Treasury claims power to seize gold and silver -- and everything else

The U.S. Government has the authority to prohibit the private possession of gold and silver coin and bullion by U.S. citizens during wartime, and, during wartime and declared emergencies, to freeze their ownership of shares of mining companies, the Treasury Department has told the Gold Anti-Trust Action Committee.

But gold and silver advocates shouldn't feel too picked on. For the U.S. Government claims the authority in declared emergencies to seize or freeze just about everything else that might be considered a financial instrument.

The Treasury Department's assertions came in a letter dated August 12 and written by Sean M. Thorton, chief counsel for the department's Office of Foreign Assets Control, who replied to questions GATA posed to the department in January. It took GATA six months and a little prodding to get answers from the Treasury, but the Treasury's reply, when it came, was remarkably comprehensive and candid.

The government's authority to interfere with the ownership of gold, silver, and mining shares arises, Thornton wrote, from the Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars, and from 1977's International Emergency Economic Powers Act, which can be applied without declared wars.

While the Trading With the Enemy Act authorizes the government to interfere with the ownership of gold and silver particularly, it also applies to all forms of currency and all securities. So the Treasury official stressed that it could be applied not just to shares of gold and silver mining companies but to the shares of all companies in which there is a foreign ownership interest. Further, there is no requirement in the law that the targets of the government's interference must have some connection to the declared enemies of the United States, or, really, some connection to foreign ownership. Anything that can be construed as a financial instrument, no matter how innocently it has been used, is subject to seizure under the Trading With the Enemy Act and the International Emergency Economic Powers Act.

Having just gone through a controversy about a Supreme Court decision about government's power of eminent domain, most Americans may be surprised to learn that the Trading With the Enemy Act and the International Emergency Economic Powers Act could expropriate them instantly and far more broadly without any of the due process extended to parties in eminent domain cases. All that is needed is a presidential proclamation of an emergency of some kind -- and of course Americans lately have been living in a state of perpetual emergency.

When the Trading With the Enemy Act was passed in 1917, gold and silver formed part of the official currency of the United States and were essential to ordinary commerce, so perhaps an argument could be made then against "hoarding," even if "hoarding" could not be well defined. That is no longer the case; the United States has officially disavowed gold and silver as money and they no longer have a meaningful role in commerce. (GATA is working on that.) So gold and silver investors may want to ask their members of Congress to seek repeal of the statutes that give the government the authority to interfere with the private ownership of gold and silver, emergencies or not.

And ordinary citizens with no particular interest in gold and silver may want to ask their members of Congress to reconsider these statutes simply for being wildly tyrannical.

Roberta K. McInerney Assistant General Counsel / Banking and Finance Department of the Treasury Washington, D.C. 20220

Michael Kirk of U.S. Rep. John B. Larson's office has forwarded to me your letter to him of December 17, which answered my e-mailed inquiry to him about forcible redemption by the Treasury Department of gold and silver coins held by private citizens. You replied that a statute empowering the Treasury Department to do that, 12 U.S.C. Section 248(n), had been repealed.

But since reading your letter I have learned of a similar statute: Title 12. Chapter 2, Subchapter IV, Section 95a, which provides in part:

"During the time of war, the president may, through any agency that he may designate, and under such rules and regulations as he may prescribe, by means of instructions, licenses, or otherwise -- (A) investigate, regulate, or prohibit any transactions in foreign exchange, transfers of credit or payments between, by, through, or to any banking institution, and the importing, exporting, hoarding, melting, or earmarking of gold or silver coin or bullion, currency or securities. ..."

Section 95a further authorizes the president to "prevent" the "use" by U.S. citizens of "any property in which a foreign country or a national thereof has any interest."

These provisions are of the greatest concern to investors in gold and silver bullion, coins, and shares of gold and silver mining companies, and to those companies themselves. So the Gold Anti-Trust Action Committee urgently requests that the Treasury Department explain how it construes these provisions. Particularly, we'd like to know:

* How does the Treasury Department construe "the time of war"? How can gold and silver investors know when the powers described in Section 95a are in operation or likely to come into operation? Are formal declarations of war by Congress required here, or lesser declarations, or none at all, but rather declarations made only by the president?

* How does the Treasury Department construe "hoarding"? Does it include the ordinary collection of gold and silver coins, numismatic or not, and bullion by U.S. citizens, businesses, and corporations, absent any collaboration with enemies of the United States?

* Does the Treasury Department construe Section 95a to empower the president to interfere with the ownership of shares in gold and silver mining companies merely because shares of such companies also might be owned by foreign nationals or foreign governments, at war with the United States or not? Under what circumstances would the president be so empowered?

