-- Published: Thursday, 3 August 2017 | Print | Disqus
Article – Part 5
The subject of gold’s confiscation has come onto our screens again, but this time, being described as a “Myth” in the future. This thought comes from Canada, a favorite place for U.S. citizens to store their gold in the hopes that it will be outside the reach of the U.S. Federal Reserve.
We respond to the article that described it as a myth, because we are firmly of the opinion that as we move from dollar hegemony to a multi currency, world currencies will find themselves competing against each other [race to the bottom] and increase the prospects for the confiscation of gold held in storage companies and by dealers as well as making such dealing illegal again.
This makes the confiscation of gold and eventually silver, a future reality. It is impossible to give a date when this will happen making now a prudent time to act.
a) Covered in the first part: In this article we will look at the real reasons why the U.S. confiscation took place and its broad objectives as well as the underlying principles behind the confiscation and how they can apply in the future.
b) Covered in the first part: We will show how the confiscation of gold in 1933 was not a money supply issue, nor will it be in the future.
c) Covered in the second part - We will highlight why such underlying principles are beginning to appear now, as this new global monetary system arrives on stage.
d) Covered in the second part - We will explain why gold is becoming an increasingly important reserve asset and will become needed by governments in the future.
e) Covered in the third part - We will explain that holding gold outside ones country will not guard it from your government’s hands unless structured properly to protect you and your gold [and in the future silver] from them.
f) Covered in the third part - We will also explain why important trading nation partners to governments confiscating gold in the future may well act in support of those confiscators.
g) Covered in the fourth part - We will look at the need for governments, through the banking system, to control money flows internally but will need to maintain confidence in their currency, to permit it to be used internationally.
h) Covered in the fourth part - We will look at how gold can be an anchor for currencies and how its price can be raised against their currency to maintain its acceptance.
i) We will look at how the slow move towards a cashless society being seen in the future must extend to gold and silver. It will include the surreptitious confiscation of gold as we are witnessing attempts to do so in Turkey and India.
i) Part V - We will look at how the slow move towards a cashless society being seen in the future must extend to gold and silver. It will include the surreptitious confiscation of gold as we are witnessing attempts to do so in Turkey and India.
We have clarified that there are already moves afoot to make ways to a potential cashless society. We have examples in Australia, the E.U. and in India where experiments on removing key banknotes [the Rs. 500 & 1,000 notes were the main banknotes used in the Indian economy at the time] have already been conducted.
The reasons given were essentially fatuous [that it was an effort to stop tax evasion, money laundering and movement of drug money.]
Tax Evaders, Money Launderers and Drug Lords
With the developed world integrated into the global banking system almost completely the pursuit of tax evaders can be effective. With Tax evasion also illegal in Switzerland as well in all the other parts of the developed world, the police and the Tax Authorities work together and can tackle the problems successfully as we saw in the case of UBS and Credit Suisse, where those banks and national authorities in Switzerland are working with others when asked. In the countries where tax evaders are resident, their authorities are taking steps to seize the assets of those involved.
But money laundering in India and elsewhere is endemic and almost impossible to halt, as the practices continue to thrive even after the key banknotes were made illegal tender and the economy nearly halted. Indeed, the money launderers utterly defeated the authorities, if that really was the objective of the exercise.
But the Indian Banking system has seen a very large number of new customers, which we believe was the objective and will continue to be so.
As to drug money, the continued existence of successful drug dealers and gangs testifies that their activities have not been even interrupted by such moves.
What has come out of the attacks on such criminals is the aim of the relevant governments is to ensure their citizens use the banking system for all their financial transactions. In that way, governments, through the banks can track all fund movements, at will. They can control these funds, seize them in certain circumstances and use them to keep the banks solvent.
It is imperative to understand that. It is not a chance consequence of chasing criminals it is the prime objective of such governments. It is more than likely that in the developed world such moves to fully control citizens and institutions will continue.
Readers may say to themselves that India is just another undeveloped nation and so such actions are unlikely to happen in the developed world. Not so! If we look at the anti-money laundering legislation in the developed world, such as FICA and FATCA we are all under their control concerning all transactions, which can be subject to all financial transactions. So government already has control, if not ownership. Should they wish to extend this control to gold, it would simply be a matter of issuing an extension of reporting to the gold arena, then visibility and, by extension control would be in the hands of the authorities. As it is the financial aspects of gold dealing are reported to the banks at all times.
What is not under control of the authorities in gold dealing is what happens to the gold after it is bought, unless it is held in nationally based storage companies.
This is not so in the case of U.K. gold dealers and storage companies who will ensure the proceeds of any gold sale go back to the account from which they came from. Likewise, if one wants to take possession of the gold you own directly, such storage companies will only repatriate your gold to your home address. In that way it is controlled.
