The U.S. Government’s Fight against Money

Imagine that you were born in 1913 (as my mother was) and that your father gave you, as a birthday present, a $20 gold coin (double eagle).  At that time, your gold coin could purchase a fine man’s suit.  By the way, 1913 was also the year in which Congress established the Federal Reserve Bank as the United States’ central bank.

Let’s assume you kept your gold coin until 1933, when President Roosevelt confiscated gold coins from Americans.  Assuming you forfeited your coin, you would have received twenty paper dollars in its place.

It became legal for Americans to purchase gold again in 1975, when an ounce of gold cost on average roughly $157.00.  So, if you had kept the paper dollars you received for your double eagle in 1933 until 1975, you would only be able to purchase roughly one-eighth as much gold as you could back in 1933.  Meanwhile, the U.S. government earned $137.00 on the gold it seized from you.  Not bad for an honest day’s work!

Let’s assume you didn’t let the U.S. government stump you in your quest to own that double eagle and you purchased one for $160.00 (it had some numismatic value by then).  Unfortunately, in 2010, you found yourself financially overextended and needed to raise some cash to make a mortgage payment.  So you sold your double eagle for $1,320.00.

Because you held the coin for more than a year, normally the capital gains tax (assuming you are in the 25% tax bracket) would apply and be 10%.  However, because your coin is classified by the IRS as a collectible, your tax rate is 28% and your tax is $324.80.

After tax (ignoring state and local taxes), you have $995.20.  In 2011, with gold at more than $1,500.00 per ounce, your proceeds from your sale can buy roughly two thirds of an ounce of gold.  Another setback, compliments of your gold-friendly U.S. government.

This is the same government that established Social Security (as a Ponzi scheme), Medicare, and Medicaid with promises to pay indefinitely (with its paper money).  It has also altered its calculation of the Consumer Price Index (CPI) to minimize the apparent inflation rate, which it has created by printing more paper dollars, thus allowing the government to pay less in inflation-adjusted payments to Social Security recipients.

And now, the Federal Reserve Chairman, Ben Bernanke tells us that gold is not money!  If that’s true, then why has the U.S. government gone to such great lengths to cheat its citizens out of their gold and/or its value?

And lastly, the inflation-adjusted price of gold is now $2,251.  Why isn’t the market price there yet?  Could it be that GATA is right?  Could it be that the Treasury Department is manipulating the price of gold and silver in the markets to keep its dollars relatively high when compared with real money?  Wouldn’t that be the last act of a desperate U.S. government?

When we consider confiscation, inflation, and taxes, it becomes clear that the U.S. government truly does not have its citizens’ best interests in mind.  It’s happy to take whatever it can get from whomever it can get it.  Just remember that fact, as it becomes ever more desperate to raise money to pay for its wars, old-age entitlements, and employees.  Things sure have changed a lot since 1913, but an ounce of gold still buys you a fine man’s suit (before tax)!

Robert Jackson Smith

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