On This Day in 1933

Tyler Durden's picture




 

Submitted by Christopher Westley via The Circle Bastiat blog,

You were considered a hoarder and a slacker if you still resisted turning over your gold to the government. From the New York Times, June 13, 1933:

slackers

(Click on the image for a sharper picture.)

Roosevelt had only been in office for 101 days and while there was broad bipartisan support for inflationary policies in Congress, it’s safe to say that most of those who voted for FDR never expected him to confiscate private holdings of gold coins, bullion, and certificates. Roosevelt called the measure a temporary one (it wasn’t), and he followed it up by invalidating gold clauses in private contracts that obligated payment in gold dollars, which had the effect of devaluing the assets of bond and contract holders. Many of these hoarders and slackers purchased gold as a hedge against the (Fed-fueled) inflationary boom of the 1920s and then hung on to it during the Hoover years when his crazed and unprecedented interventions in wages and prices caused a normal market correction to devolve into a depression. Why would they trust Roosevelt any more?

They were smart not to. By January 1934, Roosevelt increased the dollar price of gold from $20.67 to $35, thus devaluing the dollar by 70 percent while increasing the value of gold that the government now owned.

gold1050

Gold flowed to the United States because the new price exceeded the world price, causing Fort Knox to become, well, Fort Knox. Since the Treasury was authorized to maintain the new dollar-gold exchange rate, it increased the money supply accordingly. Over the next three years, M2 increased by an average of 13.4 percent a year. Congress and the president with strong ties to Wall Street got the inflation they wanted.

Queue the tape: “Happy Days Are Here Again.

A major constraint on the federal government’s ability to spend had been lifted, and by the end of the decade the balance of political power had shifted from the states and the cities to Washington, D.C. It remains to be seen whether inflating the money supply will have any different effect in the 2010s than it did in the 1930s.

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Fri, 06/14/2013 - 12:30 | 3658413 ILLILLILLI
ILLILLILLI's picture

I'm willing to give them my lead.

Fri, 06/14/2013 - 12:32 | 3658419 Clueless Economist
Clueless Economist's picture

Chilling...but I the Great Krugman say "Stack FRB Fiat"

Fri, 06/14/2013 - 12:38 | 3658457 fourchan
fourchan's picture

take it from americans, give it to china. was the feds plan all along?

Fri, 06/14/2013 - 12:48 | 3658516 Badabing
Badabing's picture

That averages out to $1912.25 for each person.

Does that sound like a hoarder?

OK back then you could exchange that paper for gold and have 95 and a half ounces, and today a little over one oz!

 Lets you know how much the FUCKING BANKS have been picking our pockets.

Fri, 06/14/2013 - 12:52 | 3658550 johnQpublic
johnQpublic's picture

each dollar in a hoard ties up 15-20 dollars in credit

very telling line of that newspaper article

Fri, 06/14/2013 - 13:00 | 3658585 bank guy in Brussels
bank guy in Brussels's picture

Big error by Christopher Westley above in his write-up about that article, claiming that Roosevelt was « devaluing the dollar by 70 percent »

Way wrong figure. Roosevelt devalued the US dollar by just over 40%. Still awful but quite different.

It is funny how often the 1933 Roosevelt devaluation of the dollar is cited wrongly ... one also sees  60% or other erroneous figures as well. Here are the maths:

When it took US $20.67 to buy an ounce of gold, then 1 dollar was worth .0483 ounces of gold

When it took US $35.00 to buy an ounce of gold, then 1 dollar was worth .0285 ounces of gold

So the dollar would buy .0198 ounces less of gold than the earlier quantity of .0483 ounces ... in other words, 40.9% less   (Take 40.9% of 483 and you get 198)

Of course Americans in their 'land of freedom', just had won back the right to drink back after 14 years of religious fanatic American-Taliban Prohibition of alcohol ... now starting with FDR they were forbidden to openly buy gold again until the 1970s ... Land of 'freedom', ha !

Fri, 06/14/2013 - 13:12 | 3658639 Variance Doc
Variance Doc's picture

Correct calculations.  The author's calculations are wrong.

Fri, 06/14/2013 - 13:32 | 3658711 Badabing
Badabing's picture

20,67 +70 % =35.139 dick

not 35 -40% fucking bankers!

