Australians must be alert to the risk of the Turnbull, or a future Australian, Government engaging in mass gold confiscation.
Across the economy, many Australians have lost confidence in the international monetary system, including recent actions of the Reserve Bank of Australia, as well as in the ability of the Australian Parliament to manage the finances and creditworthiness of the Commonwealth.
Investors point internationally to large budget deficits and exploding government and private sector debt supported by runaway money printing, zero or negative interest rates, quantitative easing, bank bail-ins, interest rate and commodity market manipulation as well as the new international war on cash as signs that governments and global multilateral economic institutions have lost control in managing domestic and international economic affairs prudently.
Twelve years of scheduled continuous federal budget deficits (2008 – 2020) and a projected explosion of net Commonwealth government debt of $433 billion over the same period, the impending loss of our triple A credit rating, record low interest rates and the newly announced Black Economy Taskforce, which will consider abolishing the $100 note and placing a legal limit on the size of cash transactions, mean that Australia is not immune from these global trends.
As I have warned in a previous Daily Telegraph article, any restrictions on the availability or use of physical cash by the Turnbull Government is likely to undermine confidence in the banking system and lead to individuals hoarding precious metals such as gold to protect their wealth.
Australians need only look at tumultuous developments in India, where ordinary Indians are now paying significant premiums to purchase and hoard gold in response to the Modi Government’s decision to abolish almost 90 per cent of all physical cash in India.
For Australians’ currently accumulating gold, maintaining the physical security and ownership of their gold continues to be a concern given Part IV of the Banking Act 1959.
Part IV contains legislative provisions providing the Governor-General with the legal power to sign a proclamation requiring all gold in Australia, except for gold coins or ‘wrought’ gold, to be handed over to the Reserve Bank of Australia (RBA), within a month, in exchange for legal tender. This would be in the form of either physical cash or digital currency, with the amount exchanged based on an RBA-prescribed gold price.
These confiscation provisions can be triggered in order to ‘protect’ the value of the Australian dollar or the Commonwealth’s ‘public credit’.
While these provisions have never been exercised, 20th century history is littered with examples of governments, whether they be communist, fascist or democratic in nature, either limiting the ownership or confiscating mass quantities of gold when running out of money, or when confidence in their issued currency collapsed from massive inflation.
For example, during the 1930s and 1940s, Stalin tortured soviet citizens to obtain their gold, the Nazis stole large quantities of gold across Europe to fund their war machine and Mussolini raised 35 tonnes of gold by convincing Italian women through nationalistic propaganda to hand in their gold wedding rings in exchange for steel wedding rings provided by the government.
Moreover, President Roosevelt, in 1933, issued Executive Order 6102, making it illegal for Americans to own gold. The order confiscated approximately 22 per cent of all gold in circulation. Legal gold ownership in America was not formally restored until 1974.
In all of these examples, the respective government compensated owners with only a fraction of the real value of their gold.
Unfortunately, Australia is not immune from its own history of gold confiscation. After declaring war on Hitler and needing to fund the war effort, the Australian Parliament enacted the Gold Tax Act 1939 imposing a 50 per cent transactional tax on gold delivered to the Commonwealth Bank Government above 9 Australian pounds per ounce.
This tax, while not confiscating gold outright, confiscated a proportion of the gold used by Australians when redeemed for physical cash. The gold tax was not repealed until 1947.
In order to avoid a repeat of history, Australians who are hoarding gold and who are concerned of the future risk of confiscation are taking specific steps to avoid government detection.
Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, bullion dealers are required to record the identities of individuals involving the purchase of gold, irrespective of payment, greater than $5,000. These records can be solicited by the government upon request.
Gold owners are therefore purchasing gold bullion in quantities of less than $5,000 in case relatively simple legislative amendments are enacted in the future that allow the government to solicit gold transaction records for purposes other than anti-money laundering or counter terrorism.
Such Australians point to the introduction of the 1928 national German gun register under the Weimar Republic which was later used by the Nazis to target political enemies or the 1938 Register of Jewish Property which was used to confiscate gold owned by German Jews.
Malcolm Turnbull can restore confidence in his government’s economic management by not only balancing the budget, raising interest rates and ending the war on cash but also by repealing Part IV of the Banking Act. This would quash current paranoia and conspiracy theories.
Further confidence can be generated by enacting legislation which would legally prohibit Commonwealth institutions from confiscating all forms of precious metals.
Tyranny and theft is only one signature away.
John Adams is a former Coalition Advisor. This op-ed first appeared in the Daily Telegraph.