Learning from History: The Future Possibility of Silver Confiscation
This commentary is a SILVERAXIS exclusive.
A certain doctor by the name of Jeffrey Lewis who discloses that his “site was created by someone with no professional background in investing” tells us that silver was also confiscated by FDR in 1934 (the gold confiscation actually occurred in 1933, the 1934 Acts made gold contracts unenforceable and devalued the U.S. dollar from $20 to $35 per ounce):
The history of confiscation of precious metals is well documented, with literally tons of gold and silver ripped from the hands of ordinary Americans during the financially tumultuous years of the Great Depression. However, history books and academic research rarely shine light into the confiscation of silver and rather focus on gold, even though both were made illegal for a total of 40 years.
In this article, we’ll examine the history of confiscation and shed light on the possible future confiscation of silver from investors.
Once Upon 1934
Franklin D. Roosevelt penned the first law to seize precious metal assets from Americans as a way to force savings in banks, rather than allowing Americans to hold their wealth in metals. Prior to the legislation, banks were riddled with liquidity problems, as trust in the American banking system waned and investors looked for the safest place to store their wealth. With both the banking system in question and the stock market still volatile after its peak in 1929, investors wanted hard assets, namely gold and silver.
FDR hoped confiscation would push investors towards the banking system, as well as raise cash for a growing Federal budget. Unfortunately, it did just that – all the while ripping wealth right out of the hands of the American people.
The Confiscation of Silver
Silver bullion was also made illegal to own during the 40 year ban. However, this is often little discussed, as silver coins were still a large part of the money supply up until 1964. Almost all pre-1964 coinage was 90% silver, and the coins were not illegal to own during this time, as it was a mainstay of the monetary economy. Silver bars, on the other hand, were illegal, as they represented wealth outside the monetary system and were systematically “purchased” from their owners at a price well below market value.
This of course is utter BS. Silver was never confiscated by FDR. I don’t think silver has a checkered past of being confiscated by other governments either. You can read a good overview of what “confiscation fears” can do to your bullion accumulation plans here. You can also see this excellent summary of the Hunt silver episode for more information on the silver market in the 1970s. How could the Hunts have acquired 55 million ounces of silver in 1973 if it was illegal to own silver bullion?
I’m not endorsing any particular bullion dealer over another here, I am endorsing the truth.
It is silly to spend too much time commenting on every silver or gold conspiracy theory that pops up.
Silver was never confiscated nor unavailable to the average individual. You could always bury a bag of silver quarter in the ground and just wait. This would have been a prudent speculation for many from 1929 through 1933 because of bank failures. I actually read financial book written in 1932 that briefly discusses this option.
So distrustful of banks at the time, my grandfather for his part took bricks out of his basement wall put US cash into the wall and mortared the brick back in the wall. I doubt that he ever thought to use silver US half dollars instead.
Gold was confiscated by Roosevelt and stored in Fort Knox. The bars are apparently still in the 90% AU / 10% CU amalgam that the orginial coins consisted. The only reason Roosevelt was successful is because the US commercial banks held virtually all of the gold in the United States in their vaults. It was easy to grab! Apparently, even in the 1920’s few people were interested and/or able to hold gold coins. I see the same general lack of interest today. The US dollar has been relatively stable for so long that people actually prefer it to metallic money.
Okay, so first I don’t post enough, then it is “silly to spend too much time commenting on every silver and gold conspiracy theory”. I guess you can’t please everybody!
Hi Siver ax, you certainly don’t post very much, and when you do you are always trying to berate others opinions rather than putting forward your own. But on the occasions you do your own stuff I find it very interesting and most insightful. OK, heres a three things to get your head round and school us on. Firstly whats your opinon on this whole CFTC up and coming meeting on precios metals?I remember you were not one to fall for Ted Butler’s manipulation theories, any changes on this now this meeting is up and coming? Also I aint heard you talk much about the basis for a long time, so much for Fekete’s cant buy gold at any price and stuff, that all died a death or did it? Thirdly when do you think this silver inventory will finally run out, I am getting sick and tired of hearing how inventories are depeleting and yet we are supposedly still at 1 billion ounces in bullion. Do you think we will ever run out? All the best, and please post more often.
