Even If It’s Held Overseas?
Today, we start with a most-excellent question from a reader named Ioanna:
I’ve been reading on the internet that no matter where a US citizen holds gold assets (ETFs or bullion) the US government can seize them… So why buy gold and then have to hand it over to the government?
Fantastic “Ask El Jefe” material! So, thanks, Ioanna.
Let me start by asking my own question: What does America look like if the US has to try to confiscate gold held overseas?
Answer: A horror movie and disaster movie rolled into a single script.
Gold confiscation only makes sense in a world where the US has exhausted all efforts at saving the ship from sinking… which means the ship is now actively sinking, and the US has to confiscate American wealth to save the government.
Government does not and never has cared about We the People. Government’s primary purpose is and always has been self-preservation. So, it will absolutely destroy you to save itself. Period.
With that in mind, I can answer your question.
Yes—Uncle Sam could, in theory, confiscate gold held overseas, or at least try to.
But it would be a grand hassle leading to lawsuits galore in the US and in overseas jurisdictions where gold is held.
Let’s assume I own gold at a private vault in New Zealand.
And let’s further assume that it’s gold coins from the Bank of New Zealand as well as some rare gold coins I bought at auction in Auckland.
First, the US government would need to change US laws that require me to self-report my gold held overseas. As laws are currently, the US doesn’t care about assets held in a non-financial account. So that means I can hold gold, silver, diamonds, baseball cards, whatever in a private vault, and the US doesn’t care.
So, the US would have to change US laws to suddenly care about that, and it would have to change laws to compel me to self-report the gold I hold overseas.
And it would have to change laws to compel me to repatriate that gold to America in order to hand it over to Uncle Sam’s G-minions… or it would have to force me to sell that gold overseas and repatriate the cash that I would then have to give to the US.
Of course, if we’re in that world, then it means the US is in a type of four-letter storm/show. As such, many Americans who hold gold overseas would very likely accidentally forget to report that gold because that gold is the one asset that is protecting them from what they know is in the offing for the economy.
And, of course, the US government would rightly surmise that accidental non-reporting is epidemic, and so the government would almost assuredly amend the Foreign Account Tax Compliance Act.
FATCA, as it’s known, requires foreign banks and brokerage firms to report to the IRS the American clients on their books. The penalty: Loss of access to the US dollar, a death knell—for the time being—since all foreign transactions in dollars pass through New York, meaning a non-compliant bank would be cut off from dollar trade.
So suddenly private vaults and bullion dealers overseas would be required to report their US clientele. But that would subject those businesses to lawsuits from Americans whose privacy was breached (the best overseas vault companies are in countries like Singapore, New Zealand, Switzerland, etc. that have strong privacy laws).
That would be a hurdle that would cause massive delays in the process of confiscating gold.
But what if the US simply told foreign governments to find all the gold held locally by Americans and to send that gold by the plane load to the US?
Uncle Sam could very well try that.
But that, too, would subject countries and local businesses to vast numbers of lawsuits for several reasons.
- The vault was emptied without client consent, and just maybe that client was holding gold for a non-American spouse, partner, parent, or whoever.
- Not all gold is created equal. Bullion is worth $X, but some bullion coins are worth $X-plus because of the collectible value. And some coins might be considered rare and are worth 5x, 10x, 1000x. There is zero way for the government to value those coins… thus we end up with huge lawsuits.
In short, sure—Uncle Sam could try to confiscate gold held overseas, but the process of trying to do that would cause enormous blowback from foreign governments. And in the current age, in which foreign governments are increasingly signaling that they really don’t care about America or the US dollar, I can easily imagine governments disregarding American dictates.
FATCA wouldn’t be much of an issue because if the US is in a situation where its finances are so devolved that it has to once again confiscate gold (like FDR did in 1933), then the dollar is on path to losing reserve currency status… so foreign governments really won’t care about losing access to the global dollar trade. They’ll trade through the euro, the Chinese yuan, or a basket of foreign currencies that (likely) excludes the dollar.
Basically, what I’m saying is that confiscating gold held overseas is possible… but highly unlikely because of all the challenges involved and the message it sends about America’s decaying situation.
For what it’s worth, I hold precious metals overseas—and I feel safer doing so than holding them in the US.
