Eighty-six years ago, today, following President Franklin Roosevelt‘s signing of Executive Order 6102 on April 5, and Executive Order 6111 on April 20, the 73rd U.S. Congress enacted House Joint Resolution 192 (48 Stat. 112), abolishing payment in gold. These steps eventually led to the Gold Reserve Act of 1934. The ownership of gold coins, gold bullion and gold certificates was forbidden. The Executive Order(s) required all persons to deliver on, or before, May 1, 1933, all but small amounts of gold. Violation of the order was punishable by fine up to $10,000 or up to ten years in prison, or both.
From The History Channel:
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 […] but, bank failures during the Great Depression of the 1930s frightened the public into hoarding gold […].
Soon after taking office in March 1933, Roosevelt declared a nationwide bank moratorium in order to prevent a run on the banks by consumers lacking confidence in the economy. He also forbade banks to pay out gold or to export it. According to Keynesian economic theory, one of the best ways to fight off an economic downturn is to inflate the money supply. And, increasing the amount of gold held by the Federal Reserve would in turn increase its power to inflate the money supply. Facing similar pressures, Britain had dropped the gold standard in 1931 and Roosevelt had taken note.
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 […] owned by them to the Federal Reserve by May 1 for the set price of $20.67 per ounce. 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.
From Peter Schiff:
After the bombing of Pearl Harbor, President Franklin D. Roosevelt called Dec. 7, 1941, “A date that will live in infamy.” When it comes to the US monetary system, June 5, 1933, should share that ignoble title because that date marks the beginning of a slow death of the dollar.
Roosevelt signed Executive Order 6102 […] touted as a measure to stop hoarding but, was, in reality, a massive confiscation scheme. Even in the heat of Roosevelt’s confiscation scheme, government troops did not break into people’s homes… Ironically, all the gold actually collected by the Treasury was willfully surrendered in a wave of misguided patriotism, while many ‘law-breakers’ simply kept their gold.
The purpose of Roosevelt’s executive order was to remove constraints on inflating the money supply. The Federal Reserve Act required all notes have 40% gold backing [but], the Fed was low on gold and up against the limit. By increasing its gold stores, the Fed could circulate more notes.
Roosevelt’s [actions] in 1933 set off a dollar devaluation that continues to this day. In 1913, prices were only about 20% higher than in 1775 and around 40% lower than in 1813, during the War of 1812. Whatever the mandates of the Federal Reserve, it is clear that the evolution of the price level in the United States is dominated by the abandonment of the gold standard in 1933 and the adoption of fiat money, subsequently. One hundred years after its creation, consumer prices are about 30 times higher than what they were in 1913.
In 1964, the minimum wage stood at $1.25. To put it another way, a minimum wage worker earned five silver quarters for every hour worked. Today, you can’t even buy a cup of coffee with those five quarters [but], the melt-value of those five silver quarters, today, stands close to $15! Roosevelt’s moves, culminating in the June 5 congressional resolutions, initiated a process of monetary deformation that led straight to Nixon’s abomination at Camp David, Greenspan’s panic at the time of the 1998 Long-Term Capital Management crisis and, the final destruction of monetary integrity and financial discipline during the BlackBerry Panic of 2008.
The legacy of June 5, 1933 continues today. The dollar continues to devalue. That means over the long-term, the price of gold in US dollars will almost certainly continue to rise.
Yay for us. ~Vic
Eighty-five years ago, today, the #1 film at the box office was the menage a trois comedy Design For Living. Released on December 29, 1933, it starred Fredric March, Gary Cooper and Miriam Hopkins. It was based, loosely on a play written by Noël Coward in 1932. It was very risqué for its time and, was a pre-code movie produced and released before strict enforcement of the Motion Picture Production Code, the censorship guidelines demanded by American Roman Catholics. Interestingly, the critical response to the film was more about its gutting of the original material than of its questionable morality.
Two Americans sharing a flat in Paris, playwright Tom Chambers and painter George Curtis, fall for free-spirited Gilda Farrell. When she can’t make up her mind which one of them she prefers, she proposes a “gentleman’s agreement”: She will move in with them as a friend and critic of their work but, they will never have sex. When Tom goes to London to supervise a production of one of his plays, leaving Gilda alone with George, how long will their gentleman’s agreement last?
♦ Gary Cooper spoke fluent French and was able to use it for the first time in this film.
♦ Lubitsch [then] asked Douglas Fairbanks Jr. to play George, and he accepted but, he contracted pneumonia just before filming was to start and he was replaced by Gary Cooper.
♦ Writer Ben Hecht and producer-director Ernst Lubitsch retained only one line from the original play by Noël Coward: “For the good of our immortal souls!”
♦ Considerable censorship difficulties arose because of sexual discussions and innuendos, although the Hays Office eventually approved the film for release. However, it was banned by the Legion of Decency and was refused a certificate by the PCA for re-release in 1934, when the production code was more rigorously enforced.