John, I am an incorrigible critic, if you haven’t learned that yet…with respect to the three questions:
(1) The CFTC meeting isn’t going to do much to the commercial situation — the only area where they can really do something is to do a better job of verifying hedge status, and I do believe they will be doing that, but I’m not sure it will be accompanied by any rule changes vs. just more transparent and vigorous enforcement. On the other hand, it is quite possible the CFTC will issue revised position limit rules, and this will actually affect speculators more (who tend to be net long). So anybody hoping that the CFTC meeting will make it easier for speculators, as far as the COMEX goes, is smoking some serious stuff.
(2) The basis is pretty much exclusive to the Metal Augmentor service at this point although if we get some clear signals or what have you, I may post on it here at SILVERAXIS.
(3) Silver inventories will never “run out”, silver will always be available at some price, it’s only that physical silver deliverable today might become very expensive at some point in comparison to silver promises in the form of forward or futures contracts (backwardation). For now, there isn’t much sign of that and I’m perfectly happy to let the basis tell us when we start approaching that point. The world’s financial system is in a very precarious situation and could unravel at any time but that doesn’t mean it will anytime soon (it could very well be decades before the current global monetary system finally gives up the ghost).
What I think we must focus on as silver investors is to understand the fact that silver investment demand is the most critical factor for silver prices. We need to monitor long-term shifts in market mood and participation levels. For now and into the foreseeable future, I just don’t see the mood or participation reverse toward what we had in the 1980s and 1990s, but we need to think about what such reversal looks like since otherwise we’ll never recognize it in the low likelihood that it does appear.
Appreciate the sane analysis, and I kind of agree with everything you said. I think you may have it spot on with regards to the CFTC. The silver market might well find a clamp down on longs. That wouldnt surprise me in the least. I also agree with regards to inventories, the constant crap I here about silver running out I just dont see it. That I feel is just a load of bull**** being fed to naive silver investors. I have heard the same story for years and I guess will here if for years to come. Also I agree with regards to the “system” taking alot longer to collapse than certain people seem to wish for. I dont even think the dollar will collapse which seems to be the hope of every PM long out there. Of course I may be wrong, but the more I invest in this sector the more I come to think that most of the pundits who I have been following really are quacks after all, you excluded of course!
Whoever thought the SOVIET UNION would COLLAPSE virtually overnight. The United States has no more BUBBLES to keep its economy growing. The Falling EROI (energy returned on invested) will make sure the USA collapses much quicker than most realize. Everyone thinks it’s the DOLLAR or US TREASURIES that makes the world go around. It’s not…its the EROI.
You can’t grow your economy unless you grow your energy base. The world is peaking in OIL PRODUCTION and the downside of the PEAK OIL GRAPH is much worse when you factor in the FALLING EROI and how much LESS NET ENERGY is remaining for society and the economy in the future. This most analysts fail to comprehend when they make the PONZI FINANCE and PRECIOUS METAL forecasts.
The United States can never save its present system by returning to a more RE-INDUSTRIALIZED or MANUFACTURING ECONOMY. Those days are over. We simply don’t have the NET ENERGY available to do it. Sure we could return to some manufacturing….but only a mere fraction compared to what we had. It wont save this LEECH and SPEND SUBURBAN ECONOMY of ours built on STARBUCKS, REAL ESTATE and PARTY STORES.
I am really surprised most ANAL-LISTS don’t see it. The WORLD and USA is heading towards a COLLAPSE. It won’t take decades as some have mentioned (SILVER AXIS) because the EROI will start to fall off a cliff by the end of this decade.
There is nothing to get this SUPERFICAL ECONOMY of the UNITED STATES going again. All we can do is watch as the US GOVT tries to PROP up the economy and wait for the US TREASURY and DOLLAR DEFAULT.
