October 20, 2008

Gold confiscation? Amero? Price controls?

People query me on these subjects quite often. My opinions follow. Price controls come with socialization (as with Medicare.) As finance socializes, there will be more controls. They begin with demanding reports from those regulated and then escalate. I think we'll see more controls of all sorts in the next administration and going forward. But it depends a lot on who's advising Obama.

Forget the amero for now. Canada loses. The U.S. doesn't gain. Only Mexico gains big. The timing for this is impossible now, anyway.

Gold won't be confiscated again. That was done in 1932 because the country went off the gold standard. No need for it today. Paulson could simply stop all gold trading in the U.S. if he wanted to. If that were done, the rest of the world would see it as a negative and pursue gold even more while abandoning the dollar. Americans would then turn their dollars into other real assets (such as land and other metals) and inflation would accelerate. Price controls would be necessary, and that is more likely in an inflation than singling out gold.

A sharp rise in gold will occur when traders foresee another sharp rise in prices (i.e., dollar depreciation.) Lincoln tried to suppress gold trading altogether in 1864 to stop the rise in gold prices. Gold instead rose even more sharply, and the legislation was rescinded in two weeks. He failed.

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