This Day In History: FDR takes America off the gold standard
Weiss
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On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. The United States had been on a gold standard since 1879, except for an embargo on gold exports during World War I, but bank failures during the Great Depression of the 1930s frightened the public into hoarding gold, making the policy untenable.
On April 5, 1933, Roosevelt ordered all gold coins and gold certificates in denominations of more than $100 turned in for other money. It required all persons to deliver all gold coin, gold bullion and gold certificates owned by them to the Federal Reserve by May 1 for the set price of $20.67 per ounce. By May 10, the government had taken in $300 million of gold coin and $470 million of gold certificates. Two months later, a joint resolution of Congress abrogated the gold clauses in many public and private obligations that required the debtor to repay the creditor in gold dollars of the same weight and fineness as those borrowed. In 1934, the government price of gold was increased to $35 per ounce, effectively increasing the gold on the Federal Reserve’s balance sheets by 69 percent. This increase in assets allowed the Federal Reserve to further inflate the money supply.
http://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard?cmpid=Social_FBPAGE_HISTORY_20150605_188501751&linkId=14737524
On April 5, 1933, Roosevelt ordered all gold coins and gold certificates in denominations of more than $100 turned in for other money. It required all persons to deliver all gold coin, gold bullion and gold certificates owned by them to the Federal Reserve by May 1 for the set price of $20.67 per ounce. By May 10, the government had taken in $300 million of gold coin and $470 million of gold certificates. Two months later, a joint resolution of Congress abrogated the gold clauses in many public and private obligations that required the debtor to repay the creditor in gold dollars of the same weight and fineness as those borrowed. In 1934, the government price of gold was increased to $35 per ounce, effectively increasing the gold on the Federal Reserve’s balance sheets by 69 percent. This increase in assets allowed the Federal Reserve to further inflate the money supply.
http://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard?cmpid=Social_FBPAGE_HISTORY_20150605_188501751&linkId=14737524
We are like children who look at print and see a serpent in the last letter but one, and a sword in the last.
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--Severian the Lame
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Ended the depression, saved the world financial system, stabilized the economy and fostered business and industry, while making gold coins scarcer and more collectible, supporting an enjoyable hobby, and spawning this board and a thousand fun and entertaining conspiracy theories
Liberty: Parent of Science & Industry
Natural forces of supply and demand are the best regulators on earth.
<< <i>Smart.
Ended the depression, saved the world financial system, stabilized the economy and fostered business and industry, while making gold coins scarcer and more collectible, supporting an enjoyable hobby, and spawning this board and a thousand fun and entertaining conspiracy theories
Actually WWII was the cause that ended the depression, stabilized the economy and fostered business & industry. Good ole USA with their wealth after WWII, saved the world financial system. I agree with the rest of your statement, especially the one about conspiracy theories.
<< <i>
<< <i>Smart.
Ended the depression, saved the world financial system, stabilized the economy and fostered business and industry, while making gold coins scarcer and more collectible, supporting an enjoyable hobby, and spawning this board and a thousand fun and entertaining conspiracy theories
Actually WWII was the cause that ended the depression, stabilized the economy and fostered business & industry. Good ole USA with their wealth after WWII, saved the world financial system. I agree with the rest of your statement, especially the one about conspiracy theories.
You are correct. Hitler actually ended the Great Depression which we were in until we went into a war time economy. FDR taking away American's gold had very little to do with it.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
World War 2 surely ended the depression and incidentally caused an estimated 60 million to 85 million deaths.
Methinks the cure was worse than the disease.
What, are we going to be the only country in the world on a gold standard in 2015?
Liberty: Parent of Science & Industry
<< <i>What, are we going to be the only country in the world on a gold standard in 2015?
If we want to be better than the rest, i vote yes
BST Transactions (as the seller): Collectall, GRANDAM, epcjimi1, wondercoin, jmski52, wheathoarder, jay1187, jdsueu, grote15, airplanenut, bigole
Mainly because scammers, cheats, and other "sharps" will do things like shaving, clipping, and other reduction in weight, as well as arbitrage (moving it to where it's worth more than face melted) and increasingly sophisticated counterfeiting. People like to point to 1933 and 1964 as watershed years, and of course they are milestones, but the processes are much older.
