Prior to the election of America’s longest serving socialist president, our money was backed by gold. Anyone holding our paper currency could demand to exchange it for gold at a set price. In 1913, the gold standard was officially made part of the Federal Reserve and the price of gold was fixed at $20.67 per ounce. The same law mandated that the Federal Reserve kept enough gold on hand to equal 40% of the currency issued at the time.
On March 4, 1933, Franklin Delano Roosevelt was sworn into office for the first time. The day after his inauguration, Roosevelt closed all of the banks, announcing a Bank Holiday in response to the nation’s financial crisis. Many Americans had rushed to their banks and demanded to exchange their paper currency for gold and Roosevelt acted to stop the run on gold.
On March 9, 1933, Congress passed the Emergency Banking Act at the strong insistence of Roosevelt, which was so strong and swift acting that many members of Congress were not even given enough time to read the bill before having to vote on it. The act allowed for banks to reopen their doors for business after being inspected by bank examiners and found to be financially sound.
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The Emergency Banking Act also gave Roosevelt a number of powers in the case of a banking crisis as defined in Title I:
“Title I expanded presidential authority during a banking crisis, including retroactive approval of the banking holiday and regulation of all banking functions, including ‘any transactions in foreign exchange, transfers of credit between or payments by banking institutions as defined by the President, and export, hoarding, melting, or earmarking of gold or silver coin.’”
According to Stephen Greene of the Federal Reserve at the time:
“The emergency banking legislation passed by the Congress today is a most constructive step toward the solution of the financial and banking difficulties which have confronted the country. The extraordinary rapidity with which this legislation was enacted by the Congress heartens and encourages the country.”
On March 13, 1933, many of the banks were allowed to reopen for business and for the most part, it appeared that the Emergency Banking Act was a success.
On April 5, 1933, acting upon the authority he assumed from the Emergency Banking Act, Roosevelt pulled all gold coins and certificates of $100 value or more to be pulled from circulation. Everyone who owned any of the gold coins, bullion or certificates worth $100 or more, were required to turn them in to the Federal Reserve by May 1, 1933. Each ounce of their gold would be exchanged for $20.67 in cash or non-gold standard certificate.
By May 10, 1933, around $300 million in gold coins and $470 million in gold certificates had been turned into the Federal Reserve.
On this day, June 5, 1933, Roosevelt, with the aid of Congress, finalized his plan to take America completely off the gold standard. No longer was our currency backed by gold. Instead, our currency was basically valued at the value placed on it by the Federal Reserve, which also played an important role in international banking and currency values. All gold coins and bullion was required to be turned over to the Federal Reserve. No private ownership of gold coins or bullion was allowed in the US.
In 1934, the federal government, now in possession of most of the gold supply in the country, raised the value of gold from $20.67 per ounce to $35 per ounce. This move was made to increase the strength of the Federal Reserve by 69%.
On August 15, 1971, President Richard Nixon declared that gold would no longer be set at a fixed value for the purpose of currency conversion. This allowed the price of gold to start climbing.
In 1974, the ban on ownership of gold coins or bullion ended when President Gerald Ford signed the legislation. Without any links between gold and the value of our currency, the price of gold has steadily increased to a current price of around $1,240 per ounce.
Sources for the above includes: Roosevelt’s Gold Program; FDR takes United States Off Gold Standard; Why We Left The Gold Standard; How Franklin Roosevelt Secretly Ended the Gold Standard; When Did the Gold Standard End?; Abandoned Gold Standard Guarantees Inflation; Emergency Banking Act of 1933