The U.S. Government's Power to Confiscate
The United States of America is currently under a state of emergency, so the U.S. government could confiscate financial property at any time
October 1, 2006
Fred Foldvary, Ph.D.

On August 12, 2006, a letter from the United States Department of the Treasury confirmed that the U.S. government has the legal authority to confiscate gold and silver from U.S. residents and prohibit their possession during wartime. The letter to the Gold Anti-Trust Action Committee also stated that the U.S. Government may, during wartime and declared emergencies, freeze the ownership of shares of mining companies. Moreover, according to GATA, the U.S. government in such cases has the authority to seize or freeze any financial instrument.

The U.S. government's power to confiscate goes back to the Trading With the Enemy Act of 1917 (12 U.S.C. Sec. 95a) and the International Emergency Economic Powers Act of 1977 (50 U.S.C. Secs. 1701-05), the latter authorizing confiscatory powers to the government even without a declaration of war. This is a far broader power to seize than that of eminent domain.

The United States of America is currently under a state of emergency, so the U.S. government could confiscate financial property at any time. President Bush issued a Declaration of National Emergency in September 2001, which states, "A national emergency exists by reason of the terrorist attacks at the World Trade Center, New York, New York, and the Pentagon, and the continuing and immediate threat of further attacks on the United States." In September 2006, President Bush issued an executive declaration, the "Continuation of the National Emergency With Respect to Persons Who Commit, Threaten To Commit, or Support Terrorism," which extends the 2001 state of national emergency for another year.

This power to confiscate raises several Constitutional issues. First of all, the U.S. Constitution authorizes to the U.S. federal government only those powers which are specifically inscribed in the Constitution, all other powers being left to the states and the people, a principle made explicit by the 9th and 10th Amendments. The U.S. Constitution does not provide the federal government with any power to confiscate or freeze property except by taxation, punishment for a crime, and, under the 5th Amendment, for public use with just compensation.

The power to seize precious metals or financial assets during an emergency or war is not ordinary taxation, nor punishment for a crime, nor for a public use with compensation. Thus there seems to be no Constitutional authority for such a taking. There is also no Constitutional authority for a declaration of national emergency.

Moreover, it seems to me there is no good economic or military reason for the government to confiscate or freeze gold or silver or other assets. During wartime, the U.S. government can obtain all the resources it needs from ordinary taxation. Gold and silver are no longer used as U.S. currency, so there is no particular reason why trading specifically with gold or silver should be a national danger.

Such government acts stems from a war mentality that allows government almost unlimited powers during times of war or warlike circumstances. Starting with the Civil War and continuing with World Wars I and II and the Korean and Vietnam wars, the U.S. government claimed the power of conscription, to draft men into the army by force. Given this maximal government power over the lives and bodies of citizens, any other powers seem secondary. The thinking goes, if the government has the power to draft a person into the army, how could it not have the lesser power to just confiscate property?

Well, the 4th Amendment to the U.S. Constitution recognizes the "right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures," and the 13th Amendment prohibits "involuntary servitude" other than for punishment for a crime. Perhaps it is reasonable to let the government confiscate any private property, and perhaps human existence is inherently evil so simply being alive and in U.S. territory constitutes a crime that subjects us to involuntary servitude. I don't know; I just live here.

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Fred Foldvary, Ph.D.

FRED E. FOLDVARY, Ph.D., (May 11, 1946 — June 5, 2021) was an economist who wrote weekly editorials for since 1997. Foldvary’s commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research included public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.