1944 Gold Coin Treasury Memorandum (& other cool stuff)

I thought this memorandum was fascinating. It's from the Treasury Dept. concerning Secret Service activity in the NYC area with respect to dealers selling gold coins during the war.

The Secret Service wanted guidance on what they should do since even during the war (1944) lots of NYC dealers were selling gold coins en masse. Treasury came back with guidance which amounted to: if the buyers pay a premium, it's de facto a numismatic coin and it's exempt.

The only restriction was on $2.50 Quarter-Eagles where they limited it to 4 coins for each mint/year (apparently realizing the cheapest coin was where hoarders among the public would most likely target).

Thanks to Roger Burdette for uncovering this fascinating memo and letting me post it.

 

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That's an excellent find. It may or may not shed light on how things would go if a President tried something similar today. (Based on recent events, any historical precedent is at best a very weak indicator of what policy decisions a President might get away with today.)

 

Thanks. Credit to RWB.

BTW, I had uploaded Page 1 twice...it's now fixed. 2-page memo.

I think this Memo is just pertinent to the loopholes that existed after EO 6102 came into effect. The government CLEARLY played hardball in a couple of cases (I can post the actual NYT articles later if you guys want them)....right after the EO in 1933, the famous case of the guy who had $5,000 in gold with Chase Bank and got it seized.

This is different...this memo concerns sales of coins over a decade later and the SS is asking Treasury if the sale of coins is OK because of the numismatic exemption...Treasury's response is: if a premium was involved, it's ipso facto a numismatic coin and it's a legal sale.

So...if 1924 Saints were common back then too....$35 an ounce value....I buy 10 of them for $350, that's illegal as per EO 6102 (I can buy only 5 bullion coins)....but I buy it from an LCS for $40 or $45 each.....then all 10 are OK because all of them are at a premium PLUS I'm allowed the 5 bullion coin exemption (which wouldn't be needed here anyway).

There were other cases and legal briefs and some good law school analyses over the decades but they all were basically irrelevant once Pres. Ford signed the law allowing Americans to hold gold (ANY gold) effective December 31, 1974 (it was a real snoozer at the time -- I have articles on that, too).

 

Louis Eliasberg was quoted by friends and those in the busness as saying he got into numismatic gold as a way to hold gold coins above and beyond the 5-coin limit imposed by EO 6102 and the domestic selling and import restrictions ordinary Americans faced.

 

I believe you can post snippets under the fair use doctrine. Just take the most pertinent sections and feel free to post them. I suggest we play it safe (I'm not a lawyer - just extra cautious).

 

These are NY Times articles.

Like this one from 65 years ago, January 14, 1961:

 

So as late as 1961 there were concerns about gold competing against the U.S. dollar by government officials, even though we have been assured that there is no such threat. So we see efforts to close the escape hatch - though as I understand it Americans could still invest in gold miners and buy numismatic coins to get indirect exposure. Silver was another way to indirectly play the gold market, but now that silver is regarded as a strategic metal, I think that's possibly vulnerable in the future.

 

I'm busy doing some personal errands, but preliminarily I am not too convinced by a Treasury Department memo from many decades ago, primarily because, from my lay standpoint, it can be overriden or nullified by a future Treasury. I still have to go over the details of all of this, but for now you can count me as a skeptic as to the legal finality of anything in this thread.

 

When you read the history books, it seems like Bretton Woods was on autopilot from 1944 to 1971.

In fact, there were speedbumps in virtually every decade, if not caused by the UK, then France, the U.S. balance of payments deficit, whatever.

 

Admittedly, I have yet to read the memo at the top of the thread - I will have to analyze it. But I was able to dig up - this is for future reference - the Supreme Court cases Perry v. United States (1935)* and Norman v. Baltimore & Ohio R. Co. (1935)**, which appear to have affirmed the right of the federal government to confiscate gold through EO 6102.

So, the Supreme Court has already affirmed that gold confiscation (as practiced under EO 6102) is lawful. This, to me, is quite insane. By the way, this is potentially legally binding and applicable to future cases. The memo posted at the top of this thread is not binding at all, though it's believed it may shed light on any future confiscation. I think this is a charitable view of that memo, but again I will have to review it thoroughly as well as the above-mentioned Supreme Court cases.

