Saturday, December 3, 2011

Q&A With The Doc: Is Government Confiscation Risk Greater Than Delivery Default Risk?

Julius writes:

Hi Doc. Thanks for your great site.
I live in Australia and have allocated silver at the Perth Mint. I am aware that you strongly advise people to have physical possession of their silver, but I do have a concern I'd like to ask you about:
One of my big goals is to use that silver to buy a house of my own when silver goes up and houses prices drop. However, the government over here seems to be quite happy to seize large quantities of cash from people it suspects of criminal activities, and I'm concerned that if I have silver in my physical possession which may be enough to buy a house, it might be taken from me when I go to cash it in simply because it's a large amount not traceable like money from a bank or bullion account and so might appear suspicious. Is this a risk that every bullion owner faces when trying to trade large quantities of phyzz at once? Do you have any suggestions?

Thanks again for your great articles.

Julius, being from the US I can't speak directly to Australian laws and authority actions, but personally, I believe your risk would be much higher that Perth does not actually hold your "allocated" silver than the risk of government confiscation.  I encourage you to contact Perth and inquire about having your allocated silver personally delivered, and you will see what I mean.  Watch Perth attempt to talk you out of it, and stall, stall, stall.
I will also never personally "cash in" my silver- meaning I do not plan on ever trading it back for fiat currency.  It is important to realize that governments can only tax your fiat gains in gold and silver if you trade them back for fiat currency, locking in fiat gains.  If you rather use them to purchase assets directly, or use them as collateral for fiat loans, the g-man is not able to skim off the "gains" created by currency devaluation.  This is important and obviously requires a long term plan and patience.
I also believe governments will attempt to confiscate retirement accounts and nationalize gold and silver mining companies before they go door to door seizing gold and silver by force.  Just this morning Portugal was reported to have seized nearly 6 billion euros in private pension funds in a desperate attempt to avoid a fiscal collapse.  This is a rapidly growing trend, and one that is likely to continue.  Nothing is easier to seize by corrupt governments than 1's and 0's in an online account.  Door-to-door seizure of precious metals is another thing entirely, and would be met with fierce resistance by a large majority of PM holders.
Not sure how you Aussies would take that, but here in the US, gold and silver government collections agents would have a lifespan of approximately 30 minutes with the ratios of PM holders who also own firearms.
Lets just say that if a g-man showed up at this front door The Doc would attempt his best Bruce Willis impersonation:  Yippee Ki Yay Mother F'r!