Mises Wire recently ran a story entitled “The Gold at Fort Knox Was Stolen From Americans,” written by Mises Institute‘s executive editor Ryan McMaken. His essay‘s apt title reiterates the facts of the events that occurred in the early days of Franklin Delano Roosevelt‘s first term as president (1933-37).
As he correctly states, FDR was determined to “...end the gold standard and confiscate private gold holdings in the United States,” believing that it was a major cause of the Great Depression. In so doing, McMaken continues, “The US government reneged on its promises to redeem US dollars in gold,” including defaulting on redemption of gold-based Liberty Bonds from World War I, which were scheduled to mature in 1938.
But the fallout of FDR’s gold adventures was far worse than reneging on US gold bond redemption, as I explain below.
First, A Personal Disclosure
I grew up hearing my parents—who were in college during the early 1930s—lambasting FDR‘s actions and enforcing their lifelong hatred of this president who was elected four times from 1932 through 1944. McMaken‘s facts about this era are correct, based on my parents‘ rantings throughout their lives and my own later reading of the history of US monetary gold from the late 19th century through today.
FDR‘s Gold Steal in 1933 Was a Two-step Process
On April 5, 1933, FDR issued Executive Order 6102, completely bypassing Congress. This EO required all persons to deliver on or before May 1, 1933, any gold—coin, bullion, and gold certificates owned by them—to the Federal Reserve (through one or more of the thousands of chartered banks across the country) at $20.67 per troy ounce in paper currency and Treasury coin of the type we use today. Failure to do so would result in ten years‘ imprisonment, a $10,000 fine, or both. Jewelers, dentists, and industrial users were allowed to keep small amounts of gold for occupational use.
Most of the publicly-owned gold at the time was in the form of gold pieces, coin that was used in everyday commercial transactions. Americans were almost emotionally attached to their gold coins, which were minted in denominations of $5, $10, and $20. There was almost a reverence for these coins, glistening as they were and with a heft in one’s hand.
Being very attached to their gold coins, many Americans risked imprisonment and fines as they retained some of them and surreptitiously refused to surrender them. Some parents and grandparents kept a few gold pieces to pass down to their progeny as they believed the coins’ forced governmental disappearance marked the end of an American era. My own maternal grandmother was one of these, and my parents respectfully treasured the $10 coin that she had bequeathed to them.
The Second of the Two-Step Gold-Steal
After FDR’s EO called in the gold coins in 1933, Congress passed the Gold Reserve Act of 1934, signed on January 30, 1934. This legislation codified FDR’s original EO signed in April 1933, officially transferring ownership of all monetary gold in the US to the US Treasury and prohibiting the Treasury and banks from redeeming dollars for gold, marking the culmination of FDR’s controversial gold program.
But most importantly, Section 12 of the 1934 Act authorized the President to establish the gold value by proclamation, which FDR did the day after signing the act into law in January 1934. He then explained the purpose of these actions was to increase the supply of credit, “to stabilize domestic prices and to protect the foreign commerce against the adverse effect of depreciated foreign currencies.”
Taking advantage of this statutory authorization, FDR declared that the price of gold would henceforth be increased to $35 per ounce from $20.67 per ounce, which Congress had set in the Gold Standard Act of 1900. This action immediately devalued the US dollar from its level established by the Gold Standard Act of 1900.
But what of the Americans who had been forced to surrender their beloved gold coins no later than May 1, 1933? They had received a mere $20.67 in paper currency and (non-gold) coin rather than this new higher $35 gold value. This final act of extortion can be said to have topped the earlier FDR gold steals.
This is the major reason why my parents—just getting started in their adult lives in 1933—and many other Americans at the time, felt ripped off by FDR’s gold coin theft. He not only forced them to surrender their valued, treasured gold coins, but then added insult to injury by raising the legally-set price of gold by 69 percent from $20.67 to $35 per ounce after the fact. To her dying day, my mother decried any politician who, in her opinion, might threaten to “devalue” the dollar, even though in today’s fiat-currency world the proper terminology would be currency “depreciation” rather than “devaluation,” a distinction she never managed to understand.
A Final Note on US Controversies Over Gold and Silver Monetary Standards
Parenthetically, for those interested in the national monetary controversies of the late 19th and early 20th centuries between a gold standard and a bimetallic standard based on both gold and silver, note the Wizard of Oz books by journalist Frank Baum. He wrote the books to entertain his children, but their allegorical quality made them popular literature for all Americans and the source of the iconic 1939 Hollywood film by the same title.
The books portray the controversy as one of regional economic and political forces. Those advocating gold lived primarily in east coast urban area, while Midwestern farmers and Western miners advocated silver. The Wizard of Oz himself—Oz being a riff on “ounce” of gold—the Wicked Witch of the West, the flying monkeys, the good witch Glinda, and other characters were all based on these stereotypes of that era. A place to start is this Wikipedia article.
