Coin Confiscation

The Truth and Lies about Gold Coin Confiscation.

Think your $20 St. Gaudens gold coins are safe from Confiscation? This particular topic is used as a scare tactic to sell you over-priced coins that do absolutely nothing to protect you and only serves to let the dealer confiscate your money. If you are concerned about confiscation, there are simple, low cost ways of protecting yourself. You will be surprised which coins are safe…. US Eagles and Buffaloes are actually safe from confiscation. Most dealers will claim just the opposite, but the legislation that created them clearly states they are “numismatic” coins.

The Gold Bullion Coin Act of 1985  (Public Law 99-185 of Dec. 17, 1985, 99 Statutes At Large 1177, 31 USC 5101, 5111, 5112) provided for minting the American Eagle gold coins. Section 2(3) provides, “For purposes of section 5132(a)(1) of [Title 31], all coins minted under this subsection shall be considered to be numismatic items.”

The Liberty Coin Act of July 9, 1985 (Public Law 99-61 of 7/9/85, 99 Stat. 115, 31 USC 5112) authorized the one ounce silver coin commonly called the Silver American Eagle.  At section 202(g) it contains identical language.

The American Eagle gold coins and the silver American Eagles are “numismatic” coins.  (31 USC Section 5132(a)(1) requires the Secretary of the Treasury to apply proceeds from selling “numismatic” items to cost of making them.)

In addition, certain dealers maintain that coins with a premium of 15% over bullion value are also defined as numismatic. This too is false. In 1984, this was proposed but never adopted.

So if numismatic coins are exempt, the new Eagles and Buffaloes are exempt too since they are specifically defined that way.

I maintain that $20 St. Gaudens and Liberties are NOT exempt.

Dealers will tell you otherwise.

Then why did the government recently confiscate over $7 MILLION worth of St. Gaudens from one family in 2005? Bet your dealer didn’t tell you about this! I have spent the last fourteen months researching gold confiscation beyond the 14 words about collectible coins every other dealer hangs their hat on. The results will surprise, shock and completely change the way you safeguard your gold. The U.S. Mint is the country’s largest coin dealer. Find out why the coins they sell are safe… specifically U.S. Eagles – while Semi-numismatics are the highest risk coins you can own! Watch for this to be updated within the month. In the meantime, I present my past information. Email or call 1-800-221-7694 for your advance copy of American Federal’s Confiscation Survival Kit. This Kit is currently being updated but I’ll send you the new information as soon as its available.

The Boogeyman of Government Gold Confiscation

In my opinion, one of the biggest lies in the coin world is: “You Need to Buy $20 St. Gaudens and $20 Liberties to Protect Yourself from Government Confiscation.” What’s happened for years and years is that the dealers and telemarketers have used Franklin Roosevelt’s executive order of 1933 to say, “There’s a law on the books that allows the President to confiscate gold or regulate gold during times of national emergency.” The argument is that because it’s already on the books, it doesn’t have to pass through Congress. They claim the President at any time can say, “The terrorists are out there and in the interest of national security, we’re confiscating gold today.” This is not exactly true. There are so many holes in their theory; I can’t cover all of them in my book (I’ m currently writing another just about this topic) but I’ll give you the basics as I see them.

In fact, in 1977, Congress removed the Presidents’ authority to regulate gold transactions during national emergency, except during war. This means that the President no longer has the authority to confiscate gold.

There’s one thing that is certain – there is a confiscation you need to worry about… it’s the dealers and brokers confiscating your money. The truth is, some dealers actually think there’s a chance it could happen. In other words, I don’t think they believe they’re lying, but they really are telling myths, not facts. It is more a question of them not doing their homework. When gold was legalized in 1974, President Ford repealed this act. After all, how can you  confiscate gold and make it legal to own at the same time?

The problem is dealers will get an idea that helps them sell coins and never let go. They’ll take one piece of information and they’ll twist it and use it to their benefit. They seldom do their research to find out if what they’re saying is true. Here’s the number one reason the dealers use the confiscation issue:

It’s very emotional. It’s very easy to scare you to death on the phone and claim the government is after you. Remember, people who are buying gold coins are very afraid of “Big Brother.” Even if you buy into the notion that the law is still on the books (again, it’s not), it’s ridiculous to assume that the twenty dollar gold pieces these dealers are selling are non-confiscatable and safe, especially in the lower grades like VF, XF, AU, and MS-60 to MS- 63. For example, assume the the government wants to call in all of the gold. The Executive Order of 1933 that President Roosevelt issued has one sentence in it that these dealers point to. The order specifically says that all gold coins are confiscatible, “except Gold coins having recognized special value to collectors of rare and unusual coins.”

