Guest Post: A Step Towards Gold Confiscation

Tyler Durden's picture

Submitted by John Aziz of Azizonomics,

In attempting to stimulate risk appetite by taking “safe” assets out of the market, the Fed has actually achieved precisely the opposite of stimulating productive investment. First, it has turned bond markets into a race to the bottom as bond flippers end up piling into the very assets that the Fed is trying to discourage ownership of  — because who care about low yields when the Fed will jump in at an even lower price floor, thus assuring the bond flippers a profit? Second it has energised other safe asset markets (such as gold) as longer term investors look for alternatives to preserve their purchasing power in the context of a global economic depression.

The Fed is firing at the wrong target; the real problem — the thing that is causing investors to scramble for safe assets — is an economic depression brought on by (among other non-monetary causes) the deleveraging costs of an unsustainable debt bubble. Without addressing the problem of excess total debt — and quantitative easing aims to increase lending — the Fed is firing blanks.

However, there seems little prospect that the Fed will listen to the debt-watchers who actually predicted the crisis. The likelihood is that the Fed will continue to attempt to take safe assets out of the market. And after treasuries, what will the Fed try to take out of the market?

Izabella Kaminska writes in FT Alphaville:

Fed purchases are the equivalent of hoarding the system’s supply of safe assets on the Fed’s own balance sheet, and in so doing preventing private investors — especially money market investors – from investing in the assets on favourable terms.

While this is mostly the point of QE — the idea, after all, is to stimulate risk appetite and cause investors to change their portfolios — a continued lack of risk appetite means the money created, rather than flowing into risky securities as hoped, is only crowding out the last remaining safe securities in the market instead. The consequences are negative rates and principal destruction — a lethal combination that is arguably far more dangerous and deflationary than no QE at all.

The idea that the Treasury could once again become the gold buyer of last resort, in exchange for liquidity, is interesting to say the least. Not only would such a strategy ease the squeeze in the Treasury market, it would do so without compromising the liquidity effects of QE.

What’s more it could help to support and stabilize the gold price, while taking zero-yielding safe assets out of the system in favour of yield bearing ones — giving money markets a fighting chance for survival in terms of yields.

While gold purchases have never been communicated as official central bank policy, there’s no denying that a shift in this direction is taking place. Be that wittingly or unwittingly.

A little behind the curve.

Last September I noted:

Bernanke has already heavily targeted yields on treasuries which have absorbed liquidity that has departed from productive ventures. But in recent years gold has offered a significantly increased yield over treasuries.

So what’s a central banker who wants to force investors into productive ventures to do? You can’t print gold — but you can buy it, and take it out of the marketplace.

And as the price of gold (in fiat) continues to rise, buying gold is exactly what central bankers may do.

Just as Roosevelt went out of his way to remove gold from the marketplace, the central bankers of today may eventually determine to do the same thing.

The main question if such an event were to occur is just how “compulsory” such purchases might be.

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ACP's picture

That's just the starting point this time around, BITCHEZ!

Mr. Fix's picture

This plan would solve to many problems. That's why they'll never do it.

Western's picture

The sign says "postmaster, please post in a conspicuous area". If you never get contacted by the government, then you don't have to do anything.


"No sir I had no idea.. didn't see the postmaster's sign"

"No sir I did not receive a letter from the government, I'm sure it must have been returned to sender unopened"

"No sir, didn't pick up the phone, didn't know who was calling"

"No sir, didn't open my door to the federal agents.. must have been sleeping"

"My gold? Oh I dropped it in the boating accident"

end of story, nobody gets your gold.

Benisprintingquintillionsbehindourbacks's picture

After spending a lifetime accumulating Gold, I realize I was wrong after reading this brilliant article and I will give all my Gold to the Fed tomorrow. I will then watch my paper dollars devalue with "positivity"

/sarc off

engineertheeconomy's picture

Is ther some good reason this fucking stupid troll "John Aziz" is here on Zerohedge?

Come on Tyler(s), we would all like to hear any justification for this B.S... 

Bullionaire's picture

I think what this chap meant was, "FT Alphaville - stopped reading right there."


Fixed it.  No charge.


paddy0761's picture

24 hours in Guantanomo Bay and you'll tell them where it is. You'll tell them shit they don't even want to know.

zrussell's picture

In the video the guy who had his bank-depositied gold confiscated sued the bank for giving up his gold. The next day he was charged with failing to report his ownership. It was thown out on the technicality; that the wrong person signed the presidential order.

Why was the case not thrown out because the US gov doesn't have jusistiction to command citizens in the 50 states?

I would think that if O-care can be forced on the citizens of the 50 states, anything can now be "presidentially" ordered. (Que the gold-sniffing drones...)

Central Bankster's picture

You have to first destroy the economy, in order to save the economy.  "It's all part of the plan."

Dr. Engali's picture

Introduce a little chaos..... Upset the establishment.

Snidley Whipsnae's picture

So the Fed is going to be one of the last central banks in the world to begin accumulating gold since the financial collapse?

