Why Governments Hate Gold

[GoldCore]

Do governments hate gold?

 The answer: Yes — Governments hate gold because they cannot print it, and it is difficult for them to control.

Because they cannot print it or easily control it, gold has little use to them during the never-ending schemes to tax and then redistribute wealth.

India is a recent example of a government trying to control gold imports through increased taxation on imports and imposing rules, such as that importers had to re-export 20% of imports as gold jewelry.

These types of rules are difficult to enforce and smuggling of gold into India skyrocketed. Once gold is in the form of jewelry or physical metals it is very difficult to tax. Below we explore some other granular points about why governments disown gold.  

Yes, some central banks do own gold …  which seems counter to our thesis but in actuality, central banks own gold for the same reasons that you and I own gold – because it is not the liability of another government.

Why Governments Hate Gold?

A) Legal tender laws mean that all taxes must be paid in fiat currency (such as the dollar in the U.S., Euros in W. Europe, …) not gold or silver (held in physical form). Nothing but sponsored fiat currencies issued by the government is acceptable to pay debts and taxes.

Why do governments pass these legal tender laws? Because in a long running series of decisions from 1921 until 1971 western governments, in response to politicians creating ever larger government spending, countries decided they prefer interference and redistribution over letting capitalism and ingenuity grow the pie for everyone (However, the pie has grown tremendously…looking at GDPs over the last 50 years).

Pursuing perfectly equal pizza slices became the ideal goal rather than a rapidly growing pizza diameter.

But you cannot control pizza slice sizes if you don’t control the pizza cutter. Since wealth is the pizza slice, and taxation is the pizza cutter, the government must ensure that only fiat money gets recognized as wealth since fiat is easier to find and tax than physical metals.

Heavily government-regulated industries cannot be bailed out if the currency is not fiat – and if it is tied to a gold standard or some other limiting factor.

Once we see that the government is helping to set the rules for industries, and influences industry via regulation, it becomes clear that government is then liable for when a regulated industry fails.

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During the 1930s banks, the world over failed because the government applied the wrong policy response to illiquidity problems. To be sure speculation and double counting of cheques all played a part in the 1930s banking crisis.   

But since the US government, along with many others were on a gold standard they could not print more US currency without more gold. In order to increase its gold reserves, the US government seized all gold held by citizens and banned citizens from owning gold.

The UK put into place restrictions which limited citizens to owning no more than four gold or silver coins and restricted any imports of gold for private citizens. The US government paid well below market prices for the seized gold and then raised the price to a higher official rate.

This allowed the government to then print more dollars to bail out the banks. Gold was ‘officially’ banned for individual ownership in the US until the 1970s – but the underground market prevailed and because gold is a physical asset it was easily hidden from government raids. 

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C) Gold has gained value against all currencies since governments abandoned the gold standard.

D) The existence of gold in the economy is a constant reminder of the poor quality of the government paper, and it always poses a threat to replace the paper as the country’s money.

Even with the government giving all the backing of its prestige and its legal tender laws to its fiat paper, gold coins in the hands of the public will always be a permanent reproach and menace to the government’s power over the country’s money.

E) Central Banks (e.g., the Federal Reserve) are for the most part privately held but controlled by the country’s government. A central bank derives its power to create and control fiat currency from the government.

So long as people use their money the central bank is happy. The problem becomes when people find an alternative to fiat currency. The biggest alternative is gold. That is why central banks hate gold. If people use gold instead of their fiat currency, the central bank loses power.

F) The Federal Reserve operates under a dual mandate. It must maintain price stability while also simultaneously promoting maximum employment. 

The Fed hates it when the price of gold rises because it correlates with a rising unemployment rate.

Gold Prive VS US Labour Force Participation Rate Chart

G) The hatred of gold is nothing new. When it operated on a gold standard, the US government was limited in terms of its ability to pursue deficit spending. It could only accrue so much debt.

The gold standard forced the practice of austerity. When the government abandoned the gold standard, it gained the power to finance any national expense by simply borrowing from the Federal Reserve.

