Q: I keep getting bombarded with emails and phone calls about the government using a law to take our bank accounts and 401 (K) and that we should invest in gold. What are your thoughts on this?
A: Marketing 101 - Fear sells newsletters and investment products such as gold. For the longest, gloom and doom marketers have been sending out this message through various mediums stirring up the fear that government confiscation of 401 (K) accounts and bank accounts was about to happen. Of course, they have the solution for you and it comes in two different ways. Either you subscribe to their newsletter where they have all of the answers or you purchase gold. By the way, if the government were to confiscate bank accounts and 401 (K) plans, there is nothing to say that the same wouldn't happen to gold.
Let's address the two - First, confiscation of 401 (K) accounts - this rumor started in October 2008 right during the height of the financial crisis. A liberal economist Dr. Teresa Ghilarducci went to Capital Hill to discuss her retirement proposals with a handful of politicians. She is a big advocate of the government getting further involved in our retirement just like with healthcare. From there the rumor mill exploded suggesting that she was proposing that the government take over 401 (K) plans. I had the opportunity to interview Dr. Ghilarducci and asked her if that ever come up in their meeting. She thanked me for asking the question and then said absolutely not - it never came up.
Next is bank accounts - there have been times where the government has confiscated bank accounts when no crime has been committed. They would do so under the Bank Secrecy Act of 1970 which states that consumers have to report cash deposits over 10,000 worth of cash to the government. This law is strictly enforced to prevent money laundering. There have been cases where a consumer will deposit large cash deposits just under $10,000 multiple times. Due to the suspicious activity, the government stepped in and took over their bank account as they investigated. Marketers take isolated incidences and make it seem as if it were the norm in order to stir emotion. People take action based on emotion. Incidentally, gold is a piece of metal that holds a perceived value to it. It is not a currency and we are highly unlikely (less than 1/2 percent chance) of going back to the gold standard. With the gold standard in place, the politicians would lose control of the money supply and that is never going to happen.