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This is a snippet
from a recent issue of the Gold Forecaster with Subscriber-only parts excluded.
In this the second part
of this series we look at the big global picture when President
Roosevelt’s Administration confiscated the gold of U.S.
citizens. Based on this
part, in the next part we contemplate whether it can happen again.
Above you will see the actual executive
order in which U.S.
citizens lost the right to own gold. From May 1st 1933
until 1971, U.S.
citizens could no longer hold gold as a protection against paper money, which
also lost its gold backing at the same time. Foreign central banks could
continue to exchange the U.S. dollars that came into their possession [known
as Eurodollars for decades] for gold and did so particularly when the $ was
devalued and then floated against the gold price in 1971.
Why?
The ‘why’ of
it all, is critical to our understanding of the global monetary system
now! There were two
distinct phases to the process that began in 1933.
1. The economic time period was as the great depression was coming to an
end in the world. It was a
time when Hitler came to power in Germany
and that country turned on the growth taps with its war machine driving Germany
out of its depression into a resurgence of that country ahead of the Second
World War. It became clear
to all that monetary turmoil was to continue. More money was needed to start
and to fuel growth in the U.S. despite the fact that the traditional way of growing
money [against real growth in the economy] would hold the world back for a
considerable period of years still. With money tied to gold and the U.S.
needing to fuel its money supply it appeared reasonable to increase the
government’s stock of gold forcefully and dramatically. The first step was this order
confiscating gold. All but
rare gold coins were handed over to the government under the threat of a
$10,000 fine or 10 years in prison. These threats were persuasive
enough. U.S.
citizens complied in full.
2. Perhaps a mix of the need for an even larger increase in the money
supply and the gathering war clouds persuaded the U.S.
government to go further still and revalue gold by a full 75%. Remember, it was still gold
that was money plus the I.O.U.’s issued against it [see the notes
illustrated here].
[You can enlarge it by pulling the corner dot when you click on the
note]. The U.S.
$ as we have now is not any form of I.O.U., it can only be changed for
another $ and has not backing whatsoever, except in our mind’s
eye. So any expansion of
money supply had to be against an increasing stock of gold. In the event of war it was clear
to the Allies that the U.S.
would be the best place to hold their gold too. [One of the war tactics is to
forge your enemy’s money and cause a monetary breakdown in his ranks
too.] So in 1935 the dollar
was devalued from $20 to one ounce of gold down to $35 to one ounce of gold
[one has to wrap your mind round the idea that the $ was measured by gold not
gold by the $]. Remember
too that it was a world of fixed exchange rates only. No exchange rates floated, or
were devalued or revalued.
It would take another 35 years before this changed! The expansion in the money supply that
this caused combined with the war preparations caused a huge U.S.
growth and brought back the days of prosperity to the States [who became
suppliers of goods to the world from then on for the next 35 year and more].
Gold
Travels to the States
This had an international
effect because, for either ignorance or willing compliance by foreign
governments, they did not devalue their currencies against gold at the same
time, in 1935. So a gold
dealer could buy gold at the old price of $20 outside the U.S.,
in foreign currencies sell it to the U.S.
for $35 an ounce. Gold up
and left the developed world and headed to Fort
Knox very quickly
making the Bullion Bankers very happy indeed. That’s how the states
managed to acquire over 26,000 tonnes of gold ahead of the outbreak of war in
Europe in 1939.
The post war monetary
system called the Bretton-Woods system still had gold in the background
behind currencies, but U.S.
individuals were not allowed to enjoy this security. European could and did enjoy
access to gold and gold bonds [such as the Rente Pinot and the Rente Giscard
in France]
and still do. But it was not
until 1971 that U.S.
citizens could own gold privately again.
The fact that it has
happened before makes it possible that it can happen again! It is wise to make sure that you are
not vulnerable to such an act.
We will look at this in more detail in a later part of the series. To ensure you get
the entire series, please subscribe to Gold Forecaster through: -www.GoldForecaster.com
These are the titles in the next part: -
The $ replaces Gold
Gold is Money no more.
Can Gold confiscation happen
again?
Gold Forecaster regularly covers all fundamental and
Technical aspects of the gold price in the weekly newsletter.
Julian D. W. Phillips
Gold/Silver Forecaster – Global Watch
GoldForecaster.com
Also
by Julian D. W. Phillips
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