It seems incomprehensible to ban something that has been so fundamental and essential to our culture for thousands of years. Yet the U.S. government did just that between 1933 and 1974.
Everything seemed to be going well in the 1920s; World War I had just finished, and it appeared that the United States was on the verge of an era of expansion, prosperity, and peace. Unfortunately, a side effect that frequently comes along with good times is complacency. The public, financial institutions, and government have all shown complacency. Banks began lending far more than they could afford as a result, while the government stood by and allowed speculators to make enormous deals on stocks and speculative investments.
The United States was about to enter the Great Depression.
When the economy is struggling, risk reduction and debt repayment are among the first things people undertake. It therefore comes as no surprise that people wanted to withdraw their cash from banks in order to buy gold or settle debts. However, banks were making far more loans than they could afford. As a result, many banks were in reality failing by 1933, when everyone was attempting to take their money at once.
Bankruptcies affected about half of all American banks. While the crisis was escalating, the U.S. administration was only able to watch from a distance and offer little assistance. In the current period, whether it was the dot-com boom, the 2008 financial crisis, or pandemic, the Federal Reserve is prepared to lower rates and pump up stimulus. The Great Depression occurred when the Federal Reserve was in operation; yet, unlike now, they could not simply go out and print trillions of dollars at the time. Every single dollar was backed by gold since the government was required to keep a certain quantity of the gold on hand for every dollar in circulation.
It was the primary driver behind the massive exchange of cash for gold, a dynamic that produced a very unusual circumstance. In order to boost the economy, the government required gold, but the people had to trade their own gold for currency or give it away. Consequently, the crisis's resolution was relatively obvious from a macroeconomic perspective.
Simply take the gold from the people and give it to the government.
The Gold Ban, Executive Order 6102, was issued by President Roosevelt on April 5, 1933. By May 1, all persons of the United States had to turn over to the Federal Reserve all gold bullion coins and gold certificates worth more than $100. They would have received $20.67 per ounce in exchange from the Federal Reserve. If someone kept their gold and the authorities found out, they could get a fine of $10,000 or up to 10 years in prison. $10,000 in 1933 is equivalent in purchasing power to about $$212,826 today.
The price of gold was increased by the Treasury Department from $20.67 to $35 per ounce in January 1934, after the majority of the gold had been collected. Therefore, the government essentially coerced people into selling all of their gold at a reduced price, and once they had gathered all of the gold, they increased the price.
Although this is obviously incredibly unfair to the owners of the gold, it seems like the right choice for the nation as a whole. This explanation clearly displeased the former owners of the gold, and many of them threatened legal action against the government.
The Federal Reserve was straining to maintain the required gold reserve ratio, and the US government did nothing to address this fundamental issue. However, now that the government has ordered all the gold in the country, this issue will no longer exist for a few more decades.
After World War II ended, the Western world adopted the Bretton Woods system, which was essentially an agreement to keep all major currencies pegged to the dollar, and the United States brought the dollar back to gold.
The decision to outlaw the ownership of gold appeared to be a wise one.
To be continued!
Sources:
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What a great post! How informative. I actually did not know about the ban, or at least I've forgotten about it since learning about the great depression in high school.
Thank you, @clairemobey, for being the first to leave a meaningful comment on this article. There are things we learned in history that either slipped our minds or were overlooked by the teacher. This was one of those.
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I love history. It was my favorite subject in school, so I find this sort of thing fascinating! And thank you for your kind words 😊 !Luv
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The continuation of this article will be published tomorrow!
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Really like your pictures. Great shots! 👍🏻
Thank you, @borsengelaber. I use my iPhone to take the photos of my gold coins.
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In fact, the government can take any decision if it is in danger. A 10-year jail term for keeping gold sounds strange now, even though it happened.
Yes. Just as we owe our parents a debt that we can never pay, we owe our government a similar debt. So when they act and give us directives, we follow.
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The government should take strict action against these people who hide gold and money in the wrong way, due to which the economy of the country is discussed. Currently, the price of gold has tripled all over the world. People here have stopped buying gold because it is so expensive, why has the purchasing power of people reduced.
It seems that the law of supply and demand is working well in your country, @djbravo!