These companies will not allow you to walk in and collect your gold from them either. In such cases it is a myth to think that you have an asset independent of the system. [But there are ways to achieve this properly is held correctly]
Independent Black System
But as we see in India, there is a “Black” financial system that works outside the banking system, simply because they refuse to allow the government and its corrupt officials to abuse them. The majority Modi continues to enjoy in the country is allowing him to tackle such problems but he does not have the support of the electorate on this matter.
There is no doubt that the continuation of the “Black” money system is assured by the presence of around 24,000 tonnes of gold in the country, the largest private hoard in the world second only to the total of 34,000 tonnes held in the world’s central banks.
Why? Because a gold and property system can operate outside the banking and financial systems, successfully, as is seen in India right now!
With the new banknotes now reaching the same level as the old notes did before “monetization” [this reached ‘normal levels last May] it is clear that the money launderers have been successful in converting to the new notes without either being caught or having to abandon their “Black Money” financial system.
This is the greatest fear of any government. It has been so since 1933 when gold and cash was a viable alternative, competing with the banking system.
Today, there is very little desire to operate a system in opposition to the banking system, in the developed world. But when confidence in the systems slides, there will be!
Inside developed nations, this is unlikely to happen as citizens are forced by a lack of alternatives to use the national currency and because they are bound into the local banking systems. Exchange Controls can enforce that overnight [as history repeatedly shows]. Only if and when hyper-inflation sets in, would a national currency collapse, inside a nation.
This leaves the only viable alternative both cash [in your hands] and gold! In the developed world there is so little gold in private hands that only a few will be able to protect their wealth. Gold has essentially been removed as money at ground level, but to ensure there are no attempts to return to gold as money, gold dealing will be made illegal and dealers closed down.
So one needs to act now to avoid the loss of your gold!
Credibility in the International Monetary system
The major problem for central banks is not so much their own citizens, but the international monetary system.
Other nations may not accept a nation’s currency. One might retort that it has been over 46 years since a loss of confidence in a major currency occurred. That was sterling in 1971, when the ‘dollar premium’ was instituted for several years.
This persuaded overseas investors to invest in the U.K. and U.K. citizens dissuaded from exporting their capital.
But the point is that it did happen in the lifetime of the older members of the financial world and undoubtedly will happen again in a fragmented global, monetary system many countries.
For instance, if the current degeneration of peace in the world continues, the international monetary system itself will begin to fragment and confidence in even the hard currencies will be eroded by the increasingly tense, global political scene.
To bring the point home, imagine that President Trump authorizes a major strike on North Korea’s nuclear capabilities? The massive breakdown of international relations will have a prime impact on confidence in national currencies and directly benefit the price of gold.
At that time it is likely that, as in 1933, gold will be brought in behind and in support of national currencies and any gold in the jurisdiction of that nation or in storage companies based in that nation will have their client’s gold confiscated even if that storage company holds client’s gold outside the country. Consequently, dealing in gold will be halted. We do think owners of that gold will be paid a currency price for their gold, but the currency in which it is paid will be declining in value, rapidly.
There is a precedent for that as seen in Zimbabwe as its currency approached the cliff from which it fell. The government confiscated all foreign securities owned by Zimbabwe ex-residents and resident and paid them a 4% government stocks and bonds for these. These were soon worthless.
Values in a cashless system within the banks
Imagine a time in the future, when all money sat in the banking system of a nation, the management of a nation’s money would be entirely under government management. Government control over money would be absolute.
Just as in Cyprus, depositors, both foreign and local had to forfeit their deposits until an outcry internationally left 100,000 euros in accounts. The rest, mainly from foreign depositors, was taken from them against the issue of shares in the banks, without either consultation or approval of those depositors. This was complete control!
Few sympathized with the depositors as they were labeled, Russian villains. Of course, the wealthier [than 100,000 euro] retirees lost considerable amounts. The focus should have been on the devastation of pensioner’s savings. Some said they shouldn’t have deposited funds in Cypriot banks. If this happens in a cashless society in a ‘hard’ currency nation, there would be no alternative or choice.
The control over your wealth would disappear.
The Confiscation of gold has begun!
[Turkey and India too]
The dwindling credit of Turkey and significant decline in its currency, has led to a call from President Erdogan to Turkish citizens to invest in gold [not U.S. dollars]. As it is, gold is integrated into that nation’s financial system. It appears logical for the next step, of calling for that gold, to be deposited into the banks. It can then be placed in support of the Turkish Lira.
Understand that with gold, as with most things, possession is nine-tenths of the law. This is particularly so with gold!
The Indian Reserve Bank has an ongoing program to persuade Indian citizens to do the same, into a gold Exchange Traded Fund as well as an interest paying deposit scheme, but such a scheme only yielded 9 tonnes from Indians.
We believe that the 24,000+ tonnes of gold privately held in India is far too much of an asset to be kept outside the official system for much longer.
