James Bovard is the author of Freedom in Chains: The Rise
of the State and the Demise of the Citizen (St. Martins
The New Deal established much of the moral framework of contemporary
political life. Though some of the programs and policies of
that era have been terminated, the moral heritage of the New
Deal continues to permeate American government and political
In 1936 Franklin Roosevelt declared, I should like
to have it said of my first Administration that in it the
forces of selfishness and of lust for power met their match.
. . . I should like to have it said of my second Administration
that in it these forces met their master. No American
president has rivaled Roosevelt in his denunciation of what
he called economic royalists. He sought to master
the forces of selfishness by making government
master of every persons private financial destiny. Like
today, the citizen who wanted to retain control over his own
life was selfish, while the bureaucrat who wanted to seize
power over the citizen was automatically presumed benevolent.
One of the most controversial New Deal policies was the seizure
of citizens gold. During the Great Depression, several
foreign nations repudiated their promises to redeem their
currencies for gold. In 1933, when Roosevelt became president,
the United States had the largest gold reserves of any nation
in the world. He announced on March 8, 1933, a few days after
taking office, that the gold standard was safe. But three
days later, he issued an executive order forbidding gold payments
by banks; Treasury Secretary Henry Morgenthau, Jr., announced
on March 11 that the provision is aimed at those who
continue to retain quantities of gold and thereby hinder the
Governments plans for a restoration of public confidence.
Thus, according to Morgenthau, any limit on government power
was bad for public confidence. And whatever confidence people
might seek to achieve must be left in abject dependence on
politicians latest salvation scheme.
The ban on bank gold payments created widespread doubts about
the Roosevelt administrations intentions. Ogden Mills,
who had served as President Herbert Hoovers treasury
secretary, observed that it was not the maintenance
of the gold standard that caused the banking panic of 1933
and the outflow of gold. . . . [I]t was the definite and growing
fear that the new administration meant to do what they ultimately
didthat is, abandon the gold standard. People
naturally sought to get rid of their paper currency and to
put their savings into something with more secure valuegold.
Gold as Contraband
Fear of devaluation spurred a panic, which Roosevelt invoked
to justify seizing peoples gold. On April 5, 1933, Roosevelt
commanded all citizens to surrender their gold to the government.
No citizen was permitted to own more than $100 in gold coins,
except for rare coins with special value for collectors. Morgenthau
announced on the same day that gold held in private
hoards serves no useful purpose under present circumstances.
Gold was thus turned into the same type of contraband as Prohibition-banned
rum. Roosevelt announced, Many persons throughout the
U.S. have hastened to turn in gold in their possession as
an expression of their faith in the Government and as a result
of their desire to be helpful in the emergency.
There are others, however, who have waited for the Government
to issue a formal order for the return of gold in their possession.
To speak of the return of gold implied that government
was the rightful owner of all the gold in the nation, and
thus that no citizen had a right to possess the most respected
store of value in history. Roosevelt assured the country:
The order is limited to the period of the emergency.
But the order stayed on the books until 1974.
Roosevelt labeled anyone who did not surrender his gold a
hoarder. His executive order defined hoarding
as the withdrawal and withholding of gold coin, gold
bullion or gold certificates from the recognized and customary
channels of trade. Actually, Roosevelt was not concerned
with the gold being in the customary channels of trade;
instead, he wanted government to possess all the gold. And
the notion that people were withholding their
gold merely because they did not rush to the nearest Federal
Reserve bank to surrender it was political logic at its best.
Roosevelt, in a later note to his Public Papers, justified
the order because it served to prevent the accumulation
of private gold hoards in the U.S. Roosevelt used
the same hoarding rhetoric against anyone who
owned gold that Stalin used against Ukrainian peasants who
sought to retain part of their wheat harvest to feed their
families. But while Stalin sent execution squads to kill peasants
who had a few bushels of grain hidden in their hovels, Roosevelt
was kinder and gentler, seeking only ten-year prison sentences
and $250,000 fines for any citizen who defied his edict and
possessed more than five Double Eagle gold coins.
