By Steve Saville
Worry About Capital Controls, Not Gold Confiscation
Due to the confiscation of gold by the Roosevelt Administration in 1933, there remains an undercurrent of concern among gold owners that the US government or another major government will confiscate gold in the future. However, the risk of this happening is presently so low as to not be worth taking into account. Of far greater risk are capital controls and the confiscation of cash.
Gold confiscation is not a realistic threat under the current monetary system, because under the current system gold isn’t money. To further explain, the reason that gold was confiscated in the US in 1933 was that gold, at that time and place, was money, with the dollar essentially being a receipt for gold. Consequently, the amount of gold in the banking system placed a limitation on the quantity of dollars. By making gold ownership illegal the US government not only prevented the public from removing gold from the banking system, thus eliminating one of the superficial deflationary forces, it also pushed additional gold into the banking system and paved the way for greater monetary inflation.
Continue reading Don’t Worry About Gold Confiscation…
Fundamentally, the gold stock rally was labeled a “bounce only” because it was just another item rising anti-USD in an ‘inflation trade’ revival. Right along with Oil, Copper and the outliers like REE, Lithium, Uranium, etc.
If we are disinterested in commodities (I am and have been), then we were cautious on the precious metals for this reason.
Like it or not, we are in a process of eliminating the inflationist gold bugs, and a lot of ‘inflation trade’ promoters while we’re at it. I guess that is me being “sanctimonious” as one blog described me recently. I prefer ‘overly judgmental’, but whatever.
Moving on, one indicator of the coming problem in the gold sector was the tried and true HUI-Gold ratio (HUI-GLD used here, while NFTRH used a very similar HUI-Gold chart to note the early caution signal on May 17).
By Michael Ashton
I am not one of those people who believe that if the Fed is dramatically easing, you simply must own equities. I must admit, charts like the one below (source: Bloomberg), showing the S&P versus the monetary base, seem awfully persuasive.
Continue reading If Liquidity is Your Sword, Keep Swinging