Many American buyers and potential buyers of gold express concern about the U.S. government confiscating gold. This fear is legitimate because rogue governments like the U.S. government can be highly unpredictable and destructive. It can steal not only gold but any thing else that the rulers want.
Nevertheless, gold confiscation is not likely. Today’s monetary system differs greatly from that of 1933 when President Roosevelt’s great theft occurred. Then gold was the money. Gold coins actually circulated and were used for buying and selling. Federal reserve notes, U.S. government notes, and national bank notes were redeemable in gold coin on demand.
Today governments officially shun gold and pooh-pooh it as money. Although their central banks hoard large quantities of gold, governments deny that it has any monetary value. It is a barbaric relic that used to interfere with their fiat monetary dreams and deserves to be banished forever from the monetary system. To confiscate gold today would be an admission that they have been wrong for the past eight decades. Moreover, today people who distrust government hold most of the gold outside investment houses, banks, and industry. They would not likely surrender it to the government.
When Roosevelt stole the people’s gold, his theft was easy. The U.S. government and the Federal Reserve held 93 percent of the country’s monetary gold as trustees for backing gold certificates, federal reserve notes, and national bank notes. With the $100 exemption, he did not have to take any gold coins held by individuals.
The monetary statistics presented in this article are from Banking and Monetary Statistics, 1914-1941, published by the Board of Governors of the Federal Reserve System. Section 11, “Currency,” Table No. 110, “Currency in Circulation — By Kind, Monthly, 1860-1941,” page 412, gives the total currency in circulation for February 1933 as $6258 million. Of this amount, gold coins accounted for $284 million; gold certificates, $649 million; United States notes, $301 million; federal reserve notes, $3405 million; and national bank notes, $861 million.
On page 506 of Section 13, “United States Government — Treasury Finance and Government Corporations and Credit Agencies,” the gold reserves for backing United States Notes are $156 million. Table No. 156, “Analysis of Changes in Gold Stock of the United States, Monthly, 1914-1941,” page 537, gives a monthly average gold stock of $4093 for February 1933.
For February 1933, the U.S. government held $156 million in gold to back U.S. notes. It also held $649 million in gold to back gold certificates. Thus, the U.S. government held $805 million in gold. Federal Reserve Banks held $3004 million in gold, and $284 million in gold coins were in circulation. These give a total monetary gold stock of $4093.
Of the $4093 million of the monetary gold, the U.S. government and Federal Reserve held $3809 million in gold or 93 percent of the country’s monetary gold. The people held $284 million in gold coins or about 7 percent of the monetary gold. If the coins were roughly evenly distributed among the population, each person would have had between $2 and $3 in gold coins (c. 123 million population). At this time the smallest gold coin in circulation was $2.50.
As Roosevelt’s confiscation order allowed each person to keep $100 in gold coins, he did not have to steal any coins that the public held. Between the Treasury and the Federal Reserve, he already had nearly all the gold. All he needed to do, and what he did do, was to violate the U.S. government’s, the Federal Reserve’s, and national banks’ contracts with the people by voiding the redemption clauses in the law and on the paper money.
Since the U.S. government made using gold coins and gold certificates as money illegal, if a person who held them wanted to spend them, he had to exchange them for federal reserve notes, U.S. notes, or silver coins. Consequently, gold ceased being a medium of exchange in the United States.
1. Franklin D. Roosevelt, 34 ‒ Executive Order 6102 ‒ Requiring Gold Coin, Gold Bullion and Gold Certificates to Be Delivered to the Government, April 5, 1933, http://www. presidency.ucsb.edu/ws/index.php?pid=14611&st=&st1=#axzz1Kq4ZdySU, April 28, 2011, from John T. Woolley and Gerhard Peters, The American Presidency Project [online], Santa Barbara, CA. Available from World Wide Web: http://www.presidency.ucsb.edu/ ws/?pid=14611.
Copyright © 2011 by Thomas Coley Allen.
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