Marc Faber: I advise every American to hold his gold outside of the United States

I would like to point out an interview with Marc Faber, one of my favorite market analysts. He is pretty entertaining, really.

Marc Faber is a hard money, old school investor who thinks that the U.S. government is going to reflate in order to avoid depression and that means gold is more valuable. But, for those of you who don’t know economic history, the fact is that this has been tried before, in the Great Depression in the 1930s and the result was that the government had to confiscate Americans’ gold.  It was Executive Order 6102 signed on 5 April 1933 right after Franklin Roosevelt came to office and it forbade all Americans from owning physical gold assets.

Quoting Wikipedia:

It required all persons to deliver on or before May 1, 1933 all gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve. Under the Trading With the Enemy Act of October 6, 1917, as amended on March 9, 1933, violation of Executive Order 6102 was punishable by fine up to $10,000 ($166,640 if adjusted for inflation as of 2008) or up to ten years in prison, or both. Because of this forced immediate sale of gold to the Federal Reserve at the government set price of $20.67 per ounce, this Executive Order is often referred to as the Gold Confiscation of 1933. Shortly after this forced sale, the price of gold from the treasury for international transactions was raised to $35 an ounce; the U.S. government thereby devalued the U.S. dollar by 41%.

Order 6102 specifically exempted "customary use in industry, profession or art"–a provision that covered artists, jewelers, dentists, and electricians among others. The order further permitted any person to own up to $100 in gold coins (a face value equivalent to five troy ounces of Gold). Nevertheless, anecdotal accounts later related that many persons who possessed large amounts of gold simply ignored the order and hid their gold until the Order ceased to be in effect.

Faber seems to think the government could confiscate your gold again very soon.  Take a look at what he has to say below.

Oh, and Executive Order 6102 was not repealed until 1974, 41 years later.


Executive Order 6102 – Wikipedia

Update Jul 2010: It seems the US government is now moving to document all gold sales in the United States. Read "US Government now tracking gross proceeds on gold sales over $600." Big Brother is watching.

  1. ryan says

    I’ll tell you what I get his newsletter and he’s dead wrong, he’s more interesting in being a whore master than telling it like it is. I advise american’s to SELL ALL THEIR GOLD, forget about holding it. Gold is going to 100 per ounce. This is not inflationary, it’s deflationary. The US will not print, they will borrow as they have been and when the borrowing begins to weigh down on the system they will Nationalize the banking system, then the pension system. Wake up people, why would the government print dollars, to hurt their credit rating if they can take dollars from you? Are you that gullible?

  2. Edward Harrison says

    Ryan, you may end up being right about deflation. It’s not a done deal yet that we are going to get massive inflation. I have come down on the side of both asset and consumer price deflation for quite a while now. But, the arguments for holding gold and worrying about inflation are still valid and I do think that gold is a good hedge against that eventuality. Faber makes a very good argument for why inflation may be the endgame here and I wouldn’t dismiss him out of hand.

    However, so far, the deflation scenario is the one that seems to be taking hold – lower commodity prices, lower asset prices, and eventually lower consumer prices. As debt levels are high, this is the scenario to fear.

  3. Justin L says

    gold was seized as part of an effort to eliminate tangible value systems, making the central bank’s arbitrary decisions the entire basis of the new value structure

    fictional value under the control of the federal reserve means that a select group of powerful people can arbitrarily modify the market

    it’s easy to buy low and sell high when you decide when it will be low and when it will be high

    it’s a system of organized robbery where the rest of us randomly lose money when the market is artificially devalued, and then the robbers invest, restore value, sell, and have taken personal spending power that can be used to seize our assets

    the pretense that they’re stabilizing the economy by setting it up for random, artificial changes is laughable

    nothing was more stable than value based on gold, that was the problem

  4. Todd "buying gold" Casey says

    My feeling is that, even just on the basis of industrial and retail demand in addition to the steady but low investor interest, the price of gold will trend up over the mid and long terms. Gold’s price volatility, being not just a little based on market psychology, offers windows of opportunity for here and there grabbing deals on physical gold in the form of gold coins and bullion.
    If confiscation were to start I expect there might be a pretty good opportunity for profit taking.

  5. pebird says

    Given that the gold bugs assert that paper gold is not backed by actual gold – who exactly is Faber advising should keep their gold out of the US – those that can afford safe deposit boxes in where (Cayman Islands, UK, Monaco?).

    Why the US would need to seize gold is beyond me – is there some settlement in gold done in international back rooms of which we should aware? Is the implication we are going back on a full/partial gold standard?

    Prior to FDR seizing gold, there was a fair amount of speculation he would do so – he actually had to deny it (with Clinton-like linguistics – that’s a backhanded compliment). Keynes has some great comments about the US administration’s handling of gold pricing after seizure (from Hoover’s memoirs):

    J. Maynard Keynes, who had earlier pronounced Roosevelt “magnificently right,” came out with a stinging criticism.
    Keynes, upon whom Fisher and Warren leaned heavily for support, described the “gyrations of the dollar” under the Government’s manipulation as “more like a gold standard on the booze” than an ideally managed currency.

    And, horror of horrors for Warren, he characterized as “foolish” the idea “that there is a mathematical relation between the price of gold and the price of other things.”

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