TIME to SHORT PONZI FINANCE and GO LONG PRECIOUS METALS, BULK FOOD and CARBINES
SRSrooco,
I agree with your comment up to a point. I think many in the Peak Oil group (these are the ones who actually read the available reports and look through the data) have missing the point of their analysis. The actual result of Peak Oil may not be gas lines and shortages or even moon shot prices, but instead a depressionary economy, bond defaults, a drop in standard of living, etc. It is not until the massive amount of debt is defaulted upon or inflated away that a massive ’shortage’ related boom or war can occur.
After Peak Oil, I do not think it will be possible to return to a manufacturing economy that existed in the 1950’s and 1960’s. However, unless a nuclear war erupts or population is reduced by 80%, suburbia is here to stay - one way or another. It may became less populated, or less desirable, but will likely stay.
Regarding the Peak Oil date, I used to think it was 2010. Now, I’m hearing about lots and lots of new oil in Iraq. It might postpone the date to 2015 or even 2020.
@eddy881
HERE’s the REAL DATA:
CONVENTIONAL CRUDE PEAKED 2005
UNCONVENTIONAL CRUDE PEAKED 2008
GAMES OVER FOLKS
Oh….by the way “The SUPPOSED IRAQI OIL”….that’s a SHAM. You listen to some of the OIL ENGINEERS….they have already drilled 31 sites in the so called NEW AREA years ago and found no significant oil.
FOLKS…this is all HYPE…if the world knew we have PEAKED in oil production it would really push the price of oil MUCH HIGHER. According to the IEA, we need to find 4 NEW SAUDI ARABIAS in the next 10-15 years to keep PRODUCTION FLAT with a WORLD DEPLETION RATE of 6.1%.
GOD BLESS FACTS for those who know where to find them.
SRSrocco: Do you really think the US would have annexed Iraq if Iraqi oil was a sham?
@john#2
IRAQ has oil…don’t get me wrong. What I said was a “SHAM” was the supposed increase of up to 10 million barrels a day. If you spend any time on THEOILDRUM.com, and read most of the information coming out of the ASPO, started by Colin Campbell (retired 32 year oil engineer), you will realize that the world has peaked in oil production.
Again…..unless we have a SIGNIFICANT CHANGE (highly unlikely) Here are the following PEAK DATES (mbd = million barrels a day):
Crude Oil & Lease Condenstate = PEAKED MAY 2005 at 72.25 mbd
Above plus all Unconventional = PEAKED MAY 2008 at 85.47 mbd
(Unconventional equals Canadian Tar Sands, Natural Gas Plant Liquids, Processing Gains, Bio-Fuels, Gas to Liquids and Coal to Liquids)
ADDITIONAL NOTE: Technology may have allowed the world to find more oil, but it has also extracted oil quicker leading to higher depletion rates.
SRSrooco,
I’ve seen the IEA and EIA data and it appears the 2005 was the peak for conventional crude. Matt Simmons seems to think 2005 was conventional Peak Oil. However, the fall from a 2005 peak was not dramatic and it is still possible to have another peak (unlikely).
The 2010 date is my estimate for Total Liquids production. It is the real “Peak Oil”. The government and the citizens cannot really discern the difference between conventional oil and biofuels. It may be 2008 due to the recession and canceled projects. The recession may have extended the Peak date by a year or three at most. It is certainly keeping the demand down and the price from shooting back to $100+/bbl. Depending on how long the recession lasts it could keep the world from ‘realizing’ Peak Oil for several more years.
Eddy881….I will continue about PEAK OIL another DAY…this is MORE FRICKEN FUN….
SO YOU THINK TUNGSTEN GOLD BARS SILLY
Check out this from GERMAN FOUNDRY:
German ProSieben TV Channel Finds 500 Gram Tungsten Bar At W.C.Heraeus Gold Foundry With Bank Origin
German TV station ProSieben finds what appears to be some evocative proof of gold counterfeiting, in the form of tungsten gold substitutes coming to the W.C.Heraeus foundry, which is the world’s largest privately-owned precious metals refiner and fabricator, located in Hanau, Germany. The foundry has isolated at least one 500-gram tungsten bar due for melting, originating from a (so far) unnamed bank, which as the head of the foundry stated made the unpleasant discovery that “not all the glitters is gold.”