In essence, we need to know whether Section 95a contemplates the instant destruction of gold and silver investors and the precious metals mining industry in the United States. So the Gold Anti-Trust Action Committee asks the Treasury Department for a meeting with the officials who might become responsible for implementing Section 95a, at which we might discuss the concerns of precious metals investors and mining companies. Would you kindly forward our request to the appropriate people?

Thank you for your follow up letter dated January 20, 2005, requesting information about how the Treasury Department interprets aspects of Title 12, Section 95a, of the U.S. Code.

Most of the questions you raise fall within the jurisdiction of Treasury's Office of Foreign Assets Control (OFAC). Consequently, I wanted to let you know that I have forwarded your letter to OFAC's Office of the Chief Counsel for a response. The chief counsel's office will ensure that you receive a response to your letter.

If you have questions about the status of your request, please call Mark Monborne, OFAC's acting chief counsel.

Roberta K. McInerney Assistant General Counsel (Banking and Finance) U.S. Department of the Treasury Washington, D.C. 20220

Your letters to Roberta McInerney, assistant general counsel (banking and finance), dated January 20 and July 17, 2005, have been forwarded to me for response. I recently became the chief counsel (foreign assets control).

The U.S. Code provision that you reference, 12 U.S.C. Sec. 95a, is a duplicate codification of Section 5 of the Trading with the Enemy Act of 1917, 50 U.S.C. App. Secs. 1-44 ("TWEA"), with respect to which my office bears responsibility for interpreting.

As you may be aware, Congress enacted TWEA during World War I to prevent certain transactions that might be of advantage to an enemy during wartime. During World War II the Treasury Department implemented extensive punitive blockings of Axis assets and protective blockings of Allied assets.

In 1950 the United States imposed economic sanctions against the People's Republic of China as a result of the Korean emergency to prevent, among other things, Chinese acquisition of foreign exchange through transactions with Americans. The Department of the Treasury's Office of Foreign Assets Control ("OFAC") began enforcing foreign asset control programs in the 1950s. Today the only economic sanctions programs administered by OFAC under TWEA are with respect to Cuba, North Korea, and certain third-country transfers of sensitive materials.

You have asked how the Treasury Department construes the term "the time of war," which appears in section 5 (b) (1) of TWEA. Although TWEA does not include a definition of the term "during the time of war," it does include definitions for the terms "the beginning of the war" and "end of the war." The words "the beginning of the war" are deemed to mean "midnight ending the day on which Congress has declared or shall declare war or the existence of a state of war." The words "end of the war" are deemed to mean "the date of proclamation of exchange of ratifications of the treaty of peace, unless the president shall, by proclamation, declare a prior date."

Thus the phrase "during the time of war" would seem to cover the period between "the beginning of the war" and the "end of the war."

Since this period cannot come into existence without some form of congressional declaration, it would appear that TWEA -- with the exception of its present applicability to the Cuba, North Korea, and transaction control programs referenced above* -- applies only to situations involving a declared state of war. In exercising any of the specific powers available to him under TWEA during the time of war, the president would issue an executive order or other similar instrument generally made available through publication in the Federal Register.

(* -- From the early 1930s until 1977, when the International Emergency Economic Powers Act was enacted, TWEA applied not only in times of war but also in situations in which the president declared a peacetime national emergency. Pre-existing emergencies declared with respect to Cuba and North Korea and certain transaction controls were grandfathered, which explains why TWEA still serves as the basis for those sanctions programs, even though the United States is presently not in a state of war with respect to any of the affected countries.)

The construction of the term "hoarding," as used in section 5(b)(1) of TWEA, would depend on how the president chooses to exercise his authority with respect to hoarding in any particular instance.

In making any decisions under the authorities conferred by TWEA, the president would, of course, be taking steps to address threats to our national security during a time of war. In the past, the president has used TWEA or TWEA-like authorities to criminalize hoarding. See generally Bauer v. United States, 244 F.2d 794 (9th Cir. 1957). Today, however, such activity is not restricted under the only sanctions programs in effect pursuant to TWEA -- i.e., the Cuba, North Korea, and transactions-control programs.

If, during a time of war, the president expressly chose to restrict the hoarding of gold or silver, he could do so.

Among the many factors the president would likely consider before taking such action, however, is the fact that the U.S. Government now mints and issues gold and silver coins to meet public demand for both numismatic and investment purposes.

You also have asked about the president's ability to "interfere with the ownership of shares in gold and silver mining companies merely because shares of such companies also might be owned by foreign nationals or foreign governments, at war with the United States or not."

