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Will Uncle Sam Confiscate Gold Again?
Will Uncle Sam Confiscate Gold Again?
Investors suffered financial losses in recent weeks as stocks globally came under pressure in August and had their worst month in the last three years.
In one of the most volatile trading periods since the global financial crisis, August saw a massive $5.7 trillion erased from the value of stocks worldwide. No major stock market was left unscathed and the risk of financial and economic contagion became evident again.
There are growing concerns internationally that in the event of another Wall Street or global stock market crash and a new systemic crisis – a Eurozone debt crisis or another Lehman Brothers collapse – there could be enforced bank closures or extended bank holidays in the EU and U.S. as seen in Greece recently.
In this scenario, deposit boxes and vaults in U.S. banks and financial institutions could be sealed and gold confiscated again.
There is a legal precedent for this. April 5th, 1933 – at the height of the Great Depression – was the day when U.S. President Franklin Delano Roosevelt instructed all American citizens to hand over all their gold coins and bars to the Federal Government.
Every coin, bar and certificate had to be handed in to Roosevelt’s government or else one would face a very large fine of $10,000 or 10 years in jail. That is whopping fine of $180,000 fine in today’s money.
Gold was money at the time as dollars were backed by gold so in effect Roosevelt was confiscating the safest and most valuable form of money that people owned for the benefit of the state. Under the Gold Confiscation Act of 1933 Roosevelt ordered all gold be handed to the authorities. At the time, gold was valued at $20 per ounce. Once the gold was confiscated from the citizens and in the government coffers they revalued gold and devalued the dollar to $35 per ounce.
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Central Banks Are Pointing A Weapon Of Financial Mass Destruction—–Right At The Global Bond Markets
Central Banks Are Pointing A Weapon Of Financial Mass Destruction—–Right At The Global Bond Markets
For the first time in its country’s history, Portugal sold 6 month T-bills at a negative yield. The 300 million euros ($333 million) worth of bills due in November 2015 sold at an average yield of minus 0.002%. A negative yield means investors buying these securities will get back less money from the government than they paid when the debt matures.
To put this in perspective, the 10 year note in Portugal now yields just 2.38%, down from 18% a mere three years ago. Back in 2012, creditors grew wary of the countries referred to as PIIG’s (Portugal, Ireland, Italy and Greece) and their ability to pay back the massive amounts of outstanding debt. Consequently, creditors drove interest rates dramatically higher to reflect the added risk of potential defaults.
If a person had fallen into a deep slumber in the midst of the 2012 Eurozone debt crisis and awoke a week ago, they may make some reasonable assumptions as to why there was a collapse of Portuguese bond yields on the long end of the yield curve; and even displayed negative yields on the short end.
Perhaps Portugal had finally balanced their budget? Or even is now enjoying a budget surplus? To the contrary, that is not even close to the truth. Portugal has not balanced its budget…its budget deficit now sits at over 3% of GDP.
Or perhaps there was a massive restructuring of outstanding debt? Upon joining the Euro, Portuguese national debt was below the 60% limit set by the Maastricht Treaty criteria. By the start of the debt crisis in 2009, that level of public sector debt had edged up to 70% of GDP. However, the recession of 2009-12, saw a rapid increase in the level of debt. Despite recent efforts to reduce public spending and austerity measures pursued by the government, Portugal still has an immense and growing debt load, with a current National Debt to GDP ratio of over 130%.
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