Today, no amount of gold is necessary for the Fed to purchase treasury bonds. It is blessed with the ability to expand their balance sheet with zero limitations. 

Simply put, gold limits the power and influence of central bankers. No wonder they hate it.

[Minimalist]

6 hours ago, GoldCore said:

Today, no amount of gold is necessary for the Fed to purchase treasury bonds. It is blessed with the ability to expand their balance sheet with zero limitations. 

Simply put, gold limits the power and influence of central bankers. No wonder they hate it.

Every single Central Banker comes out to the public with the narrative that Gold is some sort of antique or chattel. Most of the financial world actually believe such propaganda. They mark up Gold as an "asset class" when the Fed Dollar is marked up against it (Nixon). The conditioning and delusion is astounding.

[TommyTwoShots]

Governments don’t really care about gold. I have friends in the civil service, relatively highly placed and I can assure you gold is never mentioned.

[GoldDiggerDave]

They just print more paper gold don't they? And if gold is so important then why is it so under valued?  America hold circa 300 billion if I'm right.  If it's there as a hedge or a reserve it's not going to touch the sides, it's not even valued in the correct scale even if they added some zeros to their gold reserves and re valued it to 300 Trillion from 300 Billion it still would not be valued high enough, just America's top 10 tec companies alone  are worth around 11 trillion if one of them failed the gold reserve would not cover the domino effect of these companies failing.

I know some are saying Gold will go to the moon and anyone can say anything but it's looking obsolete in this digital world, not saying this because I'm anti gold quite the opposite............................if it's so valuable then why is it under valued as a oxymoron as that statement is?

And if they don't want us to have it revaluing it would shake 99.9% of new purchasers of physical gold out of the market. 

 

[frugalman]

They want you to think they hate it, and do a pretty good job most of the time.

But really its their bread and butter for mopping up the gravy 😋 

What else would a socially profiled person like a stacker do with HIS/her money fiat ?

Hoard it?

So watch out with crypto currency too! e bankers invented the tec. (People almost always never pull out at the top).

Think of the choices, make the decision but face up to reality...You are GIVEN the choice.

 

Have a nice weekend.

I looooooove working in the rain...It is my own choice  

 

Edited November 27, 2021 by frugalman

[RDHC]

Even if gold were somehow to become irrelevant as a store of value (which I think is unlikely, but we should at least be aware of the possibility), I would have thought that most gold coins would at least retain their numismatic value and interest.  

[Centauri167]

2 hours ago, GoldDiggerDave said:

They just print more paper gold don't they? And if gold is so important then why is it so under valued?  America hold circa 300 billion if I'm right.  If it's there as a hedge or a reserve it's not going to touch the sides, it's not even valued in the correct scale even if they added some zeros to their gold reserves and re valued it to 300 Trillion from 300 Billion it still would not be valued high enough, just America's top 10 tec companies alone  are worth around 11 trillion if one of them failed the gold reserve would not cover the domino effect of these companies failing.

I know some are saying Gold will go to the moon and anyone can say anything but it's looking obsolete in this digital world, not saying this because I'm anti gold quite the opposite............................if it's so valuable then why is it under valued as a oxymoron as that statement is?

And if they don't want us to have it revaluing it would shake 99.9% of new purchasers of physical gold out of the market. 

 

Correct opinion.

A product is never under valued, it means that not enough people are just interested in it or want to pay a higher price for it.

I think before gold "can" have his second youth, products like BTC must disappear or be at least regulated. The amounts of money there are in such products and in shares as Tesla ( with no real underlying reason ) is so much that gold becomes peanuts with no potential of doubling every so many months.

When I was younger, you were happy if you had an intrest of 5-6% on your savings bonds. Now people want to double their money in a few months or they are unhappy. For such people gold will never be interesting. ( until the bubble is broken of course ... )

Gold is at least "trying" to hold up with inflation, something you can not say from your savings account ...

[Centauri167]

52 minutes ago, RDHC said:

Even if gold were somehow to become irrelevant as a store of value (which I think is unlikely, but we should at least be aware of the possibility), I would have thought that most gold coins would at least retain their numismatic value and interest.  

