Friday, May 14, 2010

Confiscation Of Gold

With the price of gold escalating, commentators are finally beginning to wonder about confiscation. Indeed, just yesterday one wrote that "gold in the hands of the American public has never been confiscated, never can be, and never will be."

Oh?

Because of this equivocal assertion, I'm reprinting here a blog I wrote about a year-and-a-half ago:

Sunday, January 25, 2009

Will Private Gold Be Confiscated?

“Inflation” is “an increase in the supply of currency . . . relative to the availability of goods and services, resulting in higher prices and a decrease in the purchasing power of money” (Encarta Dictionary; my emphasis.) According to Webster’s Dictionary of the American Language, inflation is “an increase in the amount of money in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices.” (My emphasis.)

Ultimately, there is only one actor who can “increase” “the supply of currency” or “the amount of money” and only one way it can be done: a government, which possesses a monopoly on the “creation” of money, literally prints more paper currency and moves it into the stream of commerce.

If on Monday the money supply is X, and if on Tuesday the government doubles the amount in circulation, Monday’s and Tuesday's money is worth ½ X.

Historical examples of runaway inflation abound: the German mark after World War I, when postage stamps cost millions; the Chinese currency during the civil war in the 1940s, when it literally took a wheelbarrow full of paper money to buy a loaf of bread. Today one need look only at the once-prosperous Zimbabwe, where the Mugabe government has printed so much money that it’s worth less than the paper it’s printed on.

The late classical economist Ludwig von Mises wrote in his On the Manipulation of Money and Credit that “[i]nflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with [classical] liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.”

Thanks to the credulousness of our recent “compassionate conservative” president and a compliant, if not complicit, Congress, who handed nearly a trillion taxpayer dollars to his lame-duck, unelected treasury secretary with unchecked power to dispense it any way he wished, and the advent of the Obama Administration with its own grandiose plans to spend trillions more trying to spend their way out of this recession, we are facing serious, perhaps devastating, inflation— because there’s only one way the now-in-charge collectivists/statists/socialists can get that kind of money: print it!

Typically, one way to hedge rampant inflation, some believe the only way, is through ownership of gold, either physically or through enforceable claims on gold.

However, gold and the gold standard has long been maligned by the supporters of fiat money because it is an existential threat to government induced inflation. Indeed, its current quasi-free market price reflects serious concern about inflation.

But not all is well with gold, especially gold ownership.

Unfortunately, most Americas are under the illusion that they have a right to own gold. They are mistaken. America’s history, and the financial situation today, proves that our government has usurped omnipotent power over monetary affairs, one major consequence being that private ownership of gold has never been a right, and remains today a mere privilege revocable at will.

For a thorough historical discussion, see the [seminal] 1973 Brooklyn Law Review article “How Americans Lost the Right to Own Gold, and Became Criminals in the Process,” by Henry Mark Holzer: http://www.fame.org/PDF/Holzer%20Henry%20Mark%20How%20Americans%20Lost%20Their%20Right%20to%20Own%20Gold.pdf