Feds to Little People: We Need Your Gold
Stephen Kovaka
 No, they haven't done it yet. This is a headline from the future, as well as a story from the past that has been largely forgotten. But as the problems with unrestrained issuance of debt money continue to grow and leak into the realm of official discussion, it may well be coming. Leona Helmsley once said that "only the little people pay taxes". Soon we may find that the little people will no longer be able to protect their wealth by owning gold or silver. Probably gold and silver have further to go in price, but I am suggesting that those price increases will continue to be suppressed and that government may well call in the gold before prices really take off, thus awarding itself the lion's share of the appreciation that gold and silver owners have been waiting for, just as they did in 1933.
- It has been well proven since 2001 that the prices of gold and silver are controlled by the banking/government cartel.
The control is done covertly by manipulation of the derivatives markets, especially the CRIMEX, supported by metal leasing. (Examples: Not Free, Not Fair; A Short History of the Gold Cartel, The Smoking Gun, How Do Central Banks Control the Price of Gold?) The effect has been to inhibit the leakage of the debt money inflation into the gold and silver markets. This is the one bubble that they will do everything to prevent. There is to be no replay of 1979. Paul Volker is on record that the USG should have done more to control the price of gold in the late 70's, and his advice has been heeded. Sir Greenspan is on record as saying that "central banks stand ready to lease gold in increasing quantities should the price rise." (July 24, 1998 testimony, end of 6th paragraph). And that is what they have done. Prices have been allowed to rise, but only in a controlled fashion, along with everything else. Momentum has been dampened repeatedly. The manipulation has cover at the highest regulatory (CFTC) and political (Treasury Department) levels. At the same time, increased volatility has created opportunities for those on the inside to loot investors who are not privy to the coordinated moves of the big CRIMEX shorts.
- The system of disguised price controls may be nearing its limit.
Short concentrations on the CRIMEX have become absurd, much bullion has drained from the vaults of central banks, open precious metals derivatives have reached astronomical valuations, and market failures threaten on delivery dates.
- Government rarely makes public acknowledgment of a problem unless they are prepared to offer a solution.
They like to appear omnipotent. Therefore, public discussion of the overissuance of debt money will be a good indication that they are readying the public to receive their prepared solution to the problem.
- "Due to the emergency," government has usurped power to do virtually anything at all in the name of fixing the economy.
Just like FDR. This has been demonstrated over and over in the past few years. All that will be required is a suitably impressive emergency to frighten everyone into accepting the pre-arranged solution. The way things are going, I doubt that will be hard to achieve.
- Eventually, something must be done to restore public confidence in the broken debt money system.
When too many begin to perceive that the monetary Emperor has no clothes, he may be forced into donning a golden fig leaf. This can be done by using gold as some sort of fractional reserve "backing", which in turns means that the official sector will need to reassert their control over known stocks of publicly owned gold. This might take place in conjunction with the introduction of a new regional or global currency. "This time, we promise, we really won't inflate the new currency." You can fool all of the people some of the time, and some of the people all of the time . . . and that is sufficient for most practical purposes.
- Government has the option of "calling in" privately owned gold...
Again to support such a system reset, exactly as they did in April, 1933 - "Due to the emergency", of course. It will be accepted by the average citizen, just as the Patriot Acts were accepted after 9-11, especially since the average citizen today owns no gold or silver.
- The largest gold and silver holdings are vulnerable to "calling in" because they are held in professional storage.
The rise of ETFs has diverted gold and silver investment demand into new Wall Street products, while the actual metals remains in storage in the hands of the usual suspects. Neat trick! Many other investors keep their metal in unallocated accounts, which give them no legal right to take delivery anyway. Even allocated accounts are held by third parties. All of this metal is at risk of being called in by government decree, "due to the economic emergency". Professional storage facilities will do nothing to protect the interests of the actual owners of the metals if it might get them in trouble with the law. Why should they? They will quickly acquiesce to any government edict.
- All large supplies of privately held gold in the USA can be easily purchased back into government hands and paid for by more of the zero cost debt money that they have been throwing around with such abandon.
Later, the prices of gold and silver may be allowed to rise rapidly, thereby essentially devaluing the US dollar and confiscating the profits of the previous owners. This happened once before on January 31, 1934, "a date which will live in infamy." On this date Obama's role model FDR set the new price of gold at $35/oz., which amounted to a 41% devaluation of the dollar.