From that statement, many of these dealers have somehow come up with the idea that any ‘collectible’ coin is exempt; coins that have fifteen percent premiums are exempt or coins that are one hundred years old are exempt. In other words, they’ve added their own subjective ideas to this. But that’s not what it says. It doesn’t define what special value is. It does not define what a collector is. It certainly doesn’t tell you what a collectible is and it doesn’t tell you who decides this. It’s a loophole you could drive a truck through, but investors are assuming there’s hard criteria that the government would have to follow. Dealers are selling “non-confiscatable” coins, typically, the twenty dollar gold pieces, the $20 St. Gaudens, and the Liberties, based on this supposed loophole. They also sell a lot of other coins that they claim fall in this category. Understand that they include $5, $10, and $2 1/2  gold pieces also.

The comical part of this:

Most of the coins that these dealers are selling are coming from hoards in Europe. The hoards in Europe are coins that the U.S. government confiscated and sent to Europe to pay off debts. Most of the coins taken in 1933 were not melted because there was a financial gain to paying in coinage as opposed to bullion. A $20 gold piece is under an ounce and this differential played into the governments favor. These coins are supposed to be non-confiscatable, but the government actually confiscated those same coins in 1933 and then paid off foreigners with these supposedly non-confiscatable coins. So these dealers are selling you coins as non-confiscatable and, in many cases, they’re the actual coins that were confiscated!

You must remember that when the law was written, these were coins of the realm. These coins were used in everyday trade. When they confiscated gold, these $20 Liberties and $20 St. Gaudens, as well as the $5, $10, and $2 gold coins, were what they confiscated. So no one can say that even though the government confiscated these coins the first time, they’re now considered rare and unusual and can’t be confiscated today. The Government could overcome that very easily. They have precedence on their side. We confiscated them once, so of course we can confiscate them again.

Let’s take a look at it from another standpoint.  Are these coins rare and unusual?  PCGS and NGC are the two largest coingrading services. They’ve graded over 1,164,418 $20 St. Gaudens and over 720,000 $20 Liberties by the beginning of 2005. These are mostly the higher quality coins because it’s not profitable to pay the grading fees on low-grade coins, so there are many coins that are lower quality out there. They grade thousands of those coins every month.

The government actually minted 103,835,171 $20 Liberties and 69,833,846 $20 St. Gaudens! So it’s guaranteed that the population (number of coins graded) will continue to grow by leaps and bounds

It’s very easy to shoot a hole in the premise that those coins are rare and unusual. They’re anything but rare and far from unusual.

What I want people to realize is this: Even if you assume that this law is still on the books and the government may confiscate gold, buying the high-priced semi-numismatic coins does absolutely nothing to protect you from confiscation. In fact, they’re the exact coins the government confiscated the first time. It gives you absolutely no protection. The second item that I look at as far as confiscation goes is this: Assuming the law was on the books, would the government really even bother to confiscate gold? In 1933 they confiscated gold because everyone had gold in their pockets. There were gold certificates and gold coins. They were making the coins and was used every day for commerce. They were even being used in the banks.

What I’m driving at is by confiscating the gold, it affected almost everyone. Almost everyone had gold, so the government was able to take in millions and millions of ounces of gold. What would they gain today? I highly doubt if even three percent of the U.S. public owns any physical gold bullion. Even if the government decided to confiscate gold, how much gold do you think people actually own in this country? It’s simply a non-issue. For the amount of trouble the government would have to go through, it wouldn’t be worth it. The people who own gold today (and when I say gold I’m talking about any type of gold that’s been sold as a hedge, whether it’s European, U.S. gold coins or even the modern bullion coins) have such a small physical amount that, even if the government got all of it, it’s not going to amount to anything substantial in their eyes.

Remember, a few billion dollars is nothing to the government. The second problem they would have confiscating is that the people who own gold today, for the most part, own it specifically because they’re afraid of the government. So unless the government is going to go door-to-door with guns, these people are not going to voluntarily take that gold and turn it in. So again, assuming that the law is on the books, I think the chance of the government ever enforcing it is almost zero, as they have nothing to gain.

If you buy into the story that the government is out there waiting to confiscate your gold, there’s very little you can do to actually protect yourself from it.

My conclusion…

If anyone induced, persuaded, or outright scared you into buying rare coins to be protected from gold confiscation, that should not be a reason for you to hold on to your value-losing coins any longer.