Is This The Start Of India’s Gold Confiscation
On April 5, 1933, FDR signed Executive order 6102 which made illegal “the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States” in the process criminalizing the possession of monetary gold by any individual or corporation.
This was de facto gold confiscation; De jure it wasn’t, because as compensation for the relinquished gold, Americans would receive 20.67 in freshly printed US dollars for every troy ounce. Anybody who objected faced a fine of $10,000 (just under $200,000 in inflation-adjusted dollars) and up to 10 years in prison.
Once the government was confident it has confiscated enough gold, it turned around and raised the official price of a gold ounce to $35 (about $600 in today’s dollars) devaluing the US Dollar by 40% overnight at a time when currencies were still backed by hard assets.
Fast forward 82 years to a time when the barbarous relic continues to be seen as the safest store of value among India’s vast population (roughly 20% of the world’s total), not to mention the main source of financial headaches for local authorities, one of the biggest importers of gold due to its “traditional” values and where relentless Indian demand for offshore purchases of the shiny yellow metal so plagues the government’s current account and capital flow strategy, that the government may be preparing to pull a page right out of the FDR playbook.
Yesterday, Prime Minister Narendra Modi’s cabinet implemented the selling of “gold-backed bonds” when it approved the gold monetization plan and sale of sovereign bonds proposed several months ago by the Reserve Bank of India, the government said in a statement. The plans were first announced by Finance Minister Arun Jaitley in February as measures to woo Indians away from physical gold. As Jaitley explained yesterday, the deposited gold would be auctioned, used to replenish the Reserve Bank of India’s reserves or be lent to jewelers.
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