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Gold in Retirement Accounts: A Bad Idea

Written by Gary North on December 14, 2011

The likelihood of direct gold confiscation is low, says this bullion coin dealer. But that is not the only threat. There is a threat of an emergency decree controlling access to government-approved retirement assets.

Firs, on direct confiscation.

Last week I discussed how some coin marketers are trying to scare customers into purchasing more profitable (for the dealer) merchandise to avoid the risk of the merchandise being “confiscated” by the U.S. government similar to what took place in 1933.

My discussion pointed out that even though the U.S. government has the legal authority to engage in another fully compensated mandatory redemption program, that it was highly unlikely to happen. The main protection for purchasers of bullion-priced gold is that the U.S. government would likely lose money if it tried to repeat a similar program today. The value of gold that could be recovered from U.S. citizens is relatively minimal while the risk of foreigners panicking to get out of the U.S. dollars, and the subsequent huge decline in the value of the dollar, would be high.

I think this assessment is correct. I have said so for at least 45 years.

But there is another threat.

Because these articles explaining that “gold confiscation” is only a remote possibility do not discuss what I perceive to be a much greater risk where many owners of physical gold and silver could have their assets seized by the U.S. government.

The US government is desperate to uncover any means of increasing revenues. I think in this environment any group of privately held assets amounting to multiple trillions of dollars is at risk.

This becomes an ever-greater threat as the fiscal crisis accelerates. There is no politically acceptable solution on the horizon. This raises a problem.

There is one such asset class that would be ripe for government “confiscation.” That is private retirement accounts, including IRAs, 401(k) accounts and others.

Not only are such assets out there, the federal government has already started the process to eventually seize them. The original proposal in the early years of Clinton’s presidency called for a 15 percent tax on existing private retirement assets plus a 15 percent tax on new contributions, to be offset by making withdrawals tax-free. This effort stalled when the Republicans gained a majority in the House of Representatives in the 1994 elections.

The new incarnation of this effort does not include a specific tax on assets and contributions. At the House Committee on Education and Labor hearings on Oct. 7, 2008, Professor Theresa Ghilarducci, laid out a proposal that would, in several stages, end up forcing owners of private retirement accounts to turn these assets over to the U.S. government. These assets would be replaced with U.S. government Guaranteed Retirement Bonds paying a 3 percent (adjusted for inflation) interest rate. Upon retirement, these bonds would be converted into an annuity. Upon death of the account holder, the U.S. government would retain 100 percent of any remaining assets. Apparently, the minutes of this hearing have now been deleted from the committee’s website, but you can read a summary at http://www.globalresearch.ca/index.php?context=va&aid=11031.

The initial step towards implementing this seizure was discussed in a joint hearing by the Department of Treasury and Labor conducted on Sept. 14-15, 2010. See http://www.dol.gov/ebsa/newsroom/2010/ebsa082610.html.

At present, this threat is not immediate.The author says: “However, it is not difficult for me to imagine that even the Republicans could support seizure of private retirement assets under the guise of ‘guaranteeing the safety of retirement assets.’ ”

This argument is really an argument against retirement accounts generally. It is not just that gold-related assets are vulnerable. It is that all assets in these accounts are vulnerable.

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2 thoughts on “Gold in Retirement Accounts: A Bad Idea

  1. A discontinued S-IRA has been rolled into T-IRA (which had a net value below basis). Is the basis of the combined IRA the sum of after-tax contributions into the T-IRA?

  2. Just another way to implement the death tax.