The Great Gold Robbery

The Foundation for Economic Education featured as their “timely classic” today a 1999 article I did for their Freeman magazine on The Great Gold Robbery.  Here’s the piece –

The Freeman: Ideas on Liberty – June 1999

The Great Gold Robbery

By James Bovard

James Bovard is the author of Freedom in Chains: The Rise of the State and the Demise of the Citizen (St. Martin’s Press, 1999).

The New Deal established much of the moral framework of contemporary political life. Though some of the programs and policies of that era have been terminated, the moral heritage of the New Deal continues to permeate American government and political thinking.In 1936 Franklin Roosevelt declared, “I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. . . . I should like to have it said of my second Administration that in it these forces met their master.”[1]

No American president has rivaled Roosevelt in his denunciation of what he called “economic royalists.” He sought to “master” the “forces of selfishness” by making government master of every person’s private financial destiny. Like today, the citizen who wanted to retain control over his own life was selfish, while the bureaucrat who wanted to seize power over the citizen was automatically presumed benevolent. One of the most controversial New Deal policies was the seizure of citizens’ gold.[2] During the Great Depression, several foreign nations repudiated their promises to redeem their currencies for gold. In 1933, when Roosevelt became president, the United States had the largest gold reserves of any nation in the world. He announced on March 8, 1933, a few days after taking office, that the gold standard was safe. But three days later, he issued an executive order forbidding gold payments by banks; Treasury Secretary Henry Morgenthau, Jr., announced on March 11 that “the provision is aimed at those who continue to retain quantities of gold and thereby hinder the Government’s plans for a restoration of public confidence.”[3] Thus, according to Morgenthau, any limit on government power was bad for public confidence. And whatever confidence people might seek to achieve must be left in abject dependence on politicians’ latest salvation scheme.The ban on bank gold payments created widespread doubts about the Roosevelt administration’s intentions. Ogden Mills, who had served as President Herbert Hoover’s treasury secretary, observed that “it was not the maintenance of the gold standard that caused the banking panic of 1933 and the outflow of gold. . . . [I]t was the definite and growing fear that the new administration meant to do what they ultimately did—that is, abandon the gold standard.”[4] People naturally sought to get rid of their paper currency and to put their savings into something with more secure value—gold.

Gold as Contraband

Fear of devaluation spurred a panic, which Roosevelt invoked to justify seizing people’s gold. On April 5, 1933, Roosevelt commanded all citizens to surrender their gold to the government. No citizen was permitted to own more than $100 in gold coins, except for rare coins with special value for collectors. Morgenthau announced on the same day that “gold held in private hoards serves no useful purpose under present circumstances.”[5] Gold was thus turned into the same type of contraband as Prohibition-banned rum. Roosevelt announced, “Many persons throughout the U.S. have hastened to turn in gold in their possession as an expression of their faith in the Government and as a result of their desire to be helpful in the emergency.

There are others, however, who have waited for the Government to issue a formal order for the return of gold in their possession.”[6] To speak of the “return of gold” implied that government was the rightful owner of all the gold in the nation, and thus that no citizen had a right to possess the most respected store of value in history. Roosevelt assured the country: “The order is limited to the period of the emergency.” But the order stayed on the books until 1974.

Roosevelt labeled anyone who did not surrender his gold a “hoarder.” His executive order defined “hoarding” as “the withdrawal and withholding of gold coin, gold bullion or gold certificates from the recognized and customary channels of trade.”[7] Actually, Roosevelt was not concerned with the gold being in the “customary channels of trade”; instead, he wanted government to possess all the gold. And the notion that people were “withholding” their gold merely because they did not rush to the nearest Federal Reserve bank to surrender it was political logic at its best.

Roosevelt, in a later note to his Public Papers, justified the order because it “served to prevent the accumulation of private gold hoards in the U.S.”[8] Roosevelt used the same “hoarding” rhetoric against anyone who owned gold that Stalin used against Ukrainian peasants who sought to retain part of their wheat harvest to feed their families. But while Stalin sent execution squads to kill peasants who had a few bushels of grain hidden in their hovels, Roosevelt was kinder and gentler, seeking only ten-year prison sentences and $250,000 fines for any citizen who defied his edict and possessed more than five Double Eagle gold coins.

