FDR, Nixon and Gold

[jtryka]

So after reading WaxonWaxoff's signature line on Reagan allowing us to own gold again, I decided to do a little research since I had always thought Nixon took us off the gold standard and repealed FDR's executive order.

 

A bit of history is in order. Soon after FDR took office, the nation in the throws of the Great Depression and people tended to hoard currency, including gold creating bank runs and numerous bank failures. FDR declared a bank holiday to resolve the situation, and what emerged was Executive Order 6102, which banned the hoarding of gold and gold certificates. The only exception to this was amounts less than $100, or any coins of special collector interest (there were also exceptions for miners, refiners and other businesses which use gold as a raw material, but they are not germain to this discussion). You can see the text of the Order here: Executive Order 6102.

 

From May 1, 1933 until December 31, 1974 it was illegal for US citizens to own gold outside of the exceptions noted in the Order. In 1974, Congress passed Public Law 93-373 which became effective on December 31, 1974, removed the restrictions on a person "purchasing, holding, selling, or otherwise dealing with gold." So like the dawning of a new day, beginning in 1975 American citizens were allowed to own gold once again (the Founders likely turned back in their graves to their original positions, after the travesty or the original Order!). So all this is ancient history, since now we can buy and sell gold bullion, collect Saints (except for the 1933 of course ), trade futures and bury sovereigns in our backyards if we want. But, something I didn't realize, but probably should have is an easily overlooked aspect of Public Law 93-373.

 

My search led to the FDIC's website, where they discuss gold activities permitted by member banks (basically they shouldn't do it except on an agency basis for their customers). What caught my attention was the following paragraph regarding gold:

 

"It is the opinion of the Secretary of the Treasury that Public Law 93-373 did not repeal or alter the so-called Gold Clause Resolution of 1933 (31 U.S.C. 463). The Resolution prohibits any contractual provision which purports to give the obligee the option of requiring payment of the obligation in money or a specified amount of gold. Deposit contracts which purport to give the bank's customer such an option are therefore rendered legally unenforceable by the terms of the Gold Clause Resolution. Contracts specifically payable only in gold may be similarly unenforceable where the parties to the contract view the gold as a medium of discharging a debt, such as a deposit liability, rather than as a commodity to be traded. Needless to say, sound banking practice dictates that insured nonmember banks not enter into legally unenforceable deposit contracts. Conversely, while contracts entered into by a bank treating gold as a commodity, rather than a currency, such as futures contracts, may be valid obligations of the bank, they do not give rise to "deposits" insured by FDIC." (emphasis added).

 

So basically, the effect of the Gold Clause Resolution of 1933 is to forbid gold being viewed as money, or anything other than a commodity like coffee or soybeans! So, I wonder, since I consider gold to be real money, and paper fednotes to be just a poor substitute am I violating the law? Thankfully the First Amendment hasn't been repealed so such a rule cannot regulate my thoughts or belief (not yet anyway, give the Supremes enough time and they'll figure out a way around that!). In any case, there is something remarkably Orwellian about this whole area!

[zrlevin]

So, I wonder, since I consider gold to be real money, and paper fednotes to be just a poor substitute am I violating the law? Thankfully the First Amendment hasn't been repealed so such a rule cannot regulate my thoughts or belief (not yet anyway, give the Supremes enough time and they'll figure out a way around that!). In any case, there is something remarkably Orwellian about this whole area!

 

I'll drink to that!

[Bruceswar]

So, I wonder, since I consider gold to be real money, and paper fednotes to be just a poor substitute am I violating the law? Thankfully the First Amendment hasn't been repealed so such a rule cannot regulate my thoughts or belief (not yet anyway, give the Supremes enough time and they'll figure out a way around that!). In any case, there is something remarkably Orwellian about this whole area!

 

I'll drink to that!

 

That better be a Coke or a Pepsi!

[physics-fan3.14]

As a student of history in my spare time, I have come to really dislike FDR and all of his policies. Pretty much everything he did from before he became president until he died I disagree with and do not like. (And believe me, this is a very subdued and understated way of saying this.) We are still feeling the repurcussions of much of what he did even today, and this is after Reagan tried to fix alot of it.

 

So, I've got some things that I would like to sell, and I will only take payment in gold

[MAULEMALL]

As a student of history in my spare time, I have come to really dislike FDR and all of his policies. Pretty much everything he did from before he became president until he died I disagree with and do not like. (And believe me, this is a very subdued and understated way of saying this.) We are still feeling the repurcussions of much of what he did even today, and this is after Reagan tried to fix alot of it.