Really now, isn't it better this way? people buy the PMs from the Mint now, and then they get them "Certified" and sell them for a profit, or they buy large quantities wholesale part them out retail, or they buy them and store them and hope they go up in value so later they can sell them for more. And they're having a great and profitable time doing it, why ruin the fun?
(what they don't realize, maybe, is that those metals buyers, traders, and hoarders are doing exactly what the Gov't (aka "Them") want the hoarders to do
(else, why would the mint sell the stuff? why would marketers make so many cute, neat, pretty, and therefore collectible varieties of coins and bars?)
we're playing Their game just the way They want us to be, and we fool ourselves into thinking we're clever! Isn't that a hoot?
Liberty: Parent of Science & Industry
<< <i>
You are correct. Hitler actually ended the Great Depression which we were in until we went into a war time economy. FDR taking away American's gold had very little to do with it. >>
The guy tried stacking the Supreme Court too.
Unfortunately, he did succeed at imprisoning every Japanese American person into a temporary death camp.
Knowledge is the enemy of fear
<< <i>
<< <i>
You are correct. Hitler actually ended the Great Depression which we were in until we went into a war time economy. FDR taking away American's gold had very little to do with it. >>
The guy tried stacking the Supreme Court too.
Unfortunately, he did succeed at imprisoning every Japanese American person into a temporary death camp. >>
These were American CITIZENS of Japanese ancestry. FDR didn't do the same to Americans of German ancestry which tell me FDR was a racist. Also, they weren't "death camps". They were concentration camps although the government called the "internment camps". A rose by any other name........
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
<< <i>
<< <i>
<< <i>
You are correct. Hitler actually ended the Great Depression which we were in until we went into a war time economy. FDR taking away American's gold had very little to do with it. >>
The guy tried stacking the Supreme Court too.
Unfortunately, he did succeed at imprisoning every Japanese American person into a temporary death camp. >>
These were American CITIZENS of Japanese ancestry. FDR didn't do the same to Americans of German ancestry which tell me FDR was a racist. Also, they weren't "death camps". They were concentration camps although the government called the "internment camps". A rose by any other name........ >>
Racist , Fascist , pompous , vain , arrogant , a guy who expanded the powers of the executive branch more than any other president . If he didn't die he would have served 5 6 or 7 terms if it was left up to him.
The model for the imperial presidents we have been suffering under since 1988 .
If you believe that classic economics no longer applies, you are wrong. Here is a sample of classical economics from one of her interviews in 2008:
The Banking Crisis Through the Eyes of Amity Shlaes
By John Tamny
Amity Shlaes is a senior fellow at the Council on Foreign Relations, a columnist for Bloomberg, and a frequent contributor to both the Wall Street Journal and the Washington Post. In addition to that, Shlaes is one of today’s best-known economic historians. Most recently she wrote The Forgotten Man, a modern history of the Great Depression that debunked many of the myths surrounding its cause.
With many commentators today suggesting that the present financial crisis mirrors that which occurred during the Depression, Shlaes agreed to an interview with RealClearMarkets where she addressed today’s problems in terms of her extensive knowledge of what happened nearly 80 years ago. Her answers are below:
RealClearMarkets: Can you draw parallels between the 1930s and now?
Amity Shlaes: The underdiscussed parallel is the international component. Back then the world seemed to be falling apart, and then, the U.S. as well. Now, not only do we have our domestic challenge but also China has just about stopped growing. Europe is feeling pretty smug these days but their entitlement obligations mean that can’t last, Brits excepted. A simultaneous downturn world over will worsen the trouble.
RCM: What else?
AS: In his book, Allan Meltzer went back and looked at banking policy in the 1920s and 1930s. He concluded that one of the problems was the so-called “real bills doctrine.” Others have also written about this --- Thomas Hall and J. David Ferguson in The Great Depression.
