Book Of Economic Stuff (MBBOES) as
"Purposeful inflation in money and credit by a central bank to create
unprecedented amounts of debt for unbelievable of amounts of consumption that
inevitably leads to ruinous inflation in consumer prices and ruinous deflation
in asset prices such that it destroys the entire economy, which will soon lead
to many, many poignant stories of ordinary men and women who, along with their
doomed children, are wandering around, dazed and lost, living under bridges and
overpasses, calling themselves Lost Children Of The Mogambo (LCOTM), forever
bleating for pity that they did not listen when he told them to buy gold
because their government was acting so insanely with fiscal and monetary
policy, and now they are being cruelly punished by persistent price increases
against which these people can only offer falling or stagnant nominal wages and
collapsing real, inflation-adjusted wages, devalued assets, vanished wealth and
disappearing jobs, which means a drastically falling standard of living until
they are finally reduced to eating lawn clippings and miscellaneous bugs while
screaming for revenge, whereupon the world then devolves into a dreary,
post-Apocalyptic, dog-eat-dog world where, once again, for the umpteenth time
in history, we learn that the dogs that eat well are going to be the ones who
switched to gold when their governments started wallowing in such fiscal and
monetary lunacy, which is why you ought to be out buying some more gold right
now."
I would probably end the Predictable Mogambo Tirade (PMT) with something in the
vein of drawing an eerie parallel between the Fed creating too much money and
credit, which leads to disastrous, ruinous, murderous inflation in prices, and
the fact that the American government once gave smallpox-infected blankets to
the Indians, which seems so, so apropos, which deliciously rhymes so you know
it must be true.
Or maybe I would angrily relate how I, a normal, tax-paying citizen, call the
CIA and demand to know under the Freedom of Information Act if they are spying
on me, or if any other jackbooted, government-Gestapo thugs are spying on me or
tampering with my stuff, such as messing with my dishwasher which, after about
12 years of perfect performance, is now making this strange intermittent
groaning noise, like a belt slipping or something that goes
rrrrRRRrrrrrRRRrrrrrr, and then they put me on hold, and then they come back on
the line and tell me that nobody is spying on me, but you can tell from their
voices that they are lying.
Mr Hornig is not sure that the CIA is out to get more or that a confiscation of
gold is in the cards, although "An argument can be made that the yellow metal
is still useful. It runs like this: Creating money out of thin air is
inflationary, and a large stash of gold, even if it doesn't officially back
anything, serves as a sort of counterweight. People around the world will have
greater confidence in your currency knowing that, as a last resort, you can pay
your bills in gold. And the more gold you have, the better."
Nevertheless, Mr Hornig speaks for both of us when he says, "all things
considered, a modern-day gold confiscation is not high on our list of financial
worries", although he adds the caveat that "Never say never where government
stupidity is involved", which sums it up perfectly, making it almost
unnecessary that I jump up and yell, "Buy gold, silver and oil to save your
worthless butt whenever your own government is acting with fiscal and monetary
stupidity, which they are doing right now, which means" (insert musical
soundtrack with heavy backbeat) "you should be buying these things RIGHT NOW
because investing is easy when you KNOW HOW!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2009, The Daily Reckoning.)
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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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