I am almost sure that the day that gold becomes irrelevant, you will see that 99,99% of numismatic coins will also loose their numismatic value or most of it.

( and I also don't believe that gold will become irrelevant )

You see the same with stamp collecting, only a few stamps can hold their value, all the rest is dropping or holding a "paper" value till the moment you want to sell them and nobody wants to pay the price ...

[GoldDiggerDave]

1 minute ago, Centauri167 said:

Correct opinion.

A product is never under valued, it means that not enough people are just interested in it or want to pay a higher price for it.

I think before gold "can" have his second youth, products like BTC must disappear or be at least regulated. The amounts of money there are in such products and in shares as Tesla ( with no real underlying reason ) is so much that gold becomes peanuts with no potential of doubling every so many months.

When I was younger, you were happy if you had an intrest of 5-6% on your savings bonds. Now people want to double their money in a few months or they are unhappy. For such people gold will never be interesting. ( until the bubble is broken of course ... )

Gold is at least "trying" to hold up with inflation, something you can not say from your savings account ...

Dam right, I remember getting 6-7% on my ISA’s.   Gold is running way way short  real world inflation, anyone working in the building trade has seen insane price increases over the year, it’s got to the point you quote for a job and a few weeks later you have to re quote it as the cost has jumped another 15%.  As long as booze and a takeaway is cheap the masses are blind to the wholesale robbery that’s taking place. 

[Centauri167]

On 25/11/2021 at 10:05, GoldCore said:

But since the US government, along with many others were on a gold standard they could not print more US currency without more gold. In order to increase its gold reserves, the US government seized all gold held by citizens and banned citizens from owning gold.

The US government dit not seized all gold ! They made a law that limited the amount of face value gold you could have a person, the other amount you could sell to the government at the price gold was at that time. So you could still own golden coins ( limited ) and golden jewellery without being a criminal !

[Centauri167]

3 minutes ago, GoldDiggerDave said:

Dam right, I remember getting 6-7% on my ISA’s.   Gold is running way way short  real world inflation, anyone working in the building trade has seen insane price increases over the year, it’s got to the point you quote for a job and a few weeks later you have to re quote it as the cost has jumped another 15%.  As long as booze and a takeaway is cheap the masses are blind to the wholesale robbery that’s taking place. 

100% correct !

If I look at the price of gold from may till now, I see an increase of around 8% in euro, but the main reason of that rise is the decline of the euro against the usd so gold has under achieved  big time against inflation like it does most of the time ...

 

So why I still buy gold, because I think it is still one of the safest assets you can have at this moment that will try to keep up with inflation.                        That is also the reason why I wrote in an other topic that it is stupid to buy gold when it is at a to high price. Buying it at little dips helps you big against fighting inflation.

[Bigmarc]

4 hours ago, frugalman said:

So watch out with crypto currency too! e bankers invented the tec. (People almost always never pull out at the top).

The Tec is still being invented. More and more is being developed every day. Bitcoin it's self is a massive Ponzi scheme I struggle to see the value but as long as you view it as that you can make it work for you. Coming from the metals world and venturing in to this would is a massive learning curve and it's full of holes and traps but it gets easier ounce you pull your original investment (basically playing with the casino's money). Because of how difficult it is to become adopted I can never see it taking over gold as a safe asset or as money but I don't see it going anywhere soon, there is a lot of revenue for the government.

As for pulling out at the top, it's not really viewed that way in the community, it's so volatile it's impossible to do. Most I talked to pound cost average out on the way up. 

1 hour ago, Centauri167 said:

Now people want to double their money in a few months or they are unhappy.

These are the people that end up losing money and ultimately supporting the whole crypto market. 

I am definitely not a advocate for crypto and I am on a relatively tight income, so have to be creative to support my metals addiction. Coming from the metals world and may years of being ultra patient works well (so far) in the crypo world. 

[Minimalist]

9 hours ago, TommyTwoShots said:

Governments don’t really care about gold. I have friends in the civil service, relatively highly placed and I can assure you gold is never mentioned.