Roosevelt was hailed as a visionary and a savior for his
repudiation of the governments gold commitment. Citizens
who distrusted the governments currency management or
integrity were branded as social enemies, and their gold was
seized. And for what? So that the government could betray
its promises and capture all the profit itself from the devaluation
it planned. Shortly after Roosevelt banned private ownership
of gold, he announced a devaluation of 59 percent in the gold
value of the dollar. In other words, after Roosevelt seized
the citizenrys gold, he proclaimed that the gold would
henceforth be of much greater value in dollar terms.
Citizens who had desired to hold gold as a hedge against
government inflation policies were completely vindicated.
FDRs administration subsequently did everything possible
to inflate prices, foolishly confident that a mere change
in numerical prices would produce prosperity. Citizens had
accepted a paper currency based on the governments pledge
to redeem it in gold at $20 per ounce; then, when Roosevelt
decided to default on that pledge, he also felt obliged to
turn all citizens holding gold into criminals. Roosevelt stated
that the ban on private ownership was the first step
also to that complete control of all monetary gold in the
United States, which was essential in order to give the Government
that element of freedom of action which was necessary as the
very basis of its monetary goal and objective. But
the primary freedom government acquired was the
freedom to default on its promises and to manipulate the lives
of everyone depending on U.S. dollars in their daily transactions.
Curiously, FDR retained his denigrating tone toward so-called
gold-hoarders even after he defaulted on the federal governments
gold redemption promise. Even though people who distrusted
politicians promises were vindicated, they were still
evil people because they had not obeyed FDRs demand
to surrender their gold. In the moral world of the New Deal,
justice consisted solely of blind obedience to political commands.
FDR had absolutely no sense of embarrassment or shame after
he defaulted on the federal governments gold promisesit
was simply political business as usual.
Senator Carter Glass of Virginia, chairman of the Senate
Finance Committee, denounced the gold seizure: Its
dishonor. This great government, strong in gold, is breaking
its promises to pay gold to widows and orphans to whom it
has sold government bonds. . . .
Free to Inflate
The refusal to convert paper dollars into gold meant that
the government was free to flood the country with
paper money and sabotage the currencys value. The stability
of the value of currency is one of the clearest measures of
a governments trustworthiness. Before Roosevelt took
office, Americans clearly recognized the moral implications
of inflation. Vice President Calvin Coolidge had bluntly declared
in 1922: Inflation is repudiation. Inflation is
a tax whereby government prints extra money to finance its
deficit spending. The value of money is largely determined
by the ratio of money to goods; if the quantity of money increases
faster than the increase in the amount of goods, the result
is an increase in the ratio of money to goods and an increase
in prices. Thus, the governments printing presses devalue
peoples paychecks and effectively allow government to
default on the value of its debt.
The threat of inflation was invoked in the early 1940s to
justify imposing payroll tax withholding (protecting people
from their own paychecks) and in the 1970s to impose price
controls over the entire economy. Apparently, politicians
who decide to flood the money supply automatically become
entitled to increase their coercion of their victims who hold
increasingly worthless currency.
Since Roosevelt banned citizens from owning gold in 1933
and forced people to rely on the unbacked promises of politicians
for the value of their currency, the dollar has lost about
93 percent of its purchasing power. The collapse in the
dollars purchasing power severely disrupted the ability
of scores of millions of Americans to plan their own lives
and save for retirement. If someone proposed a law to give
government the right to explicitly default by 2 to 3 percent
a year on all its debts, the proposal would be widely denounced.
Yet, this is what the government has been doing for decades.
Though inflation has slowed since 1980, the purchasing power
of the dollar has fallen by over 50 percent in subsequent
years according to the governments own numbers (which
slightly exaggerate the damage to the dollar), making a mockery
of peoples attempts to calculate and save for the future.
A 1997 study by Congresss Joint Committee on Taxation
found that because of how capital gains taxes are calculated,
many citizens are forced to pay taxes on investment gains
when in reality they have suffered losses due to the deterioration
of purchasing power.
Roosevelts gold seizure was based on the doctrine that
in order for government to save the people, it must be permitted
to breach all the promises it made to the people. According
to modern conventional wisdom, government has no obligation
to do justice or treat any specific individual citizen fairlyinstead,
governments only duty is to achieve social justice
or some other abstraction perfectly suited for evasion
Would you like to buy
a copy of 1933 Gold Confiscation Order? Price: $15.00