Do the brainiacs at the Fed realize that the Chinese, Indians, SE Asia and the Mid East are providing THE FLOOR under the current gold price?

I find it more likely that the Fed will attempt to corner the PAPER gold market than the physical gold market...

howenlink's picture

Digging hole now.

AmCockerSpaniel's picture

Dig very deep, very, very deep.

kieran1968's picture

...and if you have to give up something...practise in front of the mirror until you refine an Oscar winning performance:


"You mean the Credit Suisse bars i bought were cheap chinese fakes... oh my... I feel such a fool!"



Mr. Fix's picture

China is already doing it !

Dr. Engali's picture

I think the premise of your post is off base. You and others think the fed wants to push people out into risk assets, because that is their "stated policy". I say the fed wants people rushing into bonds to keep the governments borrowing cost ultra low. The rising equity market is a residual effect welcomed by the fed but not their true primary goal. It helps to keep people off balance and scared. Rushing into bonds on every little dip.I've learned a long time ago to ignore their words and observe their actions.

Snidley Whipsnae's picture

Dr E... Why would the Fed need buyers for US T paper when they are buying (through PDs) the vast majority of it themselves? If need be, the Fed will simply buy it all.

Interest on T paper is 'ultra low' because the Fed is buying far more than enough of it do drive rates ultra low. period.

It's obvious by now that the Fed doesn't care about the size of their balance sheet. Even if they did what could they do about it? Raise interest rates? :)

Or, perhaps you are aware of a Fed exit strategy that I have not heard about?


Dr. Engali's picture

The fed isn't buying everything and if you look at their balance sheet is actually had a slight contraction. They need everybody buying that they can get and they are getting it. If they didn't have this game going of front running the fed they would have to print a lot more to maintain these rates.

Aziz's picture

I agree that QE is really about keeping Treasury borrowing costs as low as possible. (A point I have actually made many times myself).

Just as printing money to buy gold wouldn't really be about removing safe assets from the marketplace. 

LoneStarHog's picture

"...buying gold is exactly what central bankers may do." --- Maybe if you had a friggin' clue you would read the reports showing that GOLBAL CENTRAL BANKS have been BUYING GOLD in large quantities, especially CHINA and RUSSIA.  Central banks were SELLERS of gold, but they have been BUYERS for some time, now.  Do yourself a favor before writing one of you missives and DO SOME DAMN RESEARCH.

poor fella's picture

As far as confiscation, there's not enough 'force' behind such a move today. There's A LOT of people armed to the teeth, pissed off like never before, and completely disenfranchised in this current system to allow anything like this. You pull this shit on my neighbor, I got their backs, and vice versa. These fucking tools think their 'spy' shit is going to mean something? Boots on the ground baby, and they don't have them.

boogerbently's picture

They can't "confiscate" equity ownership in foreign (gold) companies.

Central Bankster's picture

Yes they can by taxing at such a high rate that the equity is nearly worthless and/or the foreign country may nationalize or tax at a rate high enough to make it worthless.  Check what is happening in Argentina and Bolivia over the last 12 months.

TwoShortPlanks's picture

Nice one CB. About fucking time someone said something which made sense!

Peope are worried about Gold being confiscated...LOL...wake up fuckers, shaking the tree the past 12mths is doing just that. Besides, what percentage of the population own physical Gold these days, 0.1%??? Whereas every man and his dog had Gold back in the 1930's.

And I'll save you all the suspense, Gold Mines can and probably will get nationalized if things get FUBAR'd. Gold will probably break $2,000 the same day it breaks $200,000...when the Central banks are good and ready for it to do so, not a minute sooner.

My advice: Measure the tide, not the swell.

TwoShortPlanks's picture

RANT 2.0

If I were part of a power-driven sychopathic family, indoctrinated and mentored with just one goal in mind, say, global glove puppet master, with my hand up every Central Banks arse. With a century or two of Merchant Banking experience and with preference to pulling the strings from within the shadows and under a multitude of layers, rather than in plain view. I'd probably create a tool which allowed me to see every movement of every significant dollar amount across the globe...every transaction (of worth) across every country and through every Bank. Yeah, I'd probably create something like,,,say,,,the BIS given enough time, money and resources.

And I'd store my wealth in physical too.

poor fella's picture

I like it CLOSE and REAL and sometimes get crazy and beat PMs into jewelry... RIC downgraded yesterday, but contrarian investing has always produced the best returns on my LOTTERY MONEY. These markets are F'ing broken, I get 100 free trades a year and have only used 1 or 2 this YEAR. Crazy times.

I see a hole about the size of a 100 oz silver bar that needs filling - I'll buy that dip.  ;)

Dr. Kenneth Noisewater's picture

Cast your metal into Eiffel towers and paint them.

