Gold Seizure in the United States

 

In 1932, America elected Franklin D. Roosevelt to replace Herbert Hoover as the next United States President. With the onset of War II and in the wake of the great stock market crash of 1929, this was a dark time period in the history of our nation. Roosevelt promised that the government would provide jobs for all who were unemployed. The manner in which he planned to revive the economy and fulfill such promises became a matter for much deliberation amongst the people. Former president Herbert Hoover pleaded with Roosevelt to hold fast to the gold standard at all costs:

 

“Ever since the storm began in Europe, the United States has held staunchly to the gold standard…. We have…maintained the one Gibraltar of stability in the world and contributed to checking the movement of chaos…[A] mass of gold dashing hither and yon from one nation to another, seeking maximum safety, has acted like a cannon loose on the deck of the world in a storm…Confidence cannot be reestablished by the abandonment of gold as a standard in the world.”

 

Distressed at the possibility of the Roosevelt administration manipulating the currency, thirty of the nation’s foremost economists joined forces January 2, 1933, to admonish:

 

“The gold standard of present weight and fineness should be unflinchingly maintained…” and further “…agitation and experiments would impair confidence and retard recovery”.

 

As rumors spread; alarmed Americans began moving their assets into gold and even out of the country entirely. Another wave of panic was sparked when a February 18th press report broadcast the refusal of Senator Glass, one of the most prominent gold and currency experts of his time, to assume the position of Secretary of the Treasury at Roosevelt’s request. The Senator publicly attributed his decision to a concern over the President’s refusal to guarantee adherence to the gold standard.

 

In February of 1933, $160 million in gold went out to foreign lands, with another $160 million in the first four days of March before Roosevelt was inaugurated. Over $280 million dollars in gold withdrawals flew out of American banks during the two week period that began with the last ten days of February and ended with those first four days of March. Many banks could not sustain the deposit runs during this period and over ten thousand closed that very year. Existing banks called in old loans and refused to make new ones. Businesses failed, causing workers to lose their jobs and stop spending. The resulting drop in prices brought down even more businesses, again costing Americans their jobs.

 

In response to what role the Federal Reserve played during this time of great havoc, economists Milton Freidman and Anna Schwartz write:

 

“The System was demoralized [and] participated in the general atmosphere of panic that was spreading the financial community and the community at large. The leadership which an independent banking system was supposed to give to the market… [was] conspicuous by [its] absence.”

 

The new Secretary of the Treasury eased public fears with the reassurance that the Roosevelt administration was not planning to undermine the gold standard. The President himself personally backed up this assurance on March 8, 1933 at his first press conference. To say these promises were short lived would be an understatement, as the very next day Roosevelt forced the Emergency Banking Act of 1933, granting him the power to put a stop to the export and hoarding of gold or silver and allowing the Secretary of the Treasury to seize all gold owned by the American People. One short month after his inauguration, under the authority of the Trading with the Enemy Act of 1917 and the Emergency Banking Act newly passed, he addressed his public with an executive order:

 

I, Franklin D. Roosevelt, President of the United States of America… do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the United States. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933. Whoever willfully violates any provision of this Executive Order may be fined not more than $10,000, or imprisoned for not more than ten years or both.

 

Hoover estimated that the amount of gold seized that made it into the banks was just around $400 million, which added less than 10 percent to our nation’s existing gold stock. There were provisions included in his proclamation to exclude certain specific units of gold and silver from confiscation, including:

 

Such amounts of gold as may be required for legitimate and customary use in industry, professions or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold. Gold coins and gold certificates in amount not exceeding in the aggregate of $100 belonging to any one person; and gold coins having a recognized special value to collectors of rare and unusual coins…

Later that same year on December 28, 1933, Executive order 6102 was revised again to exclude the provision which allowed individuals to hold up to $100 worth of gold coins or gold certificates (in addition to pieces having recognized numismatic value). Thus, after this revision only numismatic pieces, or rare coins, could legally be held by private citizens.

 

This legislation was understood by most to be a temporary measure to address the present crisis. Once it became apparent the new President was preparing to cut the gold value of the paper dollar, another run on the dollar began. Legislation passed on April 18, allowing the President power over the economy to include an ability to lower the dollar’s gold content.

 

Roosevelt took full advantage of his new executive power. Once the confiscation was fulfilled in1934 and U.S. citizens were paid out at the official exchange rate of $20.67 per ounce for their mandated gold return, Roosevelt was free to raise the price of gold to $35 per ounce. This single act systematically devalued the American dollar by 69 percent and robbed the American people.

 

Thousands of coins had been minted earlier that year. In January 50,000 $10 pieces bearing the 1933 date were minted, 200,000 additional pieces were minted in February, and 62,500 were struck in March. Of the 1933-dated $20 piece, 100,000 pieces were struck in March, 200,000 in April and 145,500 in May. The Roosevelt proclamation was made on April 5, 1933, which would have allowed anyone visiting the Treasury Department in previous months that year to have legally acquired any number of double eagles bearing the 1933 date. The Treasury Department states that 1933 $10 pieces can be legally held by collectors but the 1933-dated $20 pieces are illegal to own and are subject to confiscation. The most recent case occurred in Philadelphia in 2005.

 

The Gold Standard was eliminated when the Gold Reserve Act of January 30, 1934 was signed, stating:

 

No gold shall thereafter be coined, no gold coin shall hereafter be paid out or delivered by the United States…All gold coin of the United States Shall be withdrawn from circulation, and together with all other gold owned by the United States, shall be formed into bars of such weights and degrees of fineness as the secretary of Treasury may direct On July 13, 1954, 20 years later, Secretary of the Treasury George H. Humphrey made a revision that stated:

 

“Gold coin made subsequent to April 5, 1933 is presumed not to be of recognized special value to collectors of rare and unusual coin” and that citizens could only own “gold coin having recognized special value to collectors of rare and unusual coin, including all gold coin made prior to April 5, 1933”.

 

These regulations were active until December 31, 1974 when gold holding by the public was legalized on an unlimited and unrestricted basis.

 

Today, those remaining American gold coins serve as a reminder of the days when a dollar was not only a dollar, but backed by gold 100%. A time when everyone knew the worth of a paper dollar, before it was reduced to an exchange of empty promises.