Pre-1933 Gold

Gold Confiscation of 1933

There is a lot of confusion and false accounts surrounding the Great Depression gold confiscation and Executive Order 6102, but what happened is actually quite simple.

For example, the internet is rife with rumors about people persecuted and imprisoned for owning gold, and of a mass confiscation of safe deposit boxes. None of this actually happened. In fact, only one person was ever prosecuted for violating Executive Order 6102, and his charges were dismissed by a judge.

Executive Order 6102 was signed into law April 5th, 1933 by President Franklin Delano Roosevelt under the authority and power of a wartime statute that had not yet been repealed. Roosevelt and other government officials were desperate to find relief for struggling banks. If Roosevelt did not find a way to stabilize the nation's currency, the nation already struggling to survive the Great Depression may have found itself in even greater jeopardy. However you feel about government intervention in the economy, it will suffice to note that the need for stability was dire. Whether or not Executive Order 1602 was the answer to the nation's problems is certainly a matter up for debate.

Roosevelt argued that the economic meltdown of the Great Depression was causing citizens to "hoard" gold, thereby making the depression worse by stalling growth. Instead of spending the gold, Roosevelt claimed that it was sitting useless in banks and under mattresses. It is important to note that at this historical point the U.S was still on the "gold standard." Many coins were still made out of gold, and there was a fixed exchange rate between gold and U.S paper currency. This continued to be true until Nixon abandoned the gold standard in the early 70's. Instead of the "gold window," we have a fiat currency that is completely independent of the market value of gold. In order to stop the hoarding of gold, and in effect currency, Roosevelt's Executive Order made it illegal for any person, group, or corporation to own more than 100 gold coins: "the national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States."

Under the Constitution of the United States, the government must always compensate citizens for any confiscation of private property. As a result, many rare gold coins were exempt from the gold confiscation, as a case-by-case evaluation of coins would present a logistical nightmare for the government. Citizens had until May 1st, 1933 to surrender their gold to the Federal Reserve at an exchange of $20.67 per troy ounce of gold. This included all gold coins, bullion, or gold certificates. A violation of the order was punishable by 10 years in prison, a 10,000 dollar fine, or both.

Many people complied with the order as an act of patriotism, but many people with large amounts of gold transferred their gold to offshore accounts such as Swiss banks. The government subsequently raised the price of gold to $35 per troy ounce, and used the profits to fund a stabilization fund. The fact remains that absolutely no one can know for sure if a confiscation like this can happen again. While it remains unlikely, it is certainly possible.