Fri, 06/14/2013 - 13:52 | 3658812 Winston Churchill
Winston Churchill's picture

When I give a customer 25% discount ,I first add 33% to the price.

I have a lot of Jewish clients. They feel good, and I get my price.

Bankers never give discounts, so this simple math is beyond them.

Then again most sheeple don't get it either.

Fri, 06/14/2013 - 17:00 | 3659383 SafelyGraze
SafelyGraze's picture

it was not the dollar that was devalued

it was the weight of an ounce that got re-adjusted

 

Fri, 06/14/2013 - 13:16 | 3658651 The Shootist
The Shootist's picture

That's what I thought. 70 % is a banana republic and surely we're not that...

Fri, 06/14/2013 - 13:26 | 3658687 Imminent Crucible
Imminent Crucible's picture

Sorry, bank guy, you're making the conventional error and applying the math backwards.

Works like this:

Gold is fixed at $20.67. Gold is confiscated and replaced with dollars at $20.67 per ounce.

FDR then lowers value of USD so that it takes $35 to buy an ounce of gold (if it were legal).

$35 minus $20.67= an increase in the price of gold by $14.33.

14.33 divided by 20.67=0.6934. Hence a ~70% increase in the dollar price of gold, or a 70% devaluation of the dollar in gold terms.

 

I hope you don't really think Americans stopped drinking because of "Prohibition"? HAHAHAHAHA---whoops, sorry. Look at the article above: It says that the tally was less than $180,000 in gold turned in, and $600,000,000 still out there with the Shirking Hoarders.

This is the land of Non-Compliance, Nancy.

Fri, 06/14/2013 - 13:54 | 3658811 Steve in Greensboro
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Belgian Bank Guy has it right. 

FDR did not devalue gold.  He devalued the dollar.  Gold was the international transactional monetary unit of the day.  FDR just screwed the foreign holders of USD by dropping the rate at which he would exchange gold for USD coming back to the U.S.  He dropped the value of the dollar from 0.0484 ounces for every USD (1/$20.67) to 0.0286 ounces for every USD (1/$35.00).  The value of the USD in terms of ounces of gold went down by 0.0198 ounces per USD, each USD lost 40% of its value (0.0198/0.0484).

There is nothing governments can do to create real wealth (hint: real wealth is not fiat currency).  They can steal real wealth.  They can redistribute it. They can destroy it.  But they cannot create real wealth.

And remember, the Federal Reserve is just as “federal” as the Federal Bureau of Investigation.  If you doubt me, tell me who is going to appoint Bernanke's successor.  Tell me who is going to confirm him.

Fri, 06/14/2013 - 14:27 | 3658942 ziggy59
ziggy59's picture

I think the Federal reserve is as Federal as Fedex...both non gov entities..

Fri, 06/14/2013 - 14:45 | 3659015 Agstacker
Agstacker's picture

I do believe that the FBI gets audited from time to time.  How about the federal reserve?

Fri, 06/14/2013 - 16:00 | 3659248 malikai
malikai's picture

Yea, by the Eric Holders of the world.

Success!

Fri, 06/14/2013 - 19:21 | 3659768 Imminent Crucible
Imminent Crucible's picture

"tell me who is going to appoint Bernanke's successor.  Tell me who is going to confirm him."

Since you asked, he/she/it (Summers/Yellen/Geithner) will be appointed by the same people who run the Treasury Borrowing Advisory Committee. Whatever decision they make will be rubber-stamped by the Puppet-in-chief and the Senate.

And it won't make any difference who they choose. They all practice the same Neo-Keynesium Pump Till You Slump Religion.

Fri, 06/14/2013 - 13:56 | 3658829 OutLookingIn
OutLookingIn's picture

"What difference does it make"? To quote Hillarious! 

40%? or 70%? The buck was still devalued.

You are just argueing degree! Like Benghazi and who was responsible for the ambassadors death. The basic fact remains that he is still dead! Sheeesh! Is the tank half empty? Or half full?