- It will not be necessary to send squads of jack-booted thugs on door-to-door raids to pry the gold from the hands of the little people.
How crude! How inefficient! All they have to do is destroy the remaining liquidity that coins possess today, and that can be done by mere edict. "Stroke of the pen, law of the land – kind of cool". All that is needed is to give the little people the right incentive to cooperate. Here are some of the possibilities:
- The government offers to buy all gold at $xxx/oz. until a certain date.
Their offer ends on that date. After that, the purchase, sale or ownership of gold or silver coins or bullion in the USA are tightly restricted. Due to the emergency, of course, there will be no time to debate the issue. They did it in 1933, why not next month, or next year? I can easily imagine a Department of Alcohol, Tobacco, Firearms and Precious Metals, or ATFP for short.
- The government declares a new windfall profits tax on sales of gold and silver:
This tax is required to be collected at the point of sale, and dealers are required to withhold 50% of the price of any gold or silver sold to them and remit it to the USG as a prepaid tax. When you report this sale on your income tax return, you can receive a refund of any tax overpayment.
- This might result in a black market in gold and silver bullion and coins.
That would be the only market open to the little people when they want to sell their coins. Black markets are run by criminals, who would surely charge a very HIGH markup for negotiating the now-illiquid coins. So the little people would have the choice of turning their profits over to the government, or to private criminals (possibly in secret partnership with the government). That leaves only barter as a way to negotiate these coins without getting skinned by men with guns.
- As a result of this, only those who are politically connected, or hold their gold in private storage, or perhaps offshore, and are prepared to weather an extended period during which it becomes a non-liquid asset, will still be able to preserve purchasing power in gold or silver.
That leaves out the little people. What the little people want is a free, functioning and legal market where they can profit from their precious metals investments and avoid some of the ravages of inflation. But a market that plainly reveals the extent of government monetary malfeasance is exactly what the government/banking cartel doesn't want. If they can cripple this market while appropriating most of the public's gold, all in the name of saving the country from economic disaster, what do you think they will do?
I urge you, if you have not already done so, to read the contemporary account of FDR's economic "emergency" and gold confiscation in Garet Garrett's outstanding 1938 essay, The Revolution Was. Note how the gold confiscation was done by deceptive, incremental steps over a period of 10 months, during which the pre-planned currency debasement outcome was kept a dark secret (pages 9-11). But it was all necessary, you understand, to "save the economy, due to the emergency".
It is true that people wanted action. It is true that they were in a mood to accept any pain-killer, and damn the normal balance of authority between the executive and legislative authority. That was an emotional state of mind perfectly suited to a revolutionary purpose, and the President took advantage of it to make the first startling exposition of New Deal philosophy. Note his assertion of the leadership principle over any other. Discipline under leadership. Note the threat to Congress - "in the event that Congress shall fail." But who was to say if the Congress had failed? The leader, of course. If in his judgment the Congress failed, then, with the people behind him, he would demand war powers to deal with an economic emergency.
The word emergency was then understood to mean what the dictionaries said it meant - namely, a sudden juncture of events demanding immediate action. It was supposed to refer only to the panic and the banking crisis, both temporary.
But what it meant to the President, as nobody then knew, was a very different thing. Writing a year later, in his book, On Our Way, he said: "Strictly speaking, the banking crisis lasted only one week.... But the full meaning of that word emergency related to far more than banks; it covered the whole economic and therefore the whole social structure of the country. It was an emergency that went to the roots of our agriculture, our commerce, our industry; it was an emergency that has existed for a whole generation in its underlying causes and for three-and-one-half years in its visible effects. It could be cured only by a complete reorganization and measured control of the economic structure....It called for a long series of new laws, new administrative agencies. It required separate measures affecting different subjects; but all of them component parts of a fairly definite broad plan."
So, what the New Deal really intended to do, what it meant to do within the Constitution if possible, with the collaboration of Congress if Congress did not fail, but with war powers if necessary, was to reorganize and control the "whole economic and therefore the whole social structure of the country." And therein lay the meaning - the only consistent meaning - of a series of acts touching money, banking and credit which, debated as monetary policy, made no sense whatever. Garet Garrett - The Revolution Was
Copyright © 2009 Stephen Kovaka, CPA
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Stephen Kovaka, CPA | Corydon, IN
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