If you are a bullion holder in a Negative Swap Line (-SWAP) Nation – please pay attention.
Bernard Baruch was one of the wealthiest speculators in American history.
He started with nothing and worked his way up to becoming a war effort hero and a trusted advisor to many Presidents during his lifetime. But he made his fortune speculating.
The myth and popularity of another speculator during the same era – Jesse Livermore – gets much more print than Bernard Baruch. But in my books, Bernard Baruch ran circles around Jesse Livermore.
But I’ll leave that explanation for another day.
Today’s missive is about the biggest bet that Bernard Baruch ever made. But not only did the U.S. Government take it from him, they tormented him for doing it.
It’s said that no American individual has ever held more gold in his personal possession…
That’s over USD$125 million in bullion at today’s prices. He was America’s first Bullionaire.
So what happened to all that gold?
On April 5th, 1933, one month after taking office, President Roosevelt ordered all Americans, by Executive Order, to surrender their gold at the government fixed rate of $20.67 per every ounce of gold.
All gold coins, bullion and gold certificates would have to be surrendered to the Federal Reserve by May 1st, 1933. That was less than one month after the President’s Executive Order.
Over 14.5 million ounces were surrendered to the U.S. Federal Reserve.
Nobody surrendered more gold bullion to the U.S. Federal Reserve than Bernard Baruch, with his stash of over 2 tons of gold (over 75,000 ounces).
At the same time in Europe, the going rate for gold was about $29 per ounce equivalent.
The executive order to surrender their gold didn’t give U.S. citizens enough time to organize the required logistics to play the arbitrage opportunity. Not to mention that President Roosevelt made it illegal to do so.
Here’s what’s not mentioned in the history books of this period…
The U.S. government made a serious inquiry into all the mines and gold dealers on:
Bernard Baruch had to testify to the U.S. Secretary of Treasury why he bought so much gold. In fact, the president of one of the mining companies that sold their gold to Baruch had to also testify why Baruch bought all the gold.
Protecting one’s wealth and lack of trust in the fiat currency wasn’t an acceptable answer in the eyes of the U.S. Treasury Department.
Becoming a millionaire means financial freedom.
Becoming a billionaire means that you’re one of 2,100 people out of 7.8 billion people on planet earth. It means you’re part of the top 0.000027% of the world’s financial elite.
But there’s a new class of elite wealth being created that I call the BullionaireTM Katusa Class.
A Bullionaire is someone who’s quietly accumulated over 1,000 ounces of gold (or Ag Eq).
But before you set your sights on becoming one of the global Bullionaires, please understand what happened to U.S. Bullionaires in 1933.
On January 30th, 1934, after forcing Americans to surrender their gold at $20.67 per ounce, President Roosevelt raised the price per ounce of gold to $35 per ounce. This immediately booked a 69% gain on the gold that was surrendered in May 1933.
Bernard Baruch was 100% correct in his prediction that gold would increase in value. However, he didn’t make a penny on his gold bets because he was forced to surrender his gold to the government – and at the government’s fixed price.
In fact, the whole saga cost him a lot of money and was the source of much headache as he had to testify and defend himself from the government inquiry on why he bought so much bullion.
President Roosevelt knew exactly what he was doing.
America was in a deep recession in 1933. Famous individuals like Jesse Livermore owed millions and went bankrupt. Shortly after the Gold Reserve Act in 1934, Jesse Livermore filed for bankruptcy for a third time.
(Not to digress – But I mentioned earlier why Bernard Baruch ran circles around Jesse Livermore. Baruch never declared bankruptcy, was a good family man and lived a long fruitful life. Six years later, in 1940, Jesse Livermore was bankrupt for a 4th and final time as he shot himself and committed suicide.).
Many popular business executives that were household names committed suicide between 1932 and 1934. Eastman Kodak and Ivar Kreuger killed themselves.
The U.S. economy hit all-time lows and recorded its highest unemployment rate ever up to that point. Deflation was destroying lives, families and the morale of a nation.
Governments fear deflation much more than they fear inflation. President Roosevelt wanted inflation and the fastest way to do so was to re-price the gold they just nationalized from their citizens.
By repricing gold, President Roosevelt brought inflation to the economy. And it worked.
But before the U.S. Government did so, they forced their citizens to surrender their gold coins, bullion and gold certificates.
Knowing they would reprice gold after they forced their citizens to surrender the gold, this became the greatest insider trading scheme ever seen in the world.
If you need a refresher on what a Negative Swap Line Nation is (-SWAP), please watch the video here.
Not only are governments in the rest of world other than the U.S. breaking under the debt and deflationary pressures in their domestic economies, they’ll be forced to increase their take on foreign owned gold mines.
Those same governments will copy President Roosevelt’s Executive Order of forcing all citizens to sell their gold coins and bullion to the government at a fixed price in the local currency.
So, how does a Bullionaire protect their wealth from being surrendered to their government?
All that said, after the 1934 U.S. Gold Reserve Act, the miners experienced their greatest period of free cash flow and dividends.
Around the world, gold is already hitting all-time high prices in foreign currencies and is edging nearer to all-time high prices in U.S. dollars. It’ll truly be in a bull market once the previous USD high is in the rear-view mirror.
Within the next five years, gold will attract front-page attention as it hits prices that we’ve never seen before. Silver will also follow.
But broke governments will want their share. This means you must understand the political risks that are currently not being priced into mining company or royalty company share prices.
And for those who think they’re untouchable because they hold gold bullion, just remember what happened to the one of the greatest speculators that ever walked Wall Street, Bernard Baruch.