Never underestimate the cleverness of government in finding new ways to screw you out of your money.
In the United States, the Gold Reserve Act of 1934 outlawed the possession of gold bullion, gold certificates, and most gold coins. “A year earlier, in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector’s coins.”
The government decided that citizens (and foreign residents as well) could not own or trade gold. The law called for the confiscation of any gold not turned in to the treasury. Gold was exchanged for paper money, unless it was confiscated. All contracts requiring payment in gold were legally converted to payment in paper money.
The government had serious reasons for taking this action, as the economy was in a depression. The amount of currency that the government could issue at the time was linked to the amount of gold they possessed. But regardless of the reason, people who held gold to guard against inflation (or economic collapse) were deprived of that option.
The economic situation today is very different. But nothing prevents the government from confiscating precious metals again. And notice that the start of this confiscation was a mere executive order. The law passed by Congress was a year later.
Bank Account Haircuts
“In March 2013, banks in the country of Cyprus gave a ‘haircut’ to their customers’ bank accounts, causing a public outrage.” [Source] What’s a haircut? It means that anyone with large amounts of money in the bank accounts would lose a portion of the money. It was confiscated. “Under the arrangement, depositors in Bank of Cyprus will receive shares in the lender worth 37.5pc of any savings over €100,000, while the rest may never be paid back, according to a statement from the Cypriot central bank.”
So the gold confiscation of the 1930′s has a modern equivalent: bank account haircuts. The government doesn’t take all your money, just anything over an arbitrary amount.
A wealth tax is a tax on the value of the assets that you own, in addition to the tax on your income or profits. Essentially, this tax is only a little different from a bank account haircut. By making a new law, the government simply decrees that it can take a percentage of accumulated wealth. But in the case of a wealth tax, everything of monetary value is subject to the tax, including businesses, homes, art, jewelry, cars, etc. A problem is that much of this wealth is not liquid. So in order to pay the wealth tax, some persons would be forced to sell what they own: a family business, a home, or other assets.
Several nations today use a wealth tax. And it could happen in the United States. President-elect Donald Trump proposed a wealth tax in 1999. And although the plan does not seem politically feasible at the moment, it is constitutionally and legally feasible. All you need is the votes in Congress and the President’s signature.
In late 2016, India declared that all 500 and 1,000 rupee banknotes (currency) were no longer legal tender. This act of demonetization threw the economy into chaos. A 500 rupee bill is worth about $7.50 U.S. dollars. So the currency left for use was of low value.
People in India who were “hoarding” cash were caught unaware. (Note that, in the U.S., the gold confiscation was also undertaken on the basis of a claim of “hoarding”.) Old notes could be exchanged for new version of the 500 and 2000 rupee notes (with greater security measures against counterfeiting). But long lines at places of exchange and limited availability of new notes harmed the economy.
“The move was also described as an effort to reduce corruption, the use of drugs, and smuggling. However, in the days following the demonetisation, banks and ATMs across the country faced severe cash shortages with severe detrimental effects on a number of small businesses, agriculture, and transportation. People seeking to exchange their notes had to stand in lengthy queues….” The announcement also cause a crash of the Bombay stock exchange and India’s National Stock Exchange.
Could it happen in the U.S.? The Treasury used to print currency in $500, $1000, $5000, and even $10,000 dollar values. These still exist and are legal tender. But their rarity means that they are generally worth more as collectibles than currency. Could the $100 bill be demonetized? Well, the $100 bill in 1969 was worth more than $500 in today’s economy. And the $100 bill is the most commonly counterfeited note, and the most commonly used bill by criminal organizations. It could happen.
Given that confiscations of gold and currency have occurred in the past based on the claim of hoarding, a food shortage could see a government attempt to confiscate “excess” food stored by preppers (or anyone). All that stands between us and food confiscation is a food crisis and a new law.
One of the main general problems with government is that few limits exist on what a government can do. If there are constitutional limits, the constitution can be changed. Recall that prohibition was instituted by constitutional amendment. Owning and buying alcohol became illegal (except for medicinal purposes). Now you might think that the will of the people in a democracy can prevent some of the above described confiscations. But all of the above examples are from democracies, including the U.S.
It could happen to you.