Real bills said lending on anything other than good commercial paper was inflationary. If no one came to borrow, the Fed should remain idle. Real bills also implied that if the Fed bought government securities, inflation would follow because they are not real bills. The effect was to help banks that are healthy and not help those that weren't.
The doctrine was perverse because it was “procyclical” – when you were in trouble was when you weren’t helped. Nowadays we believe in “countercyclical” policy, which says “loosen” when the country or the banks are in trouble.
The “mark to market” accounting rules of today are similar: procyclical when we need countercyclical measures. Just when you do want to sell, your balance sheet suddenly looks worse. That’s because you have to account for an asset by its price at the moment. Both the real bills doctrine and mark to market can be Catch 22s for financial markets.
But what if presently there is no market for the asset, of what if the market is thin? The analogy would be a town where only one house has sold, say a shack. The government then comes along and says that the mansion on the other side of town needs to be priced like the shack because the market had signaled that the shack price was the value for houses.
RCM: Beyond the parallels, do you see Washington making similar mistakes that prolonged the downturn in the '30s, and that will prolong any pain today?
AS: What mattered was not the 1929 Crash, or even the many aftershocks and the bank runs of the early 1930s. What mattered was the duration of the Depression, from 1929 to World War II. Imagine if the Dow did not come back to its highs of, say, October 2007 until 2032. That is what happened then – the Dow didn’t reach its 1929 levels until the mid-1950s. “Everybody a Millionaire Era Ended Quarter Century Ago in Plunge that Still Chills” was the New York Times headline in October 1954 when the Dow finally hit that 381 baseline.
What can cause such a long duration? Monetary policy and banking policy for sure, but also a government either a) overly involved in commerce or b) hostile to commerce.
A) Involved in Commerce: What the Paulson Treasury bailout reminds me of is the National Recovery Administration. The NRA gave wide license to industry to self-police and manage recovery. The NRA was all about deals – picking winners and losers. That’s the element of the Treasury proposal that is hard to like.
Our equivalent scenario would be: raising taxes, ignoring Latin America, conducting “Pelosi Hearings” in the place of the Pecora Commission hearings of yore. In The Forgotten Man there’s a chapter called “A Year of Prosecution,” about 1934. When the New Deal didn’t bring complete recovery, the New Dealers tried to prosecute their way to economic success. That impulse is extremely destructive. The story this past weekend about President Uribe of Colombia visiting America seemed separate from the Treasury bailout story. But the two are related. Cutting back protectionism increases chances of saving Latin America politically. But it is also good for our economy.
RCM: Andrew Mellon is heroic in The Forgotten Man for his elevation of business and lower taxes, but ultimately he gave in to President Hoover's desire to raise the success penalty. What about being on the gold standard then required him to do that, and what do you think the impact would be today if the next president seeks to pass tax increases?
Under a gold standard, there needs to be gold in the bank for the economy to expand. Under a gold standard, too, countries compete for that gold. The gold goes to the countries in the best budgetary shape. If you are running a deficit, you are more of a credit risk than a country in surplus. In order to grow and get dollars, America needed good credit. Therefore it needed to balance the budget and increase federal revenues. Hence the tax hike of 1932.
This comes clear in the testimony of the men at Treasury, who were reluctant to hike taxes but felt they had to. “You cannot restore the credit structure of the country by increasing the public debt,” said Treasury Undersecretary Ogden Mills in 1932. The Treasury also put forward new car taxes, radio taxes, taxes on malt syrup and brewers, even an estate tax. This must have driven Andrew Mellon nuts since he disliked death taxes, especially. He’d seen the tax eat away at his friend Henry Clay Frick’s estate.
The gold standard was less forgiving than the current system. Under our post-Bretton-Woods arrangement, the case for lower rates to get higher revenues is more compelling.
John Tamny is editor of RealClearMarkets and Forbes Opinions, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He can be reached at jtamny@realclearmarkets.com.
I knew it would happen.
War is hell as they say~you do what you think is necessary for the common good.
Presidents back then were men. I rather have them making 100 mistakes than nothing.
