The Great Taking – or the Great Misconception

QUESTION: I have watched this video of David Webb, who distorts the history of the Great Depression, making it sound like the Fed was created to take all the gold when it was formed in 1913. Roosevelt’s “taking” was in 1933, 20 years later. As you and Milton Friedman pointed out, there was a shortage of money during the Great Depression. You provided even the catalog of over 200 cities that issued their own money. I have bought some myself now.

Am I wrong, but this guy has glued facts together, making it sound like they will take all securities like they did gold, and you will have nothing? I am unsure he understands the difference between a secured and an unsecured creditor you learn in basic finance. Then he claimed to be a hedge fund manager, but if this is the same David Webb, he sought to raise money to be just an equity fund manager and registered with the SEC. That is not a hedge fund manager who deals internationally.

Your comments would be enlightening.

FB

REPLY: The Fed was created in 1913 and had nothing to do with confiscating gold. Roosevelt’s Brain Trust was against gold confiscation. Roosevelt did that NOT to confiscate assets, only gold backing, not the dollars in your account.  That had NOTHING to do with the shortage of money but funding his Marxist agenda. Europe defaulted in 1931, and the Fed kept money tight to maintain confidence that the US would not default like Europe. People hoard their wealth in times of uncertainty. That is why even Roman Coin hoards correlate to the civil wars and fate of the 3rd century. The hoarding of wealth during the Great Depression contracted the velocity of money during that time, resulting in cash shortages.

George Warren (1874-1938) recommended the dollar’s devaluation because it had risen so high that politicians imposed protectionism. After all, they, too, did not understand the currency. Warren was called the farmer economist, but it took someone who understood international markets to see the problem was the high dollar value. Roosevelt put a spin on that, confiscated the gold at $20.67, and then devalued the dollar to $35—the profit he used to fund his socialist agenda.

Yes, I agree; there seems to be a misunderstanding of title and law. There was a Supreme Court case that goes to this very question of secured title to assets and unsecured. Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999). The court overruled a district court that seized UNSECURED assets without a judgment and trial. The Supreme Court ruled there was no such power to do so before a judgment. That power resides only with SECURED assets such as a mortgage where the title has NOT passed to the homeowner until he has paid off the mortgage and as such, there is no question who owns the title.

The problem with a brokerage house is that if you have contracts or shares, and certainly if you are trading on margin, the title is NOT yours. Just like a mortgage, you have to own it 100% outright. In the case of MF Global, Bankruptcy Judge Martin Glenn seized all the client’s funds and attributed the losses to them as a whole, for they were UNSECURED creditors.

Martin Glenn was the judge in New York on M.F. Global bankruptcy. He was the first to engage in FORCED LOANS by abandoning the rule of law to help the bankers by protecting them from losses and taking client accounts to cover M.F. Global’s losses. That is no different from what we saw in Cyprus. He allowed the confiscation of client funds, which were UNSECURED when the rule of law was that the bankers were responsible and M.F. Global’s losses should have been reversed. The client’s funds should never be taken for M.F. Global’s losses to the NY Bankers. Judge Martin Glenn placed the entire financial system at risk by trying to protect the bankers. He pampered these bankers, making them the new UNTOUCHABLES. We must be concerned that no rule of law will protect you in a crisis.

When you deposit money in a bank, you are a UNSECURED creditor. When a bank fails, you get in line with all the other depositors. The same thing would take place when a government defaults. You are still an UNSECURED creditor. Unless the government intervenes, current shareholders in any major company will be wiped out in a bankruptcy court, and the stock becomes worthless because shareholders have no claims on the company’s assets in bankruptcy court. Take the GM filing for Chapter 11 reorganization in the Manhattan, New York federal bankruptcy court on June 1, 2009. GM bondholders will fare slightly better than shareholders. GM owed a total of $33 billion to bondholders; $6 billion was SECURED, and $27 billion was UNSECURED. Secured bondholders were willing to accept lower interest payments than unsecured bondholders to be at the top of the list of creditors to be paid back if the firm entered bankruptcy. The shareholder lost most of their value, and the company had to issue more shares to raise money. The SECURED creditor comes first, just like the bank owns your property until the mortgage is paid.

To suggest that the government is going to take everything you own is just not true. That would be REVOLUTION time, and the government would collapse instantly, for not even the army would support them. You MUST understand the difference between an UNSECURED and a SECURED creditor. Equating this to the taking of gold is not the same situation. Your money in the bank at the time was expressed in dollars – not ounces of gold. The Supreme Court held that changing the backing of the dollars did not change the dollar you had or owed.

The governments will NOT seize the ownership of everything. They rely on the military for power. Just as in Russia, when Yeltsin stood on the tank and pleaded with the military not to kill their fellow Russians, once they stood down, the coup collapsed. In China, the military obeyed, but to a limited degree, forcing the government to change direction in 1989. The government could NEVER seize everything without the military backing them up.