Fri, 06/14/2013 - 14:23 | 3658925 RockyRacoon
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My calculation of the percentage of the outstanding gold "recovered" was about 0.0003%.   That is, before my little calculator started smoking.   The old newspaper article was nothing but a scare tactic to drive more gold out of the sock drawers.  It didn't work, as you point out.  As I recall, only one person actually was prosecuted -- and he was an idiot.

Fri, 06/14/2013 - 14:38 | 3658985 RafterManFMJ
RafterManFMJ's picture

Thanks for the maths ImCrucible.

 

The important take away here is, sure, they outright robbed people and impoverished them, but this was a one off and will NEVER happen again.

Fri, 06/14/2013 - 16:55 | 3659372 lunaticfringe
lunaticfringe's picture

I'll tell ya about bad luck. I bought 17 ounces of gold with my case money and had it in a backpack on my friends boat on a trip east of the keys. Boat went down so fast I couldn't get to my backpack. Shit luck. Honest injun.

Sat, 06/15/2013 - 11:15 | 3660790 Bluz
Bluz's picture

Sounds like a job for Odyssey Marine Exploration.

You are right -- Shit luck.

Fri, 06/14/2013 - 20:02 | 3659853 Imminent Crucible
Imminent Crucible's picture

a one-off that will NEVER happen again.

Right you are, RafterMan. The 213 silly sheep who actually obeyed EO 6012 are all dead now. The rest of us don't really give a rat's ass what the pigmen say.

I only regret that my carelessness, in combination with an extreme state of inebriation, means that my hedges cannot be recovered without SCUBA gear and some form of memory enhancement.  Was it the Colorado River or the Snake River? Was it 1999 or 2004? Did I really ever have any to begin with? Only José knows--José C. Tradicional.

Fri, 06/14/2013 - 13:01 | 3658594 NotApplicable
NotApplicable's picture

Thing is, even that number is inflated now that required reserve ratios (assuming they even mean anything) are zero for many types of deposits, while the remainder are approaching it.

Eventually, a single dollar might be responsible for an infinite amount of credit! Pure fucking genius there, I tell ya. But hey, at least it might take some pressure off of the rehypothetication daisy chain?

Fri, 06/14/2013 - 13:53 | 3658815 TeMpTeK
TeMpTeK's picture

<-------- on the next episode of Hoarders, buried alive.

Fri, 06/14/2013 - 14:36 | 3658976 Jones79
Jones79's picture

I never thought about holding gold that way, as withheld credit.  It makes sense that banks and the supporting financial media should be so against holding gold--if you're a holder/"hoarder," banks can't make any money of you, either as fiat depositor or borrower. 

Fri, 06/14/2013 - 14:40 | 3658998 Jones79
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of course, this is at the margin, and the quote is just for effect.  Interest rates "should" adjust to money demand naturally. 

Fri, 06/14/2013 - 15:01 | 3659070 Meat Hammer
Meat Hammer's picture

If you read between the lines (which I know you did) it says each dollar in hoard ties up 15-20 dollars in fiat that a banker can create out of thin air, turn into 27 times that amount via his buddy Mandrake, charge interest to all of it and get retarded rich; and since we are owned by the bankers, so are you.  

We are fighting a depression (that we purposefully caused). 

Fuck you, FDR and Bernanke

Fri, 06/14/2013 - 12:48 | 3658529 Buckaroo Banzai
Buckaroo Banzai's picture

Probably. I'm convinced that Bill Clinton was working for the Chinese. Not just bought and paid for, but ideologically committed to modern Chinese Communism. He even had a term for it: "The Third Way".

Fucking traitor.

Fri, 06/14/2013 - 13:03 | 3658606 NotApplicable
NotApplicable's picture

Don't you realize that he only said shit like that in order to rile you up?

Simply put, the people he works for are not attached to nationalistic labels. Those are for us plebs to fight over.

Divide and Conquer 101.

Fri, 06/14/2013 - 14:18 | 3658912 Zymurguy
Zymurguy's picture

Naw, he was talking about 3rd Input... anal.