The same type of scammers and cheats now do the shaving and clipping electronically as money is "laundered" through banks, market exchanges, Wall Street corporations, bit coin exchanges, credit cards, etc.
The gold standard for the public did end in 1933. But for governments and international trade, it existed into 1971-1975. FDR only got rid of part of a gold standard. It's still an inconvenient truth that central banks hold >30,000 tonnes of gold and have been net buyers of gold since 2009. For a standard that's been "gone" for 40 years, you wouldn't know by the current actions of central bankers, most notably China, India, Russia, Brazil, etc. I am not advocating a return to a gold standard (the bankers have already shown their support for that)... as no matter what standard is put into play, the markets will find ways to legally cheat on it....derivatives are one of the latest mods. We need moral bankers more than we do a "workable monetary standard."
Amity Shlaes, is a senior fellow at the Council on Foreign Relations, a columnist for Bloomberg, and a frequent contributor to both the Wall Street Journal and the Washington Post. ....sounds like a well-connected, member of the too big to fail - big boyz economists club.
AS: In his book, Allan Meltzer went back and looked at banking policy in the 1920s and 1930s. He concluded that one of the problems was the so-called “real bills doctrine.” Others have also written about this --- Thomas Hall and J. David Ferguson in The Great Depression. Real bills said lending on anything other than good commercial paper was inflationary. If no one came to borrow, the Fed should remain idle. Real bills also implied that if the Fed bought government securities, inflation would follow because they are not real bills. The effect was to help banks that are healthy and not help those that weren't.
As Dr. Fekete talks about the "gold real bills" doctrine it was the key to the workable gold standards of the 1800-1914 era. Following WW1 the real bills doctrine was essentially gutted world wide. The "gold standard" of the 1920's was nothing like the one in place from 1900-1914. So I'm not sure how real bills can be blamed for the financial crisis of the 1920's and 1930's. The US exhibited world record industrial growth and expansion in the 2nd half of the 19th century, all on a "real bills" type of gold standard. I don't believe that there were tonnes of gold continually deposited at the USTreasury to balance that expansion. Regardless, the growth continued. During those times there was always competing paper that was inflated and eventually busted the system. While gold is the convenient scape goat, it was the cheater and scammers in the banking, govt, and financial sectors that were the real cause. Considering that average consumer prices decreased from 1800 to 1907 would seem to suggest that gold and its real bills clause were hardly inflationary. If Shlaes is talking about anything but "gold real bills" then it's just more unbacked paper "junk." (ie otc derivatives today).
Looking at the Dow chart the US stock market was already rebounding in 1932, long before FDR's gold executive order. As Cohodk often says, the cure for high prices is low prices. And prices were low enough in 1932 to commence a recovery. But I would agree that it was re-tooling for WW2 that eventually got things headed in the right direction for good. If you look at the Dow of the 1920's it's a mania (nearly 4X increase in 4 years). And what caused that? Any chance it was the cessation of an effective gold standard in 1914? There's no parallel for that kind of mania under 19th century gold standard periods. If anything, the mania of the 1920's resulted in a snap back crash in the 1930's. The cure for high prices is low prices. Take away the 1920's and early 1930's and the chart muddles on through nicely from 1914 to 1945. Govt interventions make these boom/bust cycles more pronounced. The markets are going to cycle up and down anyways regardless of the monetary standards or policies in play. With the current $1.1 Quad in otc derivatives in play, the bankers are in effect skirting around current monetary policies with their own brand of market interventions (ie this won't end pretty). And we want to blame gold standard "abuses" for past ills? It's almost laughable that the "bad" and unworkable gold standard has been replaced with a banker's otc derivatives standard that currently has no limit to available "liquidity,".....until the emperor asks where his clothes are.
Dow chart 1900-1950
the exact same thing happened with stocks in the late 1990's, this time with electronic trading available to the public for the first time, this time with internet companies, "e" companies,biotechs, etc. There are usually many factors involved, anyone who claims that any one event "caused" a long, complicated problem are usually oversimplifying.
