Should overseas gold-holding be rethought?

Discussion of the Gold portion of the Permanent Portfolio

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murphy_p_t
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Should overseas gold-holding be rethought?

Post by murphy_p_t » Thu Mar 14, 2013 12:30 pm

The premise of this essay is that the US gov't can and likely will get the gold in overseas holdings (I'm extending this to Goldmoney, Perth Mint, etc. )

Is this fear-mongering?

Can this occur under existing laws in the US?

http://www.kitco.com/ind/AuthenticMoney/20130204.html
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craigr
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Re: Should overseas gold-holding be rethought?

Post by craigr » Thu Mar 14, 2013 3:03 pm

Why would they want to seize overseas gold when they have a ton of other assets in-country they could grab first and a lot easier?

Even if they do enact a law to do this, you can stall for ages with attorneys here, attorneys overseas, etc.

Or if the assets were large enough, you could take a plane to the locale, liquidate your gold, and use the proceeds to buy some real estate there as a fall-back plan. You'd still have some hard asset overseas, and now you can rent out the house to get some income. Also, you can't repatriate a house. Maybe they could make you sell it and bring the money back, but again if they are doing that then there are a lot of very other bad things likely happening and chances are your overseas assets will be the least of your worries. But, at least you'll have options on what to do vs. everyone else with all their money in-country for easy pickings.
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Re: Should overseas gold-holding be rethought?

Post by bronsuchecki » Thu Mar 14, 2013 9:00 pm

Julian Phillips has been pushing this in a recent series of articles, but it is all about selling some trust structure he has put together that is supposedly protected against forceful repatriation.

The only way the Perth Mint will hand over gold is if the US government applies to our local courts for it, in which case they have to make a case that a US law has been broken and then our local courts investigate and if find that is true, then order the Perth Mint to hand it over.

This will prevent wholesale "we are from the US Govt, give us all the gold of Americans" and they will have to specify individuals. That whole process will drag on for some time.
Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.
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AgAuMoney
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Re: Should overseas gold-holding be rethought?

Post by AgAuMoney » Thu Mar 14, 2013 10:32 pm

bronsuchecki wrote: Julian Phillips has been pushing this in a recent series of articles, but it is all about selling some trust structure he has put together that is supposedly protected against forceful repatriation.
Yup, and others with similar agendas.  (how to make money for me!)
The only way the Perth Mint will hand over gold is if the US government applies to our local courts for it, in which case they have to make a case that a US law has been broken and then our local courts investigate and if find that is true, then order the Perth Mint to hand it over.

This will prevent wholesale "we are from the US Govt, give us all the gold of Americans" and they will have to specify individuals. That whole process will drag on for some time.
But I don't think that helps.

If it goes down as it did in 1933, they 1) change the law, 2) freeze the assets, 3) say "turn it in or else."  They did pay the official rate for all gold turned in.  If you did not turn it in, the fines were so stiff you were almost certain to lose money, and then stack on the penalties...  It was ominous.

Applying that to the Perth Mint example, once the law is change it will be against the law for a U.S. citizen to own gold.  A letter to the Perth Mint might suffice at that point to exchange gold for U.S. dollars, or at least to freeze the assets of the U.S. citizens.  Does the Perth Mint comply with the special reporting requirements on U.S. citizens today?  I expect it does, so I would have no reason to expect they would not comply with said letter.  And once the assets are frozen, as is typical of any court case involving disputed assets, it really doesn't matter how long it takes.  In fact, the citizen may be wise to choose to give up immediately, get the cash, and pursue other opportunities.

Of course, if it happens next time as it happened in 1933, there was essentially no enforcement and even less prosecution.

Either way, I think if you want the ultimate safety of storing gold overseas, U.S. citizens need to avoid any kind of legal entity such as Phillips' trust or the Perth Mint, and stick to basically putting coins in safe deposit boxes in foreign cities.  Any legal structure that reports now or can be required to report on U.S. citizens isn't safe.  Thinking about a 2nd passport yet?
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smurff
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Re: Should overseas gold-holding be rethought?