Roosevelt was hailed as a visionary and a savior for his repudiation of the government’s gold commitment. Citizens who distrusted the government’s currency management or integrity were branded as social enemies, and their gold was seized. And for what? So that the government could betray its promises and capture all the profit itself from the devaluation it planned. Shortly after Roosevelt banned private ownership of gold, he announced a devaluation of 59 percent in the gold value of the dollar. In other words, after Roosevelt seized the citizenry’s gold, he proclaimed that the gold would henceforth be of much greater value in dollar terms.

Citizens who had desired to hold gold as a hedge against government inflation policies were completely vindicated. FDR’s administration subsequently did everything possible to inflate prices, foolishly confident that a mere change in numerical prices would produce prosperity. Citizens had accepted a paper currency based on the government’s pledge to redeem it in gold at $20 per ounce; then, when Roosevelt decided to default on that pledge, he also felt obliged to turn all citizens holding gold into criminals. Roosevelt stated that the ban on private ownership “was the first step also to that complete control of all monetary gold in the United States, which was essential in order to give the Government that element of freedom of action which was necessary as the very basis of its monetary goal and objective.”[9] But the primary “freedom” government acquired was the freedom to default on its promises and to manipulate the lives of everyone depending on U.S. dollars in their daily transactions.

Curiously, FDR retained his denigrating tone toward so-called gold-hoarders even after he defaulted on the federal government’s gold redemption promise. Even though people who distrusted politicians’ promises were vindicated, they were still evil people because they had not obeyed FDR’s demand to surrender their gold. In the moral world of the New Deal, justice consisted solely of blind obedience to political commands. FDR had absolutely no sense of embarrassment or shame after he defaulted on the federal government’s gold promises—it was simply political business as usual.

Senator Carter Glass of Virginia, chairman of the Senate Finance Committee, denounced the gold seizure: “It’s dishonor. This great government, strong in gold, is breaking its promises to pay gold to widows and orphans to whom it has sold government bonds. . . .”[10]

Free to Inflate

The refusal to convert paper dollars into gold meant that the government was “free” to flood the country with paper money and sabotage the currency’s value. The stability of the value of currency is one of the clearest measures of a government’s trustworthiness. Before Roosevelt took office, Americans clearly recognized the moral implications of inflation. Vice President Calvin Coolidge had bluntly declared in 1922: “Inflation is repudiation.” Inflation is a tax whereby government prints extra money to finance its deficit spending. The value of money is largely determined by the ratio of money to goods; if the quantity of money increases faster than the increase in the amount of goods, the result is an increase in the ratio of money to goods and an increase in prices. Thus, the government’s printing presses devalue people’s paychecks and effectively allow government to default on the value of its debt.

The threat of inflation was invoked in the early 1940s to justify imposing payroll tax withholding[11] (protecting people from their own paychecks) and in the 1970s to impose price controls over the entire economy. Apparently, politicians who decide to flood the money supply automatically become entitled to increase their coercion of their victims who hold increasingly worthless currency.

Since Roosevelt banned citizens from owning gold in 1933 and forced people to rely on the unbacked promises of politicians for the value of their currency, the dollar has lost about 93 percent of its purchasing power.[12] The collapse in the dollar’s purchasing power severely disrupted the ability of scores of millions of Americans to plan their own lives and save for retirement. If someone proposed a law to give government the right to explicitly default by 2 to 3 percent a year on all its debts, the proposal would be widely denounced. Yet, this is what the government has been doing for decades. Though inflation has slowed since 1980, the purchasing power of the dollar has fallen by over 50 percent in subsequent years according to the government’s own numbers (which slightly exaggerate the damage to the dollar), making a mockery of people’s attempts to calculate and save for the future.