 

So, I've got some things that I would like to sell, and I will only take payment in gold

 

I concur and I wish.

[Hoot]

This is pretty interesting. If gold can only be seen as a commodity, then how can the Mint legally denominate gold coins, particularly bullion?

 

Hoot

[TomB]

It has always been my belief that under the Nixon administration we were allowed to own gold again. In fact, I recall the excitement about it back in 1974. However, one could always collect Saints or buy gold jewelry. In my opinion, this had the greatest impact in buying gold bullion, such as the Krugerand. I had not written anything about this in WW's posts because he/she was not very receptive to my initial advice and I didn't want it to seem like I was stalking this person.

 

The paragraph you quote is interesting in that it purports to espouse the opinion of the Secretary of the Treasury and not the will of the legislative branch, which means that it is not implicitly part of the law.

[WinstonWare]

Yes interesting post! Thanks!

[IGWT]

This is pretty interesting. If gold can only be seen as a commodity, then how can the Mint legally denominate gold coins, particularly bullion?

 

That is interesting. I suppose we should get a copy of the law instead of relying on the opinion of the Secretary of the Treasury. As I understand it, coinage (and currency) is legal tender by law (as opposed to by decision of the Mint) that becomes monetized when the Federal Reserve Bank or its branches accept and pay face value for it. The Mint certainly isn’t going to monetize gold bullion – which has intrinsic value that far exceeds its status as legal tender – by selling it to the FRB at face value. It must be monetized when either sold internally from one department of the Mint to another or sold to the Mint’s “authorized purchasers.” But payment in an amount that reflects the intrinsic value doesn’t change the legal tender status.

 

I’d be interested in knowing not only how gold bullion has legal tender status in light of Public Law 93-373, but also WHY bother making it legal tender at all if it’s limited to a fraction of its value as a commodity. What’s the point?

[Morgannut]

This is pretty interesting. If gold can only be seen as a commodity, then how can the Mint legally denominate gold coins, particularly bullion?

 

Hoot

----

Of coarse Congress, not the Mint, denominate gold coins-so that overrides the Treaury Secretary under the Constitution. But I'd guess what The Treasury is really is saying is that the FDIC isn't going to insure banks for deposits, or calls on deposits, of gold coins---at the MInt Issue price. So if Congress issues a gold commem at $250, but the gold value drops to $150, the FDIC is saying these "aren't for commerce"--they're collectors items or commodities. Therefore and we don't insure them.

[WaxonWaxov]

I stand corrected on the Nixon/Reagan thing.

 

Every time I think of the FDR gold thing I get furious.

 

In about 1925, my Great Grandfather liquidated EVERYTHING, the family farm, all of his holdings, the coal mine he owned, you name it and put it in Gold coin.

 

Then that ***** Roosevelt STOLE my Great Grandfather's gold and didn't even give him the cash equivalent of the face value. The family was ruined. My father didn't get to go to college, I didn't get any inheritence, etc.

 

Somewhere someday I'm going to find a goverment record of the golod they stole from my family and I'm going to demand reparations.

 

** rant over **

[MunkyMan95]

Wow man, that's harsh! I agree that FDR should not have made it illegal for Americans to own gold. My family too lost much money when this happened. Certainly not as much as yours, but still a lot of money in those days.

[TomB]

I don't understand your rant, WaxonWaxov, since the government made the hoarding of gold illegal but replaced the redeemed gold for a like amount of silver. Therefore, I think your family history has the potential to have substantial myth to it and little meat. Here is the relevant paragraph from the Executive Order-

Section 4. Upon receipt of gold coin, gold bullion, or gold certificates delivered to it in accordance with Section 2 or 3, the Federal reserve bank or member bank will pay thereof an equivalent amount of any other form of coin or currency coined or issued under the laws of the Unites States.

[IGWT]

I buried a question in my last post: "Why bother making [gold bullion] legal tender at all if it’s limited to a fraction of its value as a commodity. What’s the point?"

 

Does anyone know?

[WaxonWaxov]

I think they do that doubly-value the coin.

 

Let's say if you buy a 2006 Platinum Eagle that has a face value of $100. Two years later somebody find a new platinum mine in the Arctic that is the size of Pennsylvania, hence the value to platinum drops to below $100 an ounce. The face value fo the coin would then be more than the bullion value, so you're coin will never be worth less than $100...get it?