No doubt.

Have you ever asked your friends in the civil service how fiat is created - while simultaneously asking them where the Banks got the money prior to making all loans? The reactions are priceless or they resort to complete denial.

[Minimalist]

4 hours ago, GoldDiggerDave said:

As long as booze and a takeaway is cheap the masses are blind to the wholesale robbery that’s taking place. 

Most of my mates think the whole system isnt like this by design. Its incredible.

[GoldDiggerDave]

41 minutes ago, Minimalist said:

Most of my mates think the whole system isnt like this by design. Its incredible.

Mate, If you sit down with most people and explain the system was rigged before you were born and will continue long after you die they will not accept it. The very same system that educates you is the same system the steals from you.  George Carlin said "They want people smart enough to use the machines but stupid enough not to ask any questions"    I leaned a long time ago we are nothing but cattle in the fields for the rich to feed from.  

 

[Minimalist]

48 minutes ago, GoldDiggerDave said:

I leaned a long time ago we are nothing but cattle in the fields for the rich to feed from

Its self determined, there is no excuse, no wonder the masses get exploited and when you try and make people aware they deny it - but you are spot on. Its mentally troubling.

[GoldDiggerDave]

5 minutes ago, Minimalist said:

Its self determined, there is no excuse, no wonder the masses get exploited and when you try and make people aware they deny it - but you are spot on. Its mentally troubling.

All you can do is to put yourself in the best position you can, and don't buy into all out consumerism, In my late 20's I would buy into the biggest and best tech, spend's £650 on a stone island jacket etc, and I could not understand why I was skint all the time.   I woke up and stopped spending on stuff that is designed to keep poor people poor.  I took the decision to have a goal of being 100% mortgage and debt free before I was 40,  I did this by 38.  Not because I was earning loads I looked at debt differently and saw it as the beast that controlled me, I did without a new car, did not go on holiday for years.  The day I cleared everything I realise I have not missed the flash goods that  depreciate 99% the second you bought them. 

Now 45 and I work part time only doing the jobs I totally love to do.  There's has not been a day in the last year or so that getting out of bed and working that's felt like a chore,  I have done so many jobs in the past though very good at it  I hated and felt physically sick doing,   if people are honest I'd have to say 3/4 of people right now are doing a job that they hate but also have to admit they are the ones who have enslaved and indebted themselves to do, some until they are well past 65 years old. 

I could talk for hours about the way the system is designed to control the masses.  

Cheers

Dave 

 

[Minimalist]

9 minutes ago, GoldDiggerDave said:

All you can do is to put yourself in the best position you can, and don't buy into all out consumerism, In my late 20's I would buy into the biggest and best tech, spend's £650 on a stone island jacket etc, and I could not understand why I was skint all the time.   I woke up and stopped spending on stuff that is designed to keep poor people poor.  I took the decision to have a goal of being 100% mortgage and debt free before I was 40,  I did this by 38.  Not because I was earning loads I looked at debt differently and saw it as the beast that controlled me, I did without a new car, did not go on holiday for years.  The day I cleared everything I realise I have not missed the flash goods that  depreciate 99% the second you bought them. 

Now 45 and I work part time only doing the jobs I totally love to do.  There's has not been a day in the last year or so that getting out of bed and working that's felt like a chore,  I have done so many jobs in the past though very good at it  I hated and felt physically sick doing,   if people are honest I'd have to say 3/4 of people right now are doing a job that they hate but also have to admit they are the ones who have enslaved and indebted themselves to do, some until they are well past 65 years old. 

I could talk for hours about the way the system is designed to control the masses.  

Cheers

Dave 

 

Outstanding post and thats the truth. I feel exactly the same. Too much nonsense with consumerism goes about in society, I used to be the same in terms of going to football games and out drinking every single weekend without fail but I knew something deep inside me it wasnt what I wanted. The whole system is a farm.

[TommyTwoShots]

4 hours ago, Minimalist said:

No doubt.

