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N0KFQ > TODAY 05.06.15 16:41l 53 Lines 2427 Bytes #999 (0) @ WW
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Subj: Today in History - Jun 5
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1933
FDR takes United States off gold standard
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.
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 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.
The government held the $35 per ounce price until August 15,
1971, when President Richard Nixon announced that the United
States would no longer convert dollars to gold at a fixed value,
thus completely abandoning the gold standard. In 1974, President
Gerald Ford signed legislation that permitted Americans again to
own gold bullion.
73, K.O. n0kfq
N0KFQ @ N0KFQ.#SWMO.MO.USA.NA
E-mail: kohiggs@gmail.com
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