With the intransigence of Indian gold owners it is only a matter of time before there is an attempt to make gold dealing illegal in the country and for privately owned gold to be confiscated thereafter and put behind the Rupee. Perhaps they will be allowed to keep their gold, if it is held in a bank, in the owner’s name, but other gold not in the banks [or temples] or gold dealers/jewelers would be likely to be confiscated.
In Turkey, where there is a greater acceptance of the banking system, as part of life, there we would expect the scheme to have considerably more success. After all, interest is being offered on such gold deposited in the bank and both banks [with the encouragement of the government] and individuals believe they have free access to their gold at the end of the term of their deposit. Gold is now pretty well integrated into the country’s financial system.
Ownership and Control, what’s the difference
It is here that one has to look deeply into the ownership/control over the gold.
As we saw in the ‘bail in’ in Cyprus of a leading bank there, a depositor is simply an unsecured creditor of the bank, by definition.
This technically left the ownership of the deposit [gold or currency] in the ownership of the depositor, but control has now moved to the bank and through the bank, the government. Any overnight government decree can force the bank to hand gold, so deposited, over to it. The owner will not be consulted in this event, but may well be paid a price in the failing local currency, as we mentioned above, in Zimbabwe.
Bear in mind too what Jamie Dimon stated that, ‘confidence in a nation’s institutions is vital’. This is even more important in countries like Turkey and other emerging nations. With Turkey’s banks garnering a high degree of confidence among the Turks we expect a high volume of deposits of gold to be made into the two schemes they are offering.
The Turkish central bank is launching two new investment opportunities for physical gold.
1) They are issuing a gold bond.
2) An instrument for the loan of gold and gold jewelry.
The scheme is that the Turkish government is taking control of this gold and using it in the nation’s financial system.
This is being marketed as broadening the financial system allowing citizens to earn additional income with their gold reserves if they subscribe to the schemes. It is being explained as stimulating the local economy.
They are promising to pay a certain interest rate on such gold deposited, during the term of the bond, in Turkish lira.
This interest rate will be linked to the gold price.
The gold-covered loan certificate also entitles the holder to receive interest after physical gold or gold jewelry has been deposited with the intermediary bank, under the control of the government.
It is likely that when the government cannot borrow internationally, which may well happen it will be able to confiscate people’s gold using a bond scheme that in the end they will be forced to default or delay indefinitely.
We attach a link to a Zero Hedge article that gave a similar spin on this story:
Many feel that stories of confiscation are dredging up myths from the past that will never happen again, but nothing could be further from the truth.
We are living at a time when fragmentation of nation’s politics alongside a degeneration of international politics is spawning a divided, uncertain world in which China is a rising power, taking that power from the U.S. and its dollar.
But it is already clear that even in the U.S. most of the gold outside of government is under the control of it banking system. For instance the gold backing the U.S. based gold Exchange Traded Funds sits in banks under the thumb of the U.S. government.
Gold dealers there operate under a license from government, which can be revoked at any time.
In China, all but the gold jewelry held in China is held in government controlled/owned institutions.
The same applies in the U.K. and E.U.
All that remains for any government in the world to do, to achieve a near total confiscation of a nation’s gold, is to issue a decree to do so. The gold is already under their control.
In the U.S. there is relatively little privately held gold but in 1974 when the U.S. government after 41 years allowed U.S. citizens to own gold it was stated that it was ‘not a right, but a privilege’. Should a confiscation order be issued it too will have followed an order making it illegal to own gold. The confiscation from Custodians and dealers would follow.
Only in India would it be necessary to raid individual’s homes and temples for the gold after a confiscation order is issued.
Do you control as well as own your gold?
You should examine who controls your gold. This is established by the difficulty in being able to go to whoever holds it for you and collect it from them. We expect you will not be allowed to do so. In effect it has already been confiscated!
When confidence in the global monetary system weakens and in individual currencies falls further, an announcement will be made to advance government control of a nation’s gold to its ownership!
You may feel that that confiscation of gold is a long way off and do nothing about it. With the Second World War several years ahead of them people started to leave Germany with their wealth, but many thought they had plenty of time and waited until the way out was blocked. They then suffered more than their loss of wealth!
The only retainers of wealth left Germany from one to six years before the war began.
We feel that we are within that time spectrum of the six year before all this happens!
Act Now! There is only one structure designed to combat the confiscation of your gold and that is the Ultimate Gold Trust / Stockbridge Management Alliance Ltd. Contact it at:
Bear in mind that gold dealers would also be put out of business as gold dealing would be banned. Only governments would be allowed to own gold and would brook no competition from the private sector!
You need also to protect yourselves as you would then be required to report your gold holdings under a new FATCA regulation to be imposed then. UGT would be in a position to guard you even then!
Contact us NOW!
Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Julian D. W. Phillips makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Julian D. W. Phillips only and are subject to change without notice. Julian D. W. Phillips assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage which you may incur as a result of the use and existence of the information, provided within this Report