FDR confiscated American’s gold for the same reason Lenin confiscated it in Russia and Hitler confiscated it in Germany, namely, to get it out of the hands of the people. [That view is contrary to the prevailing belief that such was done] to re-establish confidence in the dollar. [Let me explain the background of this confiscation and my rationale for coming to such a conclusion.] Words: 815
So says James Turk (www.fgmr.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
Turk goes on to say, in part:
The Prevailing Myth of Gold Confiscation
There are a number of common misconceptions about the gold confiscation foisted on the American people by President Franklin Roosevelt in 1933. Most of these have been offered as justification for FDR’s nefarious deed, and over time have endured to become urban legends.
For example, perhaps the biggest and most enduring myth is that FDR had to confiscate gold because it was needed to back the dollar, which was still defined as 23.22 grains of fine gold, i.e., $20.67 per ounce. What the propagators of this popular myth conveniently ignore is basic math.
In December 1932, the US Gold Reserve equaled 204.5 million ounces. This weight was slightly more than the reserve’s average weight of 202.2 million ounces from the October 1929 stock market crash through December 1932, a period that covers the worst of the depression.
After FDR’s election victory in November 1932, rumors began circulating that once in office, FDR would seize the people’s gold. Because of these rumors, which perhaps originated from tips by White House insiders who knew of the confiscation scheme, dollars were redeemed for gold, as was possible at the time, and much of this gold was exported or simply hidden. This point is explained in detail in Milton Friedman’s The Monetary History of the United States.
As a result of these redemptions of paper dollars for physical gold, the US Gold Reserve dropped to 193.3 million ounces by FDR’s inauguration in March 1933. With the confiscation thereafter in place, the outflows stopped, and the reserve began to grow with the metal collected from the confiscation. The reserve reached 195.1 million ounces in January 1934 when FDR re-defined the dollar as only 13.71 grains. It was a 41% devaluation of the dollar, which meant that it thereafter took $35 to exchange for one ounce of gold. Here is the math.
At $35, the 195.1 million ounces in the US Gold Reserve in January 1934 equaled $6.83 billion of gold backing for the dollar. Gold was now overvalued in dollar terms, as evidenced by the rapid flow of gold into the US Gold Reserve, which in the first month rose to 212.5 million ounces but the bonanza for gold holders did not stop there. People continued to exchange their overvalued gold for dollars, with the result that the US Gold Reserve reached a new all-time record high of 227.9 million ounces only six months later in August 1934.
From these huge gold-flows into the reserve, it is clear that valuing the gold reserve at $6.83 billion was high enough to re-establish confidence in the dollar. Therefore, if we divide this value by the 193.3 million ounces in the reserve before the confiscation, we can conclude that a devaluation of the dollar to $35.33 per ounce would have achieved the same $6.83 billion valuation necessary to re-establish confidence in the dollar, but it would have done so without any confiscation.
So clearly, notwithstanding the enduring myth, FDR really did not need the weight of gold collected from the confiscation to re-establish confidence in the dollar. Simply devaluing the dollar by a slightly greater amount would have achieved the same objective.
The Reality of Gold Confiscation
In our book, The Collapse of the Dollar, John Rubino and I provided an answer, but it wasn’t an explanation that we developed. Rather, the answer came from Alan Greenspan’s 1966 essay entitled Gold and Economic Freedom.
“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit…The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold.
Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
[Given the above,] it seems clear to me that FDR confiscated American’s gold for the same reason Lenin confiscated it in Russia and Hitler confiscated it in Germany, namely, to get it out of the hands of the people…
[Editor’s Note: The above article has been has edited ([ ]), abridged, and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.]
The laws of gold confiscation are very clear in the U.S.: During any time of national crisis, it becomes illegal to buy, sell, or “hoard” gold bullion in any form. It is delineated under an Executive Order and can be re-administered as quickly as the assets in your checking account can be frozen. The penalties for violation are 10 years in prison, $10,000 fine, or both. Words: 821
Imagine living in a country where the government suddenly decides to make it illegal to hold a certain type of asset, and goes on a systematic process to relieve its citizens of such an asset? Such actions happen in wartime and by politically-corrupt regimes but how about private-asset seizure in the good old U.S.A.? Well, it has happened before. [The 64 trillion (in keeping with the times) dollar question is: “Will it happen again?”] Words: 585
That governments will want – and will NEED – much, much higher gold and silver prices in the future is counter intuitive, given that they have done everything within their power to throttle back and to keep a lid on bullion prices. Let me explain why. Words: 1300
As economic and political matters become more desperate in the U.S., so will what the government considers acceptable. If a debt default cannot be engineered via continuous inflation as the Fed’s current money-printing is attempting to do, it will occur via a direct repudiation of obligations or a quasi-surreptitious one such the hypothetical one I present in this article. Here is… a look (not a prediction) at a series of not improbable events that could develop [and which] would change our economic world overnight[ – and your financial well-being too]. Words: 1365
Do we really honest-to-God no-fingers-crossed cherry-on-top believe that the powers-that-be will simply allow us to mosey up to the cashiers cage and redeem or convert our Gold for whatever monetary unit reigns supreme or is created [should our current financial system and currencies collapse? As such,] IF there comes a time when the best move forward is to sell most of our Gold and switch to another asset class, one more likely to survive the transition intact, will we be able to see this as obvious and a no brainer? [Let me explain what could well happen and the effect such a development would have on all things Gold.] Words: 3037
Silver has more than doubled [in price] from its 2008 multi-year high…primarily due to demand among the industries of the developing world…and among those industries where silver is virtually irreplaceable… If silver goes too high, however, it could provoke government interference in the name of ensuring national security. Let me explain. Words: 606