Before you ask the inevitable question “Have you lost your mind?” let me reveal the “method of my madness”. There are a growing number of people including some level-headed analysts who have publicly wondered whether it was possible that the private ownership of physical gold might be outlawed in the United States.
Many would say that the likelihood of that in the land of democracy and The Constitution is virtually zero. That is what I’d like to believe as well, especially if I were more “historically naive”. But, history does tell us that the US government, in the days of a fixed gold price, did intervene in a very direct manner with President F.D. Roosevelt banning the “hoarding of gold coin, gold bullion, and gold certificates” and thus forcing US citizens to sell to Federal Reserve at $20 an ounce. Subsequently the Fed raised the price of gold to $35 an ounce, and the ownership of gold was literally outlawed up to around 1971.
Lawrence Williams, writing from London for Mineweb.com opined recently that “…President Obama is known to be a Roosevelt disciple and he must be well aware of what was done at the time, given the parallels of the U.S economy between the present time and the 1930s.” There must be a temptation to try the same tactic, and then raise the gold price dramatically in a move which would certainly support reserves within those nations which still have major gold holdings.
“Indeed, if monetary authorities worldwide see the gold price really start to take off, this kind of process has to become even more of a temptation as a big global move into gold could exacerbate the global financial crisis in that it would show that people no longer have faith in the economic status quo (it can be argued that already they don’t) and the the current crisis of confidence could be severely worsened by such a rush.”
As I’ve often said, it is the black widow spider that we don’t see that bites us, not the one before our very eyes. The “obvious” conclusion on this subject might not be the most accurate one. Yet it is an important subject to discuss and debate.
In an article published late last year, Mark Mahaffey of Hinde Capital argued that such a possibility (that an economic crisis could trigger drastic government action) existed and pointed out that “the fear for anyone who is in credit is that the financial system could become geared towards negating debt which, in turn, would destroy the value of their assets.”
“One way of bypassing this threat is to buy gold (and obviously a lot of people are doing just that at the present time). However a general shift to gold would undermine the power of central banks and their influence on the economy.”
Of course the monetary situation nowadays is completely different and the banning of gold holdings, and subsequent revaluation would be much harder to accomplish domestically - and even more so globally.