The same boom mania and bust crash happened in physical precious metals in the late 1970's and in 2009 to the present.
(among other times in history) and may very well be happening again with stocks. Bonds, IMO, are very late in the cycle and due for a huge fall as interest rates begin to rise..
Liberty: Parent of Science & Industry
<< <i>The stock mania and crash of the late 1920's was caused by "the public" getting involved in the stock market at a large scale for the first time, often using too much leverage, and chasing something higher and higher, beyond all rational valuation, simply because it has been going higher, without sufficient knowledge of the underlying assets or the market. The cause was largely new kinds of stocks, such as automobile companies
the exact same thing happened with stocks in the late 1990's, this time with electronic trading available to the public for the first time, this time with "e" companies
The same boom mania and bust crash happened in physical precious metals in the late 1970's and in 2009 to the present. (among other times in history) >>
Where did the public get all the money needed to participate in the stock market. It wasn't like everyone became rich coming out of WW1. If it was mainly due to leverage, then maybe a stricter monetary/lending standard in place could have prevented that. The markets certainly would have fared no worse under a strict pre-1914 equivalent real bills gold standard. The bankers $1.1 Quad in otc derivatives is just another variation of that 1920's leverage. So now we are blaming the 1929 stock market crash and ensuing great depression on the "public?" So it wasn't the fault of the banks, govt, or a gold standard? I always knew J6P was up to no good....
Liberty: Parent of Science & Industry
I have no idea if this is true or not, since I'm not magic, omniscient, or a time/space traveller to alternate realities.
Liberty: Parent of Science & Industry
<<As Dr. Fekete talks about the "gold real bills" doctrine it was the key to the workable gold standards of the 1800-1914 era. Following WW1 the real bills doctrine was essentially gutted world wide.>>
In his book, Allan Meltzer went back and looked at banking policy in the 1920s and 1930s. He concluded that one of the problems was the so-called “real bills doctrine.” Others have also written about this --- Thomas Hall and J. David Ferguson in The Great Depression.
I think she means that lending on anything other than good commercial paper (backed by the gold standard prior to 1914) was inflationary. I think she means that the problem was because they didn't remain on the gold standard but continued to lend in the 1920s and 1930s as if they were. I don't think she is saying that real bills were a problem.
I knew it would happen.
<< <i>See the edit about "oversimplifying" by attempting to pin a large complicated event on one single pet "cause" >>
You mean by "simply" blaming the "public" for the 1920's and 1990's stock market mania as an example of a single "pet cause?"
So what entity created the debt and easy money that was then passed on to J6P in both those eras to speculate in stock market manias? Wouldn't a stricter monetary policy have prevented that? The money has to be created somewhere before J6P can leverage it up into investment speculations. And the FED sure created a ton of debt and paper money in the 1892-2000 period. Why weren't there any all encompassing, nationwide stock market manias prior to the creation of the FED in 1913? I guess we could always blame it on prohibition. Interesting that the 1920's boom begins with prohibition. And the darkest days of the depression seem to end with its repeal in 1933.
Thanks Jmski52 for clarifying that. So basically it was out of control lending and leverage that led to the great depression...the same thing that leads to all artificial booms.
Liberty: Parent of Science & Industry
How did the people who held gold benefit from this executive order?
<< <i>. . . These were American CITIZENS of Japanese ancestry. FDR didn't do the same to Americans of German ancestry which tell me FDR was a racist. >>
Look up Crystal City Internment Camp, which imprisoned innocent citizens and non-citizens including thousands of Germans.
My Adolph A. Weinman signature
Why didn't they lock up Italian Americans too?
Would the German and Italian Americans and their relatives tend to vote for FDR ? If so that might explain why they were left free.
If the Japanese American voting block had been important to winning an election for our most imperial president they probably wouldn't have been locked up.
<< <i>If the Federal Gov't bought the gold for $20.67 and revalued it at $35, isn't this wealth confiscation?
How did the people who held gold benefit from this executive order? >>
They fulfilled their patriotic duty.
Natural forces of supply and demand are the best regulators on earth.