Our nation was founded with the sacred words, “We hold these truths to be self-evident, that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty and the pursuit of happiness.” But in 1933, all that was shattered if by “pursuing happiness,” you chose to pursue gold.
The Foundations of the Great Confiscation
Confiscation all dates back to the Trading with the Enemy Act of 1917. That year, President Woodrow Wilson signed the “TWEA” into law, forbidding American individuals and businesses from engaging in trade with “enemy nations.” The world’s functional gold standard, which had overseen tremendous global economic growth in the early years of the twentieth century, was effectively halted by the outbreak of World War I, and the stage was thus set for the Great Depression and World War II.
Shortly after taking office sixteen years later, Franklin Delano Roosevelt signed Executive Order 6102 into law, prohibiting the “hoarding” of gold. Under this executive order, Americans were prohibited from owning more than $100 worth of gold coins, and all “hoarders” (i.e. people who owned more than $100 worth of gold) were forced, by law, to sell their “excess” gold to the government at the prevailing price of $20.67 per ounce.
Then, once the government had all the gold, FDR revalued the dollar relative to gold so that gold was now worth $35 an ounce. By simple decree, the government had thereby robbed millions of American citizens at a rate of $14.33 per ounce of confiscated gold, which is why most historians agree that the Gold Confiscation of 1933 is the single most draconian economic act in the history of the United States.
The Utilitarian Rationale Behind Confiscation
The reasoning behind the Great Gold Confiscation was, of course, the Great Depression, which had begun several years prior. After an inflationary run-up in prices and asset values, the stock market crashed in 1929, and the economy soon went with the crash.
Rather than responding to the situation with laissez-fair wisdom, President Herbert Hoover, often accused of being a proponent of laissez fair by those to whom the term is considered an epithet – instead raised taxes and erected new trade barriers, intensifying the misery. When FDR was elected, the people were willing to go along with nearly anything to try to alleviate the deflation that had gripped the country and strangled economic activity.
The boom of the 1920s was largely an illusory creature of the still-new Federal Reserve’s gross ineptitude, and by the thirties when reality had caught up to the loose-money standards of the prior decade, the money supply quickly contracted, causing deflation.
Like inflation, deflation also begets more of itself, and as prices dropped, it became wiser for the possessors of money to hold it rather than spend it, since prices would be lower the next day – and even lower the day after that – ad infinitum.