By Jeff Nielson

VANCOUVER ( Bullion Bulls Canada ) -- A question which I am regularly asked by readers (especially U.S. readers) is whether I believe that government(s) would once again confiscate the gold held by individuals. The question is a reasonable one, given the U.S.'s prior history of "gold confiscation" during a time of deep economic strife.

Executive Order 6102, issued by the Roosevelt administration on April 5, 1933 commanded U.S. citizens to turn over all of their bullion holdings, with a few limited exceptions. The official exchange rate for all gold confiscated was $20.67 US, which was the official, fixed price for gold at that time.

There are many observations to be made about this event, and once examined it should be more obvious to people to what extent that threat exists today. To begin with, we must look to the purpose behind that Executive Order. Here, what we see is that there was more than economic strife which motivated this action.

By that time, Hitler had already risen in Germany, and the severely flawed Treaty of Versailles (which resulted from the Armistice of World War I) was increasingly seen as a driver of new hostilities in Europe, rather than the basis for a lasting peace. With the prospects for major, European war once again rising, it was imperative to the U.S. government that it have sufficient financial reserves to engage in its own military build-up.

Here, we must remember that the global monetary system was firmly tied to a gold standard at that time. Thus the only way in which the U.S. government could rapidly increase its money supply to finance its military without shattering the gold standard (as Nixon did in 1970) was to find a way to significantly (and quickly) increase its gold reserves.

Confiscating the gold of its own citizens was clearly the easiest way to accomplish this. A very nice article on this period by Bullion Vault points out another interesting aspect to this episode. Immediately after confiscation, the U.S. government "revalued" gold against the dollar (i.e. it devalued the dollar) to $35/ounce -- netting the U.S. government an immediate 50% profit on the gold it had taken from its citizens. But that was literally only half the plan.