Under TWEA during times of war -- and also under the International Emergency Economic Powers Act, 50 U.S.C. Secs. 1701-05 ("IEEPA") during peacetime national emergencies -- the president has broad powers to regulate property in which there exists a foreign interest. See TWEA § 5(b)(1)(B); IEEPA Secs. 1702 (a) (1) (B).

Consequently, the president may restrict shares in any company owned by foreign persons consistent with the purposes of any declared emergency.

In this respect, foreign-owned shares in gold and silver mining companies are no different from foreign-owned shares in companies in any other industry.

Finally, you raise concerns about the "instant destruction of gold and silver investors and the precious metals mining industry in the United States." In the establishment and implementation of sanctions, the U.S. Government is always mindful of the domestic impact of restrictions meant to serve national security and foreign policy purposes. Just as the U.S. Government has been mindful of the practical impact that sanctions have on various service and manufacturing industries, it would also be mindful of the potential impact of sanctions with respect to the markets and industries associated with precious metals.

I hope you find this letter instructive. Thank you for your interest. If I can be of any further assistance, please call me.

Sean M. Thornton Chief Counsel (Foreign Assets Control) U.S. Department of the Treasury Washington, D.C. 20220

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If you really want to get 'exercised' review the history of the Federal Reserve Bank. After Teddy Roosevelt moved against Standard Oil for being a monopoly, breaking it up into little companies, John D. Rockefeller swore revenge. He began by getting approval for the Federal Reserve Bank ("Fed"). Contrary to common belief, the Fed is a privately owned by several corporations (and families). Today the Rockefeller family (and others) control the monetary policy of the U.S. Which means that Old John got his ultimate revenge. His family, along with a few other families, now control all the wealth in America.

Standard Oil (S.O.) has expanded its oil company holdings one hundred fold by corporate ownership and interlocking corporate boards. The old Standard Oil broken up by T.R. now controls Texaco-Mobile-Chevron, Unocal-Chevron and British Petroleum (B.P.). Its monopolies are stronger than ever. The S.O. also controls several other major industries. In the meantime, oil is worth more now than ever before. It truly has become "Black Gold."

If you want to blame someone, blame the Rockefellers. It's all their fault.

While sifting through some of the background information on the Wikipedia page that I referenced in #16, I noticed a link to this document, which purports to be the actual orders as posted to American citizens (at post offices, it appears from the document) at the time of FDR's general confiscation of gold. I haven't seen this document before, and I cannot vouch for its authenticity, but I found it interesting even if possibly specious.

"This is because they disregarded the lessons which were lost beyond their memory horizon."

Agreed. Happens every day on our stock markets.

But suckers losing money won't cause an economy to crash (the money typically remains in circulation, spent by the guys on the other side of the deal).

Nor is gold a threat to our digital economy. Most people own more gold in the form of worthless, ugly yellow jewerly than they have in investment bullion (which has to be melted, measured, assayed, and professionally stored).

Gold could disappear from this planet tomorrow and the U.S. would never feel its loss.

In a low inflation, low interest rate, high productivity economy, the top thing to track for a hint of a correction (or worse) is the speed of money...i.e. how fast commercial and retail and financial transactions physically occur (but be warned, the government has a very different definition of the speed of money as being our savings rate divided by its monetary measures...making the government stats and charts on this subject meaningless).

If the speed of money decelerates, watch out. If it increases, then hang on!

It isn't cool with me. I used the inflation calculator online and discovered as z/vm system programmer I make a bit less in real inflation adjusted terms than a mechanical engineer of your grandparents' era, but he hardly paid any taxes, I pay half in taxes, so I take home half. Is that cool? And you have your counterpart of the past whatever your career, and though you are being paid many paper dollars, it has about the same purchasing power as the gold he or she was paid. So what's the problem, other than the taxes? Only this. Your counterpart could save his money and find it bought the same stuff 30 years later. THAT is cool. But you save your paper today and find 30 years hence that prices have increased by a factor of 10, that is NOT COOL, that is theft. Smarter people use realestate to store wealth because paper money doesn't do the job. But they shouldn't have to because the Constitution guarantees them precious metal money. It guarantees you the right to free speech, the right to keep and bear arms as well. Shall those rights be treated as casually as the former (gold)? Also, the gold was truly owned by your counterpart, he didn't have to rent it from anyone. You, we, needlessly rent your paper money from the banks and your taxes pay the fees. And the inflation losses of your saved dollars pay for bigger government. The crash is happening, it is happening slowly, it is more of a melt than a crash and most of the American people are clueless about debt, and walk into the debt trap like rats after the cheese. Our current paper money serves to transfer wealth, that we create. And the purpose of this attitude on the part of treasury is to prevent us from protecting ourselves completely from that wealth transferral. We are like cows in the stall, with the automated milkers attached and pumping, and that is exactly where our government wants to keep us.

