The Gubmint owns your gold

OC & EM - I agree mostly. Australia is in a bit luckier position at the moment compared to say, UK or US, that Nationalising the mining output (one way or another) could well be the first route but it is also slower. Depends on how much and how fast the flying excrement hits the rotating turbines.

 

Nationalisation of our mines would cost them a LOT more than simply buying the output. Probably/possibly the full market capitalisation of the companies concerned.

No matter where the source, they have to pay market value for all the gold they want to buy and private holdings would be a TINY part of the 240 tons a year they have at their disposal.

 

MRRT's and RSPT's cost nothing.

Export bans cost nothing (but in the case of gold will prob be "market" price of gold).

 

But why? gold isn't money, it's just some old relic that has no use/place in modern society?

 

What Gold

 

Me: It was in my boat and my boat sank
Them: I don't see any boat
Me: Of course not, it sank

 

Turns out it was tungsten... can I have a tax offset pls

 

I don't think confiscation will happen because it is too messy and in your face, when they already have a confiscation law in force - income tax.

Lets say we had 10 years of 10% inflation and gold goes up with inflation say, $1800 gold goes to $4670. Govt says you made $2870 profit, you get 50% CGT discount and then taxed at say 37% marginal tax rate means your left with $4139 cash. Keep in mind your $1800 was able to buy you, say 900 bottles of 2lt milk @ $2. But with 10 x 10% inflation milk is now $5.19, so your $4139 only buys 797 bottles, so you went backwards by about 11% - ie Govt confiscated your wealth without any fuss.

Now run those numbers with gold at $50,000 and it works out at $48,200 "profit" and with only a few ounces you are in top tax rate of 45% so your $50,000 ends up at $39,155 left over. $1800 to $50000 is 27.7 times increase, so milk is now worth $55.55 a bottle, so your $39,155 only buys 705 bottles, a 22% reduction/confiscation.

Sure they would get more by just outright expropriating it at $1800, but inflation tax is a lot less messy and doesn't get non-gold holders worried if their assets are next. Plus they can always put a "super profits" tax on gold due to all those speculators who have made so much money out of gold going to $50,000, which is not going to be a problem getting non-gold holding majority to agree to as "fair".

 

Could you run those numbers past me again using a loaf of bread as your reference point instead?

Im lactose intolerant.

 

^^^What about 1kg of rice, im gluten intolerent

 

Thought the references to milk got me confused - that is actually a cracking summary from Bron there...

For those struggling with the concept, I empathise completely!

 

Bron, Yippe and I were talking about when (if?) the Government goes back to a gold standard.

 

I've always wondered if under this situation someone forgot they had gold. Then they discovered it, and turned it in, after the price was $50K per oz. Would the government pay the $3000 or $50K?

 

^^^ Anyone's guess, but it'd probably be considered illegal holdings.

As yippe pointed out, the divestment would probably happen through a black market instead.


...but as pointed out by many others in the past, the treatment of jewellery would probably be different (up to a certain weight/purity of course).

 

They can go back to the gold standard without having to confiscate. Indeed it would be better to go back, revalue, and the tax the resulting gains investors made (which would have to be paid in gold).

 

This is an interesting (and important topic) so I don't want to be flippant about it. I know you've been thinking about this sort of thing for years so do you have any links to old articles you've written?

Given the Fed still has substantial gold reserves the US would seem to be able to more readily move back to a gold standard than Australia without any confiscation (albeit would require revaluation of US$ to ~$10,000/oz under the Rothbard plan). I haven't done the calculations for Australia (but shouldn't be too hard) but have a very strong suspicion that the revaluation would place the exchange rate under significant short term pressure and hence would seem to be in the short term benefit of the Government to acquire large quantities of gold in a short period of time.


EDIT: OR is it possible that - because we are significant producer - the A$ could be backed by a mixture of above ground AND short term below ground reserves on the promise that, say, X% of next Y years production will go straight to currency backing? This would be an in-between fractional gold backed currency that would still require effective nationalisation of production (probably without true compensation).

Another "option" of course, is to have two currencies like China where the foreign traded one is gold-backed but the domestic one isn't. But this is getting into the realm of very strong capital controls by a Government whose power has gotten even stronger and we would be at risk of falling into being a fascist/socialist political economy rather than the (nominal) liberal-democracy we have now.

 

The way of doing it without causing alarm would be for the government to say the gold mining companies have to give them (the government) right of first refusal to purchase their output at market rates. That way there isn't any nasty sovereign risk stuff going on where the government just takes stuff and it fits in nicely with the "just terms" requirement of the constitution.

Doing that means they can effectively stop new gold being exported in bulk and they can quietly print the extra cash to pay for it. Obviously that inflates the dollar, however it also increases the amount of gold backing of the dollar, so those extra dollars are actually worth something.

 

^^^ Yes. This is one of the means that has psychological advantages. Under the constitution exports are 100% subject to whim of the Commonwealth Government so is easy to implement (c.f. live trade saga). (What they then deem to be "market price" is of course subject to manipulation and depends on how big a tin foil hat you have on.) I class this sort of thing as "effective nationalisation".

 

I think you could simply call it "export controls" for something that the government considers to be of special importance.

I'm pretty sure our government has to approve the sale of uranium to foreign buyers but we don't say the uranium miners are "effectively nationalised".

I also think they could use the real market price since there isn't any compelling reason not to use it and a lot of problems with public perception if they force sales below market price.

Even if they simply print a billion new dollars to buy gold from local miners at the real market price, that billion dollars in cash is backed by N ounces of gold.

 

Debasing your money supply so that you can steal the gold more subtly defeats the reasons for having a gold standard