Post by smurff » Thu Mar 14, 2013 11:21 pm

I have often wondered:  what's to stop the country where the gold is held outside your own from confiscating it?

I would suspect in a true crisis--the series of world events that would ultimately lead to something as drastic as gold confiscation--all governments would be up to no good.  It might even be politically more palatable for them to confiscate the gold of foreigners and other absentee owners than to take the gold of that country's own citizens.
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bronsuchecki
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Re: Should overseas gold-holding be rethought?

Post by bronsuchecki » Thu Mar 14, 2013 11:41 pm

The Perth Mint is currently not reporting anything to any US agency. I assume you are referring to FATCA, which is not yet in operation, but in any case being a non-bank Government owned entity we do not think it applies to us.

Anyway, all the US govt has to do is go to its banks and ask for a copy of all wire transfers to bank accounts of gold dealers and trace back and then visit those people. Unless you bought your coins for cash and took them to the safety deposit box yourself, you will get a "please explain" audit.

The only way to really avoid confiscation is to have bought metal over time in small amounts for cash. Otherwise it is discoverable.

And no, we will not freeze or hand over our clients gold on the basis of a "letter". Under the privacy Section 74 of our Act we won't even confirm or deny if someone has an account. We have done this in the past to phone enquiries from people purporting to be from government. What we say to them and will say in the situation you propose is, apply to an Australian court for information/freeze/whatever it is you want.

Now I suppose in the case of a confiscation order in the US, the US authorities could apply to an Australian court that all gold of American citizens be handed over, sort of a class action I suppose. But then there needs to be some court determined process of determining how we know who is an American citizen eg just becuase they have an address doesn't mean they are Americans.

Either individual or some group application to our courts will take some time. Perfect time for a holiday to Australia I'd say on your 2nd passport.
Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.
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Re: Should overseas gold-holding be rethought?

Post by MachineGhost » Fri Mar 15, 2013 4:24 am

bronsuchecki wrote: The Perth Mint is currently not reporting anything to any US agency. I assume you are referring to FATCA, which is not yet in operation, but in any case being a non-bank Government owned entity we do not think it applies to us.
Is Perth Minth not a custodian or bailee which are reportable activities?
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craigr
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Re: Should overseas gold-holding be rethought?

Post by craigr » Fri Mar 15, 2013 10:41 am

I think people can get themselves into *much* more trouble doing tricky things (like overseas trusts) than just doing something very simple with a well-established provider. I have often found that investors try very hard to outsmart themselves and often end up doing exactly that.

These trust structures are always suspect to me, especially when sold as asset protection. If a judge orders you to repatriate funds to pay a settlement after losing a lawsuit for instance, and you don't comply, you will probably be going to prison.

Also, let's say it's a blanket order to repatriate for every citizen. Well, why would the foreign locale even comply? If they see the law is likely illegal, immoral, unethical, etc. they could drag their feet on behalf of their clients. The people running these institutions are humans and watch the news and may be sympathetic towards their clients.
Last edited by craigr on Fri Mar 15, 2013 10:49 am, edited 1 time in total.
murphy_p_t
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Re: Should overseas gold-holding be rethought?

Post by murphy_p_t » Fri Mar 15, 2013 11:50 am

you mean like the UBS example?

<sarcasm off>
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craigr
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Re: Should overseas gold-holding be rethought?

Post by craigr » Fri Mar 15, 2013 12:07 pm

murphy_p_t wrote: you mean like the UBS example?

<sarcasm off>
There was no repatriation of assets. They closed accounts and disclosed names of those likely to have been hiding assets. The customers could decide what to do. UBS was enabling tax fraud and actively engaging in activities that were criminal tax evasion. When your banker is smuggling diamonds inside tubes of toothpaste, you have to ask whether that's a legitimate and legal banking product.

