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Gold Seizure Mechanism in Place
By David L. Ganz, Numismatic News
August 05, 2010

This article was originally printed in Numismatic News.
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It’s not the dog days of summer, but rather the economy that’s causing a number of people to query my law office about gold seizure scenarios that they believe might take place, what they can do to prevent it, and what they might be able to do about it.

These inquiries come from sincere believers not in conspiracy theories, but rather in the staying power of gold in both the short term and the long run. Their inquiries are genuine, the concerns expressed real – these are hard money strategists, not people who go off with half-baked ideas.

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I have no great insight to offer as to whether or not gold seizure is in the offing, but there are some interesting reasons cited by many as to why the government of the United States – and maybe the world as well – needs to nationalize gold, if only for the purpose of making sure that governments, not citizens, remain in control of the economy.

In talking with many of the people, they question how the government could possibly enforce a gold seizure and go on to tell me that no power on earth could make them give up their gold. My rejoinder is that some of the best literature has been written by authors from prison, to which they often sublimely respond that the government lacked the resources to prosecute people – and that even in the old days, that wasn’t something that the government did (prosecute people for declining to turn in their gold.

Let’s clear up some misconceptions as to what happened in 1933-1934; what legal authority the President has to order the seizure of gold (or other precious metal); what evidence of compulsion was used before (and what could be used now), and just what is so magical about this metal that makes some individuals covet it, and makes governments fear it.

Let’s start with the premise that there is no element of compulsion that can be employed to make a citizen turn in gold coin or bullion, especially if the coin is legal tender. The premise is absolutely wrong.

In 1933, President Franklin D. Roosevelt (using the “Trading with the Enemy Act of 1917”) issued an executive order on April 5 requiring that less than a month later on or before May 1, 1933, all persons in possession or control of gold coin, gold bullion, and Gold Certificates (i.e., paper currency redeemable in gold coin of the United States) to turn them in to any Federal Reserve bank or any “member bank” of the Federal Reserve system.

(The “Trading with the Enemy Act” is still around; it was last amended by Congress a couple of years ago and the general consensus in the legal community is that it could happen again. Want proof? Try Professor Hank Holzer’s article in the 1973 Brooklyn Law Review: “How Americans lost their right to own gold and became criminals in the process”).

Can the government grab all of the gold? Probably not, at least not without paying just compensation – which is a small solace. But what happened in 1933 is that gold (valued at $20.67 an ounce) was turned in and paid at face value – a double eagle or $20 gold piece received 20 bucks from Uncle Sam in paper, or coin – but not gold.

When all of the gold that was going to be got was turned in, FDR devalued the dollar 59 percent – from $20.67 an ounce to $35 an ounce. (In 1971, Nixon raised it to $38 an ounce, and in 1973 it was raised to $42.22 an ounce. The entire American gold reserve of $11 billion is figured on that artificially low figure (i.e., if Fort Knox were emptied with other storage sites, the government would really have about 30 times the figures quoted today as being part of the reserve.

That means over $400 billion in gold is presently in government hands. Billions of dollars more in gold now in the hands of the people would move to the government. Once in hand, the gold’s official dollar price could be revalued or left on its own. Either way, though, the average citizen now, as then, would lose out.

There were exceptions then. Treasury Secretary William Woodin, himself a coin collector (and originator of Adams-Woodin pattern coinage citators, allowed everyday people to keep $100 in gold coin (it was the Depression, after all) and also allowed retention of “rare and unusual coins” having a “recognized special value to collectors.”

Those who did not want to turn it in (the current argument is that the government lacks the resources to make it mandatory): the executive order provided for Draconian criminal penalties for non-compliance: a $10,000 fine or 10 years imprisonment, or both. You have to be really unafraid or believe that the government would not prosecute.

Some said that the government only tried to capture a single 1933 $20 gold piece. Not true. They went after all 1933 double eagles – they sued or were sued by collectors who sought to retain the rarity. James A. Stack was involved in lawsuits in federal and state court; Barnard, in Tennessee, was, too. Both lost, even though they had paid a lot for the coin which was both rare and unusual.

But there were other cases, too. A sampling going back to the Civil War, when the Act of July 13th, 1861, allowed Treasury Regulation, No. 22, forbidding all transportation of coin or bullion to any State or section declared by the President’s proclamation to be in insurrection (a Supreme Court case affirmed that right); in 1969, an airman was sentenced to seven years at hard labor for possession and hoarding of gold coin and bullion (U.S. v. Whitfield, 1969 WL 6253 AFCMR, 1969).

In another case, “An indictment against Gus Farber, a diamond and jewelry merchant of San Francisco, charged ... that on or about Feb. 21, 1939, he willfully, unlawfully, and knowingly acquired 13 genuine $20 gold coins of the United States without a license in accordance with the President’s Order No. 6260, as amended, 12 U.S.C.A. 95 note”, (Farber v. U.S., 114 F.2d 5 , C.A.9, 1940). He was convicted.

In another instance, a 206-troy-ounce gold rooster was forfeited to the United States: “Richard L. Graves ... was the owner of certain properties in Sparks, Nev. Included in these properties was the ‘Dick Graves Nugget Casino’. As part of the operation of that establishment, Graves ran a dining room in which the specialty was fried chicken. This room was known as the ‘Golden Rooster Room’. For various reasons, including, among others, the advancement of the interests of his business establishment, Graves developed the idea of acquiring, and showing, a solid gold rooster as a main object of attraction in this room.” (U.S. v. One Solid Gold Object in Form of a Rooster, 208 F.Supp. 99, D.C.Nev. 1962.)

In sum, there’s ample authority – and many cases – allowing for seizure of gold coins and bullion. What of the exemptions? I’ll take that up next column.



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(Next column)



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Comments
On August 6, 2010 A. Garland said
This should help Goldline in their case...huh?
On August 7, 2010 Shawn Willett said
I'm not a part of the "black helicopter" crowd, but given our nation's history...It doesn't seem out of the realm that our government would seize gold again. Especially considering, in this person's opinion, the fragile state of the world's fiat currencies. How can a government owe money if it has it all? Just something to consider folks.
On August 11, 2010 Brian S. said
The reason for the confiscation was to avoid DEFLATION.Money was still something tangible.Govertments would ruin the market for Gold the very thing they need to survive.Today the USD is not tangible and is payment of DEBT. There is not enough GOLD in the world to cover it. Besides Gold is 1% of the world's wealth. The confiscation mantra is a scare tactic at best and merely a misunderstood time in our brief history as a nation.

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