Don StottI don't think so. A piece on Le Metrople Cafe is making the rounds, and I think it must be rebutted. The piece was written by a very reputable numismatic coin dealer, first of all, so the ax to grind is obvious. Numismatics dealers have to mark up their inventory, as a matter of staying solvent. This means they buy low and sell high, and this is not meant as a criticism, but a matter of fact. If I had a large, expensive inventory, rent to pay, and a select, limited clientele, I'd have to charge a lot more than a 1.5% commission. Numismatics are an inventory item for the sellers of them, just like the grocery store or auto dealer has to maintain an inventory, and sell at a profit to stay in business. A broker, such as precious metals, stock, options, or futures, on the other hand, has no inventory, no showcases, no magnifying glasses, and no grades to fool with, or estimate, so the commission is small. Brokers carry no inventory, and display nothing.
The "confiscation" fear has abounded for years, and it's time to put a stop to it. First of all, government probably has no gold anyway, as far as I can tell, but has sold or loaned all of it. The bullion at West Point has a label on it that is not indicative of ownership by the US government. The last inventory done at Ft. Knox, was during the Eisenhower administration, and locals say immediately after that, a series of large trucks were seen leaving the area. Did they have America's gold in them? The US government has no more gold certificates, and no more promises to pay in gold on the bills, and further, it doesn't set the price of gold any more, nor mint gold coins that are commonly used for trade, as in pre-1933 times. By law, American gold and silver Eagles are "NUMISMATIC," and therefore "collectible." All "collectible" things are bought for the purpose of increasing their value as time passes, as their supply is extremely limited; be it a doll, stamp, auto, or coin of any denomination, size, or content. "Wheat pennies," are worth more than one cent, as an example.
The so-called "confiscation" of 1933, wasn't confiscation at all, but an order to turn in the gold coins for an equal amount of paper money, under threat of a fine. Who turned them in? A lot of people, I am sure, because it would have cost $20, $10, or whatever, to store them in the bureau drawer. Obviously, a lot of them didn't, as they are still for sale today. America stopped making 90% silver coins in 1964, but never ordered them to be "turned in." Guess what? I'd be willing to bet that most of them are still around. "Bags" of US silver coins ($1,000 face value) are around by the tens, if not hundreds of thousands. Gresham's law states that bad money drives out good money, and the silver coins were driven out…to collectors.
Who has gold? Just about everyone did in 1933, as it was the most common money. True money. No one carries gold around in their pockets any more, and it is all tucked away. How would the Fed know who has it? In 1933, all they had to do was go around to stores and banks, and scoop it up. They replaced it with paper money instantly. Those who weren't suffering too much from the depression, probably said to themselves, "Hell no, I won't turn in my gold." They didn't, and that's where the supply now for sale in coin shops comes from…or is it? The sorry part of this, is that back in the 70's tens, if not hundreds of thousands of fake double eagles made their way into America, by being smuggled in from various communist countries. They're made of real gold, and look, to the naked eye, like a beautiful, uncirculated Double Eagle. They might be almost uncirculated, as they are fakes, and the real can't be told from the fake without a jeweler's loop. The fakes are the reason why there are so many more Double Eagles around than Eagles, Half Eagles, Quarter Eagles, etc. Believe me, $20 was a lot harder to come by in 1933, than was $10, $5, $3, or $1, and these smaller coins are really scarce, and expensive. Logic says that there should be far more smaller gold coins for sale than $20 double eagles, because there were far more in existence. The fake has to come into the act here. An ordinary Double Eagle sells for about $450, I believe, and is 0.9675 ounce of gold. A full one ounce Gold Eagle is less than $300, as I write this, and a far better buy.
If government tries to confiscate private property, the Supremes will get that case quickly, and it will be decided against the Fed, without doubt. If the government wants to get into gold again, after disposing of selling, leasing, or who knows what, with theirs, they would have an impossible task of finding out who has it. Remember the 4th Amendment? "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures shall not be violated…" If the Fed wants to get into gold again, because of financial panics, let them buy the gold straight from the mines or producers. That's a lot easier that trying to find the millions of people who anonymously bought theirs. Would you turn in yours if ordered to do so? Of course not, and no one else would either. After all, drugs have been illegal, as has prostitution for many years, and both flourish. All the threats, laws, and fines haven't stopped it, and never will. Gold is not habit forming, nor sexually satisfying, doesn't need to be sold on street corners, and never will, so for a government to find it, is absurd. Talk about a needle in a haystack.
We buy gold and silver coins as a hedge against inflation, and whether numismatics or bullion is the best hedge, is an argument of Ford vs. Chevrolet. Numismatics dealers say theirs goes up fastest, and stock brokers say gold and silver stocks go up fastest. Bullion dealers, like myself, say that when it all 'comes down,' it will be who has the most ounces that are the most recognizable and saleable, that will count, and the hell with the dates, or pieces of paper with ink on them. The arguments can continue, but when numismatics dealers try to say the gold will be "confiscated," that's nonsense. Government can't find bin Laden, and to find out who has the gold would be impossible. An ounce or two here, or five there, would be the rewards of the confiscators, even if the Supremes gave them permission. Are they going to dig up yards, inspect attics, and develop a breed of dog that can smell gold? If the government runs short of housing, will they confiscate yours? If they need cars, will they confiscate yours? Bullion coins all look alike, have no grades, don't need to be inspected by buyers, and are easily sold by phone through brokers such as myself. That's why the "confiscation" scare comes around regularly like spring and fall. Get a life coin shops and numismatic dealers! Stop trying to scare everyone.
February 27, 2002
Don Stott has been a precious metals broker since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com
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