If you go to the LINK you can see the YOUTUBE VIDEO:
http://www.zerohedge.com/article/german-prosieben-tv-channel-finds-500-gram-tungsten-bar-wcheraeus-gold-foundary-bank-origin
I’m a new poster here, but wish to express great appreciation in Tom Szabo’s prudent estimations. Tom your integrity comes through clearly and I’ve been a fan of yours for a number of years. However the skepticism regarding the bid underpinning silver may (ironically, as this is a very pro-silver website) be somewhat overdone? I’ve long been aware of the periodic table published by the US Geological Service, wherein Silver is tipped to be among the very first metals to expire from the crust of the earth in commercially minable quantities. Perhaps you could devote a public article to reviewing this - as their estimations are well known and on the surface of it carry quite remarkable implications. Here’s just a couple of link evidencing this thesis. This is not silverbug nonsense. There are piles of highly reputable estimations which put silver right in there with the very rarest of the rare earths in terms of years to expiration. I believe the Silver years to commercially minable expiration range from 9 years up to 15 years from 2010. What is your most carefully considered comment therefore? If these estimations are the case, you get price manifestations in the silver market one heck of a lot sooner than the expiration date.
http://www.theoildrum.com/node/5239
http://www.theoildrum.com/node/3086
and this (pardon the provenance, from a silver bug website, but the article is robust in it’s basis estimation. =:-)
http://www.silverbearcafe.com/private/05.09/scarcity.html
Would be very interested to read Silverax’s most carefully considered comments on this.
Yikes, looks like it is time to actually start updating the website, sorry about the absence but been very busy trying to get our Metal Augmentor website subscription system up and running. It’s pretty much done so I hope to have some more time to updating SILVERAXIS, the first order of business will be to follow up on this particular “no confiscation” commentary because I did more of a brush-off instead of a full historical expose and I think the full history would be useful for perspective so please look for a posting on that soon.
@Lukester
Hello and sorry for your comment not appearing up to this point, I had failed to notice there was a legitimate comment (among the tons of span) waiting to be approved. You raise a very good point about silver in terms of peaking production and the subject deserves a careful analysis instead of a “drive-by” response. Let me think about it to see if the amount of effort required to give the subject justice is commensurate with the benefit or reward.
In general I would say that the USGS and other studies do not fully take into account that a large amount of silver is produced from underground vein deposits where reserves are not established more than a few years in advance of production. That would probably impact the estimates upward. Also, reserves have a fixed reference price (a price at which production is profitable) so to get a fuller picture of the geological potential that remains we want to look at resources and discovery-stage as well. Certainly as mine output drops as we approach a peak scenario, we would then have higher prices that would mean more silver not currently in the reserves could then be mined profitably. That is what makes “peak” not necessarily a valid concept — it will only become apparent well after it has happened, and there is actually very little predictive power in “peak analysis”.
That said, silver will at some point face a situation where production is declining and new reserves or even resources are not being identified at a pace that would suggest the decline is anything but temporary. When that realization gets made, it is very possible that both investment demand (for hoarding) and industrial demand (for stockpiling) will rise, perhaps even substantially. On the other hand, a large decline in silver production could in the longer term have the opposite effect in that monetary silver to some extent does actually rely on the availability of new stocks, and since some of the demand for, and value of, silver is essentially monetary, we could ironically see a declining interest in silver as a result of declining mine output. Before you indignantly disagree, please note that I am talking about a hypothetical event well into the future, but I am also relying on historical precedent (monetary silver had its biggest popularity after the Spanish minted their huge stocks of silver plundered from the Americas into “pieces of eight” and again in the late 1800s with the discovery of the Comstock Lode and other large deposits of silver in the western U.S.).
So in conclusion thanks for providing an idea that has great potential for exploring!