Fri, 06/14/2013 - 15:10 | 3659097 Lore
Lore's picture

What the American people are saying when they tell you not to do these things, they're not telling you not to do these things. - Bill Clinton's response to Public Opinion Polls, 14-Jun-2013

Fri, 06/14/2013 - 12:51 | 3658531 Imminent Crucible
Imminent Crucible's picture

And they say history doesn't repeat; In 1933 the Treasury stole everyone's money, the Fed created enormous monetary interventions and the Lying Commie Bastard administration Executive-Ordered one idiotic policy after another, such as "Kill millions of piglets to make farming more profitable".  And five years later, in 1938, the country remained in what was called "a Depression within a Depression".

Amity Schlaes' The Forgotten Man is a good antidote to our current national amnesia.

"We're fighting a War On Depression"---from the liar du jour. With fascist governments, it's always a "war" on something or other. That way, if you don't cave in and support the madness, you're a traitor.

Fri, 06/14/2013 - 13:28 | 3658725 BigJim
BigJim's picture

 That way, if you don't cave in and support the madness, you're a traitor.

What, you want us to lose the war??? Take him away! 

Fri, 06/14/2013 - 14:44 | 3659008 RafterManFMJ
RafterManFMJ's picture

I'm a grizzled veteran of the war on drugs, the war on poverty, the war on the Patriarchy, the war on terrorism, the war on savers, the war on NSA leakers...missed out when we surrendered and lost the war on alcohol.

Right now, I'm gearing up for the war on Whitey!

 

Fri, 06/14/2013 - 19:19 | 3659760 willwork4food
willwork4food's picture

That's just what they want us to do. Divide & Conquer 3.0

Fri, 06/14/2013 - 13:39 | 3658773 Umh
Umh's picture

 David A. Shannon wrote a book boringly titled "The Great Depression" in 1960. What I really enjoyed about the book is that it is written as a series of events/scenarios such as boy and girl tramps being obsessed with food or destroying crops to support prices. It is told in 56 scenarios.

Fri, 06/14/2013 - 20:11 | 3659872 Imminent Crucible
Imminent Crucible's picture

Shannon's book seems to be out of print. A pity. I think quite a few people will be obsessed with food before the final chapter of current Fed policy is written.

I don't have any, so don't come looking at my house when you're starving. I won't be there anyway. I'll be down on the ejido cutting artichoke hearts with the amigos.  ¿La vida es buena en Puerto San Carlos, no?

Fri, 06/14/2013 - 12:46 | 3658515 Buckaroo Banzai
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Stack it??? ANY form of saving is anathema to the "KRUG AM THE GREAT KRUG AM!"

Fri, 06/14/2013 - 15:43 | 3659213 JeffB
JeffB's picture

Pretty soon our debt will be thousand dollar bills stacked to the moon.

http://www.peakprosperity.com/crashcourse/chapter-11-how-much-trillion

 

Sat, 06/15/2013 - 14:21 | 3661118 papaclop
papaclop's picture

To quote a great man, JS Kim, Paul Krugman is an economic buffoon.

Fri, 06/14/2013 - 12:33 | 3658422 Pladizow
Pladizow's picture

.

Fri, 06/14/2013 - 12:46 | 3658514 The Shootist
The Shootist's picture

So, FDR was worse than Chavez.

Fri, 06/14/2013 - 12:34 | 3658434 Killtruck
Killtruck's picture

Slackers...probably a bunch of high school dropouts with employment issues.

Fri, 06/14/2013 - 13:07 | 3658616 NotApplicable
NotApplicable's picture

Wait... you mean the deadline... was... TODAY???

 

Fri, 06/14/2013 - 13:35 | 3658752 Professorlocknload
Professorlocknload's picture

93 Hoarders? Dissent was THAT massive back then? Wild!

Fri, 06/14/2013 - 12:35 | 3658437 slaughterer
slaughterer's picture

Coming to a fascist debt-junky country near you.  

Fri, 06/14/2013 - 12:47 | 3658520 ironsky
ironsky's picture

Save your brass.

Fri, 06/14/2013 - 12:47 | 3658522 King Nothing
King Nothing's picture

I think we can all afford a "Shared Sacrafice" by giving the goverment all the lead they need to stop the rape and pillaging they do now.

No sarc what so ever.

Fri, 06/14/2013 - 12:49 | 3658537 azzhatter
azzhatter's picture

and if your family didn't turn it in, today you'd be called rich

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