* https://supreme.justia.com/cases/federal/us/294/330/

** https://supreme.justia.com/cases/federal/us/294/240/

 

Upon skimming the memo (need more time to review it - OK, just finished it), it offers an interpretation of the Gold Reserve Act of 1934*, which was then repealed in 1974**. It does offer some clues as to how a future confiscation may take place, but this is speculative. I'll add relevant links so those browsing this thread can grasp the memo in a wider context.

* https://fraser.stlouisfed.org/title/gold-reserve-act-1934-1085

** https://www.congress.gov/93/statute/STATUTE-88/STATUTE-88-Pg445.pdf

The memo cites an interesting case of an Israel Switt, who in 1934 was caught with 98 gold coins while trying to board a train from Philadelphia heading to Baltimore. This could be of interest as to how the Gold Reserve Act of 1934 was applied - or rather how some were ensnared***.

*** https://www.casemine.com/judgement/us/5914a437add7b049346b5b13

 

Yes, I see the government picked on the Quarter Eagle fans! As always, the government can get clumsy, and yes, there were ginormous loopholes to the Gold Reserve Act of 1934*. I recall, also, that another exception was jewelry.

* For some context here, a president can issue all manner and number of executive orders that have no legal force or weight. The Gold Reserve Act of 1934, passed by Congress and signed by FDR, ratified Executive Order 6102.

 

This Treasury Memorandum is only of interest in the context of the gold prohibitions by FDR a decade earlier.

For now.....gold's legality is established by Ford's signing of the law (not EO !) effective 12/31/74 and by the decades of gold buying by American citizens. I don't think you could have gold prohibited for even future buying, let alone ordering it to be turned in. If some government tried that, you'd have bigger problems in the financial markets and economy, IMO.

So many more Americans have purchased and hold gold today than back in the 1930's. It'd be like banning home ownership.

This Treasury Memo is fascinating because if we were back in the time between 1933 and Ford's signing of the gold legalization law....it clarifies how Treasury and the SS treat gold purchases (as Eliasberg suspected): just pay a premium, and you're on safe ground. Now, whether that premium had to be 5% or 10% or 20% -- I guess the Memo is unclear on that point.

But....it is clear: pay a premium, the coin is therefore a numismatic and exempt. Without the Memo being the subject of the evening news or newspapers and with no internet...even if this Memo had been public, it probably wouldn't have gotten much attention UNLESS the government broadcast it, which they had no intention of doing.

 

Different time, different era.

We were ON a gold standard then....whereas today we are not.

Gold holdings by most Americans were tiny 95 years ago ...today, it's a much larger base with more gold/$$$ invested.

I would NOT be worried about gold confiscation. I would be more curious (worried) about wealth taxes.

 

Yes, there you had the equivalent of the numismatic exemption at play....family heirlooms and sentimental gifts.

I don't recall anything saying gold jewelry needed to be turned in.

 

Oh, I agree, the repeal of the Gold Reserve Act by President Gerald Ford in 1974 is the current law and what is now binding. But I think what the Gold Reserve Act did was to establish a precedent for future action according to economic or monetary crises that may arise in the future. I posted two Supreme Court decisions, which admittedly I will have to carefully review. They are frightening. On the other hand, the loopholes you have highlighted also need careful consideration, because they may exist in the future under potential confiscation. I think what the above memo does is give us details on how the Gold Reserve Act (and by extension EO 6102) was enforced, and so it lays out some parameters on enforcement (what can and cannot be done with regard to coin dealers). But these parameters were unique to the specific way that the Gold Reserve Act was written. We have no idea if a future act will be just as generous or will afford as many loopholes, but that is another matter. We will cover all of this and more here.

 

Gold was the means -- or was BELIEVED to be the means -- by which you increase the money supply.

If people hoarded gold...the money supply shrank. That's why hoarding was such a problem overseas and what FDR was trying to nip in the bud.

Lots of new stuff in the last 30 years about French hoarding and the French Central Bank being more responsible for The Great Depression; I may have posted some of the articles and research.

Barry Eichengreen's GOLDEN FETTERS book is outstanding. Former Fed Chairman Ben Bernanke has some research pieces out there, too. If you want to read this stuff, Google a few of the topics and they should all pop up.

I read AMERICAN DEFAULT a few years ago, not sure I posted my review and thoughts on it. Another book, this one detailing the Supreme Court's decisions in the 4 key cases you reference.