But if you are using an overseas account to hide assets then all bets are off. I think if someone lives in a country and taxes are owed, they should pay them. Nobody likes paying high taxes. If they don't like the taxes being charged, then they can move somewhere that is more suitable.

Also, there is nothing that's perfect. The idea of geographic diversification is go give an investor options in the event of a serious national emergency that is either natural disaster type or manmade. The idea is not to hide assets for dodging taxes.
Last edited by craigr on Fri Mar 15, 2013 12:09 pm, edited 1 time in total.
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bronsuchecki
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Re: Should overseas gold-holding be rethought?

Post by bronsuchecki » Fri Mar 15, 2013 8:40 pm

MachineGhost wrote:Is Perth Minth not a custodian or bailee which are reportable activities?
We are looking into the regulations, but it is not that straightforward as there is a carve out for Government entities and also there is a test as to how much of your business is custodial below which you are not deemed a custodian.
Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.
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Re: Should overseas gold-holding be rethought?

Post by smurff » Fri Mar 15, 2013 9:26 pm

Natural disaster = serious events with major, long term destruction.  Major earthquakes, tsunamis, asteroid or large meteorite hits, major volcanic activity, major hurricane, etc. 

Man-made disasters.  The list is longer here.  War (conventional, nuclear, cyber, or chemical), a series of successful terrorist attacks, nuclear accident, major radiological accident, pogrom, ice-9 type experiment gone awry, regional  contamination by man-made GMOs, etc.

I would also include individual capital-destroying disasters as well:  lawsuits, divorce, criminal trial, imprisonment, and having to flee stalking by the kind of psychopath the police cannot or will not handle.  Not all of these individual  events are major disasters, but sometimes they can be.  Also the list does not address fault; a lawsuit or criminal trial can wipe you out whether you committed the act(s) or not.
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Reporting of Overseas Gold to US Authorities

Post by CPAGUY » Tue Apr 09, 2013 10:59 am

I have read a lot on the question of required reporting of foreign held gold.  The regulation quotes I have seen look very vague, especially when they use vague and ill-defined words like "account" and "financial institution".  Clearly reporting is the same as registering, and registration is usually a first step preparatory to control or confiscation.  Therefore, I was pleased to read the recent article in International Living by attorney Bob Bauman which stated:
http://internationalliving.com/2013/03/ ... -this-way/

Under current U.S. reporting laws, if you hold gold—or any other precious metal—in an individual, U.S.- citizen’s name, you do not have to report it either to the IRS (under the Foreign Account Tax Compliance Act— FACTA—on IRS Form 8938, Statement of Specified Foreign Financial Assets) or to the U.S. Treasury (on Form TD F 90- 22.1, U.S. Treasury’s Report of Foreign Bank and Financial Accounts, known as FBAR).

and

So how you own your gold is important. For instance, if the title of the precious metals is held in the name of a legal entity, such as a corporation under your control, it must be reported. And where offshore you store your gold is another factor to consider. If the gold is held in your offshore bank or financial institution—for instance, in a bank-provided safe-deposit box—it is reportable.
Paper money continues to lose its value.”?

If it is held in a non-bank vault or storage company instead, it is not reportable.


To me, this is a clear indication that GoldMoney and similar vaulted storage providers are not currently required to be reported, and that is how I intend to play it.  That said, of course, nothing prevents a dictatorial government from coming back later and saying, "Oh, we intended that your gold should have been reported and we meant to include GoldMoney in our definition of 'financial institution'."  But Hey, you have to draw a line somewhere with compliance.

Another factor is that overseas storage now may allow you to get out of the US at a later date when the USG begins to criminalize the removal of personal wealth from the US.  Your wealth is already out of US jurisdiction.

Finally, location of gold within vaulted storage in a foreign country could well make it more marketable if/when the USG tries to interfere with the domestic retail gold market.  I bet there is always a buyer in Switzerland. 
Last edited by CPAGUY on Tue Apr 09, 2013 1:10 pm, edited 1 time in total.
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