Have you ever asked your friends in the civil service how fiat is created - while simultaneously asking them where the Banks got the money prior to making all loans? The reactions are priceless or they resort to complete denial.

I wouldn’t try asking them they would prob not come back for dinner again 😂

[MonkeysUncle]

On 27/11/2021 at 11:01, Centauri167 said:

I am almost sure that the day that gold becomes irrelevant, you will see that 99,99% of numismatic coins will also loose their numismatic value or most of it.

( and I also don't believe that gold will become irrelevant )

You see the same with stamp collecting, only a few stamps can hold their value, all the rest is dropping or holding a "paper" value till the moment you want to sell them and nobody wants to pay the price ...

I disagree on the stamp comments. It is true that you have to be clued up and very selective to make good money.

Most collectors do not collect as an investment - the vast majority have it as a hobby.

Unused GB stamps with gum intact are useable (except pre-decimal) and are worth face value for postage. Selling back to dealers will obviously reduce what you get back, but that is how commerce works - buy low, sell high.

[Centauri167]

36 minutes ago, MonkeysUncle said:

I disagree on the stamp comments. It is true that you have to be clued up and very selective to make good money.

Most collectors do not collect as an investment - the vast majority have it as a hobby.

Unused GB stamps with gum intact are useable (except pre-decimal) and are worth face value for postage. Selling back to dealers will obviously reduce what you get back, but that is how commerce works - buy low, sell high.

And I disagree with you. A new stamp will indeed keep his value when you use it for postage use but we are talking about numismatic coins.

So special stamps who had a higher cost or are just a lot older. Many of them have still a high value in a catalogue, but nobody wants to buy them at those prices ...

And maybe the Uk is an exception, but in Europe that is the situation and I was a stamp collector for more than 30 years.

It was a hobby indeed, but most of us also saw it as not a real investment but as a way of keeping your wealth safe, the latter has now proven a big mistake ...

[arcticfox]

On 27/11/2021 at 17:58, GoldDiggerDave said:

All you can do is to put yourself in the best position you can, and don't buy into all out consumerism, In my late 20's I would buy into the biggest and best tech, spend's £650 on a stone island jacket etc, and I could not understand why I was skint all the time.   I woke up and stopped spending on stuff that is designed to keep poor people poor.  I took the decision to have a goal of being 100% mortgage and debt free before I was 40,  I did this by 38.  Not because I was earning loads I looked at debt differently and saw it as the beast that controlled me, I did without a new car, did not go on holiday for years.  The day I cleared everything I realise I have not missed the flash goods that  depreciate 99% the second you bought them. 

Now 45 and I work part time only doing the jobs I totally love to do.  There's has not been a day in the last year or so that getting out of bed and working that's felt like a chore,  I have done so many jobs in the past though very good at it  I hated and felt physically sick doing,   if people are honest I'd have to say 3/4 of people right now are doing a job that they hate but also have to admit they are the ones who have enslaved and indebted themselves to do, some until they are well past 65 years old. 

I could talk for hours about the way the system is designed to control the masses.  

Cheers

Dave 

 

Nice to hear some who's done what I'm currently doing, I over pay on my mortgage every month and aiming for it to be done by 40 "Currently 35" and be fully retired by 55.

I currently have savings for both my kids so when they get to uni or want to buy a house they wont have to worry about the fee's/deposit - again trying to set them up for a good future but I also show them the gold/silver I buy and why before it goes into the safe.

I think education on all aspects of life is vital and unfortunately most of us learn far to late in life to benefit from the knowledge "Myself included".

I'll stop talking c**p now HAHAHAHA

[CANV]

The downside with not having debt, especially in property over the last 25 years is that you have been under leveraged in a booming market with ever decreasing interest rate costs.. if you paid your mortgage off in 2000 and had spare cash. You could have leveraged up and bought as big a house as possible on an interest only mortgage, made a fortune tax free and have a somewhat insignificant outstanding debt by 2022.   And got to live on a much nicer house.   Which you can now sell. Downsize or move out releasing a large amount of loot ..

or borrow more against it.  It’s tax efficient 
 

Edited December 14, 2021 by CANV