Titan Uranus's picture

Beautiful!  Not many will catch that one.  Then move to Lavender Hill, mix a drink, sit back and watch the chaos...

andrewp111's picture

They don't have to confiscate anything. All they need to do is orchestrate a worldwide, coordinated, multi-trillion dollar gold buying program. IMHO, the only reason they haven't done this is that very little gold is mined in the USA (Brazil, Africa and Russia mine most), and Bernanke isn't a big fan of the yellow metal anyway. Most hoarded gold isn't in the USA either. China, the Middle East, and especially India are the world's biggest gold bugs. If the Fed printed a trillion dollars for buying gold, most of that cash would leak out of the US economy as fast as it was spent. What good would it do Bernanke to stimulate Brazil, Russia, India, Saudi, and China, unless it was part of a larger coordinated worldwide plan that directed some big foreign stimulus to the USA?

tenpanhandle's picture

this spagetti you are throwing at the wall has all slid to the floor.

DollarMenu's picture

Trouble is, as I see it, if people want gold, they will have it.  

Witness the "War on Drugs".

A success?

Why would this be any different?

goldfish1's picture

printing more fiat to buy the gold is the fed's answer?

Non Passaran's picture

And then what? I wouldn't sell but I would be happy to know that the market price is going up.

Snidley Whipsnae's picture

and111... and I suppose you believe that China, Russia, the Mid East, et al, will go along with a Fed plan to buy up the world's gold with dollars?

What do you believe the price of gold in dollars would reach after the first hour of buying?


oddjob's picture

stealth confiscation and 'we buy gold' is the same racket.

Snidley Whipsnae's picture

"stealth confiscation and 'we buy gold' is the same racket."

'We Buy Gold' is a transfer of gold from weak hands to strong hands... A great deal of that gold is headed East and isn't coming back.

BigInJapan's picture

You're on the right path here.
This is what I'm seeing in Japan.

Dr. Kenneth Noisewater's picture

Besides, I went out on a boating trip and took all of my gold with me, but unfortunately a big cigarette boat went by and the wake caused it to go overboard.  Took my guns overboard too :(

lightning's picture

Gotta call you on this one.  These people who won't allow this are the same sheeple that when I try to tell them that both political parties and the bankers are stealing their money, they look at me and either tell me Romney/Obama will make it all better.  Those people?  I actually come to Zero Hedge because other than my spouse and you fine people, the rest of the world is BLIND and STUPID.  I am endlessly assured that if any "real" criminality took place then the government would "surely" investigate and prosecute it.  As for boots on the ground, they (the government) do have them and have hatched a plan to use them.  Personally, I think they will confiscate gold and do it for NO other reason than to destroy what little of the middle class is left.  The best predictor of future behavior is past behavior and I don't think they need a reason to try and take people's wealth.  BTW, in the 30's when they "confiscated" gold they did so by telling you that they would "compensate" you for said gold.  Once most gold was confiscated they then upped the cost per ounce (I think from $25 to $35) to benefit themselves.  My point here is that it wasn't confiscation without compensation, which is why it was seen as legal at the time.  In the age of the Patriot Act, NDAA, and the War on Terror they won't go after gold?  They will take your gold, your retirement account, and make sure the death panel is working before you have time to complain.

Red Heeler's picture

Bullish black market.

earleflorida's picture

scary thought... but, it would telegraph to the feeble sheeple that we surely are in a depression and that war is eminent.

Would the pleasure be that of Monsignor O`bambi?


Deo vindice's picture

"scary thought... but, it would telegraph to the feeble sheeple that we surely are in a depression and that war is eminent."

War has always been eminent in the minds of TPTB.

This would make it appear imminent.

Rattling Bones's picture

And what kind of response, in this day and age, would an executive order from Obama to turn your gold over to the Federal Reserve generate? 


Besides laughter.

alien-IQ's picture

Let's face it, all bravado aside, there is more than ample evidence to support the conclusion that Americans will simply (as usual) do as they are told.

For all the guns and hero worship and violence and big talk, at the end of the day...this is a nation of sheep.

They will shut up and take it...because the Idiot Box will tell them it's the "patriotic" thing to do and there is nothing more American than obeying the Idiot Box. And take it a step further...they will turn on their friends and neighbors who refuse to hand over their gold.

Manthong's picture

"because the Idiot Box will tell them"

Um.. I don't think they are the folks that have the monetary metals..

and they are also not likely the ones that hold Pb  as "protection against what we call tail risk, really, really bad outcomes".

andrewp111's picture

Almost nobody tells their friends and neighbors about their gold. It is common sense that you don't discuss such things. If you are hoarding gold, the only one who knows it is the company who sold it to you, and perhaps your credit card company if you bought it online.

Of course, if you bought your hoard from the US Mint, the Treasury already knows you have it, or at least once did.

JohnG's picture



I showed my little brother (20 years my junior) where to find it, and what to do if I'm dead.  Not my wife, son, father (mom is dead), no one else. 

I can trust him for a fact to keep his mouth shut. His is in the same place :)

HungrySeagull's picture



I don't own gold yet. That remains to be seen.


Now I can buy a bunch of crappy computer CPU's and smelt these until they give up the gold inside them.

dark pools of soros's picture

It's barely worth the effort but would make for a good reality show like a Geek Gold Rush. Sponsored by ZH