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Leave it up to the Gov to steal from the people then double the price of the asset. UGH! 😆
I'm curious... if we were with the government and saw what was happening... what would have been done🤔?
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First off I would have ditched the Federal Reserve. After all, they're the ones who created this mess. Then I would let the banks fail or be absorbed by other solvent institutions (the same thing they should have been done in 2008). We need to get back to free markets before we see the end of this madness. It will just keep repeating over and over and we'll keep kicking the can farther down the road until we can't afford the interest payment on the debt.
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Will history repeat again? I would presume it would be done under the auspices of a Patriotic appeal by the Treasury department and the President at the time.
As far as Canada is concerned the same thing would happen more by media driven legislation and Social shaming and stigmatization.
"Only terrorists use gold!"
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Just like some of what the ordinary guys did in 1933, I'll probably keep my gold if it happens again!
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It's a interesting bit of gold history. I don't think it can happen now !
Who knows? Only time will tell! Interesting, huh?
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The good old days showing us all how much "big brother" know best... It was a horrible decision! May the lunacy never happen again!
Just goes to show silver is a great and safe investment!
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Ah... that's an open debate, my friend.
The operative word is "May".
But I hope it does not happen again!
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If you we’re living back then, or if they issued another “ executive order” would you turn in your Gold or any precious metal now @silversaver888 …..🤔
Nope... the gold stays in storage, @silvertop... hehehe 😁.
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😇🤗😊…… I completely agree @silversaver888!
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Unfortunately, this continues to be the way of acting of politicians who make citizens pay for their mistakes while they enjoy the benefits.
In the case of the U.S. during the gold ban, this wasn't the case. In other countries, perhaps.
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One needs to be watchful of sudden change happening, Bretton Wood system by what I understood when other currencies agreed to utilize the USD as international based between global trade America has upheld the deal of keeping the seas of the world safe to international trade to continue.
Should America now stop patrolling the seas, will international currencies continue in this vein? Currently watching movement between East and West disputes arise once again nothing is ever set in stone.
An interesting piece of history to remind one that prior EURO and globalization ideas arrived, when purchasing imports during 1990s we still paid in each countries local currency. Buying into USD only came into being from mid 90s, in other nations I have no idea on how long this system took to come into being as standard used for all imports/exports.
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I was just reading about the gold ban and Bretton Woods in chapter 4 of 'The Bitcoin Standard' by Saifedean Ammous. I'm on chapter 5 now, where he talks about money and time preference, and so far it's been quite an interesting read. Being that you are into monetary history, another really good book you might be interested in if you haven't read it already is History of Money and Banking in the United States: The Colonial Era to World War II which I read a couple years ago and found highly informative. It's mind blowing how many times, over and over, the government prints fiat to fund this or that project or military intervention or whatever, and it always ends up in inflation, bank runs, and then inevitably going back to real money.. gold and silver.
I will definitely read those books, @derekrichardson!
We can never really know the whole story. That is why it is so interesting. Only time will tell.
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I’d like to see someone come a try to take my gold. Lots and lots of ammo to go through first before that happens….
Hahaha.. me too! If we had lived during the period of confiscation, we would have kept some gold for ourselves.
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Crazy times back then. Hope they won’t repeat.
Thanks for sharing such a great information 😎
Have a wonderful Thursday 👋🏻😊
Sorry for being quite… had no internet for about a week 🤓 will catch up soon.
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I watched films of the 1920s, and the women's clothes were epically romantic. In California, it was the heyday... people were just complacent and living the life. Crazy indeed!
Yes, Thursday! And it is now evening here. As usual, I don't get to comment on my post of the day until the evening.
I read your article!!! EPIC!!!
A big hug to you too, @littlebee4🤗
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Yep, I did too a few. Love their clothes from back than. Such a difference with now. Truly romantic… 🥰
Most did back than what was told.
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You say I have gold? What gold?! It would have made me really angry had I been around back then. If the government could do that, then, and of course they still could, take practically anything of yours, mine and theirs at any given time! Me thinks the tables should be turned on the powers that be!
Okay, so now I will get off of my soapbox! I look forward to tomorrow's article, sis! Love ya!😘🤗🌸💖 !LADY
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I never there was a gold ban in USA.