You have every right to be POed if you wish. But you are delusional if you believe that the average American of today is not immensely better off financially than the average American of say 1920.

Since dollars and purchasing power have a built-in controversy when compared from era to era, let's just look at the way we live.

As late as 1950, the average new home was 975 sf in size. Today it is over 2200.

In 1920 almost nobody had a phone at home, and not much over half had flush toilets and electricity. And of course absolutely nobody had TV, computers or the internet. Most people had a car, but it was a Model T and very few had more than one car.

In 1946, in the movie It's a Wonderful Life, George Bailey is quite proud of the fact that he earns $45 a week rather than $40. He has a solidly middle-clas job. That $45 is worth $462 in 2005. Even if you weren't paying any taxes, that ain't a great deal of money by today's standards.

to track for a hint of a correction (or worse) is the speed of money...i.e. how fast commercial and retail and financial transactions physically occur (but be warned, the government has a very different definition of the speed of money as being our savings rate divided by its monetary measures...making the government stats and charts on this subject meaningless).

No, velocity is usually stated as GDP/money supply.

This ratio has been declining since the 1950's with the exception of a rally in the mid-90's.

but be warned, the government has a very different definition of the speed of money

The government definition for the speed of money is utterly useless. GDP/money supply doesn't tell us how fast money is moving or even how much money is changing hands.

South America is an example of a large money supply that doesn't change hands. The rich in South America hoard their money...when they even leave it in that continent (they often store their wealth abroad). That puts large amounts of money out of effective circulation, doing grave harm to their economic growth potential.

Well, if you have lots of money, but no one is buying or selling anything, you can rest assured that your economy is lousy.

Conversely, lots of large, high-speed financial transactions is positive (e.g. stock exchanges) for an overall economy.

New loans (amounts, time to process), new mortgages, credit card volume, sales tax receipts, UPS/FedEx/USPS volume, car title registrations (new and used), eBay volume, Casino receipts, ATM withdrawals, tax withholdings, wire transfers, stock volume, bond volume, commodity contracts, train shipments, truck shipments, container ship cargo bookings, exercised options, brokerage account withdrawals, gasoline sales, pipeline volume, etc.

The "speed of money" is how fast financial transactions occur, and in what volume.

Zero financial transactions = slow economy. Record financial transactions/volume = booming economy.

"the gold was truly owned by your counterpart, he didn't have to rent it from anyone. You, we, needlessly rent your paper money from the banks and your taxes pay the fees. And the inflation losses of your saved dollars pay for bigger government. The crash is happening, it is happening slowly, it is more of a melt than a crash and most of the American people are clueless about debt, and walk into the debt trap like rats after the cheese. Our current paper money serves to transfer wealth, that we create. And the purpose of this attitude on the part of treasury is to prevent us from protecting ourselves completely from that wealth transferral."

That's silly. The U.S. Treasury isn't preventing you from buying all the gold that you desire.

What you want to do is to lock everyone into mandatory gold ownership by tying gold to a currency. That's enslavement. Everyone is forced to invest in gold by default under your coercive system.

In contrast, Americans are currently free to invest in gold if they **want** some of the ugly yellow metal, or they can eschew such nonsense if they prefer. Free country and all that.

Likewise, Americans are not currently coerced by our government into debt; it's a free will choice.

Nor is any "crash" coming, much as you might wish for it. Increases in American productivity, population, and personal wealth (more than 80% of Americans now own stocks, for instance, a far cry from 1935) insure that no such crash is even remotely possible.

Oh, you might get a 10% decline in a real estate market for one or two cities or regions now and again, but not even the massive S&L crisis or the Internet Stock Bubble could do permanent harm to the Great American Long Boom.

American prosperity is pre-ordained; get used to it.

"By that metric you would have invested in the Kuwati oil bubble."

At $67 per barrel today, that would have made you some serious cash.

But yes, that metric would have you chasing hot trends. Beats investing in buggy whip stocks in the vain hope that "one day" they won't be so cheap, though!

"Agreed. However we are currently penalized for preserving purchasing power in the face of dollar depreciation. That's wrong."

Except that the penalty (i.e. currency depreciation) isn't mandatory. Storing your wealth in another medium (e.g. real estate, metals, other currency, stocks, etc.) can avoid that devaluation, if desired.

For most people, it isn't worth the effort... Except to gripe about it, of course!

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