A 1997 study by Congress’s Joint Committee on Taxation found that because of how capital gains taxes are calculated, many citizens are forced to pay taxes on investment “gains” when in reality they have suffered losses due to the deterioration of purchasing power.[13]

Roosevelt’s gold seizure was based on the doctrine that in order for government to save the people, it must be permitted to breach all the promises it made to the people. According to modern conventional wisdom, government has no obligation to do justice or treat any specific individual citizen fairly—instead, government’s only duty is to achieve “social justice” or some other abstraction perfectly suited for evasion. []


1.   The Public Papers and Addresses of Franklin Roosevelt, 1936 (New York: Random House, 1938), pp. 232–33. 

2.   Editor’s note: See Richard Timberlake’s article “Gold Policy in the 1930s,” The Freeman, May 1999. 

3.   Gustav Cassell, The Downfall of the Gold Standard (New York: Augustus Kelley, 1966 [1936]), pp. 118–19. 

4.   Barry J. Eichengreen, Golden Fetters: The Gold Standard and the Great Depression (New York: Oxford University Press, 1992), p. 321.

5.   Cassell, p. 124. 

6.   The Public Papers and Addresses of Franklin D. Roosevelt, The Year of Crisis, 1933 (New York: Random House, 1938), pp. 110–11. 

7.   Ibid., p. 112. 

8.   Ibid., p. 114.

9.   Ibid., p. 115. 

10.   Benjamin Anderson, Economics and the Public Welfare (Indianapolis: Liberty Fund Press, 1979 [1949]), p. 314.  

11.   Charlotte Twight, “Evolution of Federal Income Tax Withholding,” Cato Journal, Winter 1995. See  

12.   For information on the deterioration of the dollar’s purchasing power, see the Web site of the U.S. Bureau of Labor Statistics at 

13.   Bruce Bartlett, “How Inflation Hikes the Capital Gains Bite,” Washington Times, March 31, 1997.           



17 Responses to The Great Gold Robbery

  1. Ray December 7, 2006 at 1:56 am #

    That’s a great piece Jim, and I say that as a fellow FDR hater on this anniversary of the beginning of FDR’s war to cover up the Great Depressions.

  2. Marc Swanson December 7, 2006 at 5:20 am #

    Amazing that someone who greedily snatched gold coins from little old lady “hoarders”, hindered recovery from what came to be known as the Great Depression by creating of a multitude of insanely counterproductive corporatist economic programs, and either looked the other way or remained clueless as the Japanese fleet closed to within striking distance of Pearl harbor during a period of dangerously heightened tension, is often regarded by politicians, intellectuals, and nostalgic senior citizens as America’s greatest President.

  3. Jim December 7, 2006 at 2:15 pm #

    Thanks for the feedback!

    Yes, hopefully FDR will get the reputation he deserves.

  4. whig December 7, 2006 at 5:56 pm #

    But did Roosevelt have a choice in light of the default to the Federal Reserve?

  5. Saturdaynightspecial December 7, 2006 at 6:00 pm #

    Maine, Lusitannia, Pearl Harbor, Tonkin Gulf, and 9/11 (and the USS Cole)

  6. Jim December 7, 2006 at 11:35 pm #

    whig – yes, FDR had a choice. It was his own perfidy that made the gold default and gold seizure so devastating to many Americans.

    He and his halfwit economic theorists… and his moon cow Brain Trust that thought Stalin was the model for the future…

  7. whig December 8, 2006 at 1:44 am #

    Hm, but what about the decision twenty years earlier to create the Fed and place the United States in a debt-financed currency to begin with? Coupled with an income tax to revolve payments on the debt.

  8. English Phil January 20, 2007 at 5:28 pm #

    After reading this informative and well written piece I have an odd feeling that history is in the proccess of repeating itself.
    Buy yourselves some gold real soon.. and don’t tell a soul 😉

  9. Alon June 11, 2008 at 1:33 pm #

    Rather… Buy yourselves more guns and ammo.. and don’t tell a soul! 😉

  10. Tim March 5, 2009 at 11:57 am #

    The US got into WWII because the US implemented an oil embargo on Japan. FDR claimed he did not want to go to war but his administration actually planned on it to get us out of the Great Depression. Pearl harbor was the sacrificial lamb and the government knew all about it. If you research it enough, you will find that there were so many errors made in security just prior to Dec 7 1941 that it could be nothing else but a plan to go to war. It wasn’t until 1943 that we returned to employment levels of 1928. Going to war was a last resort to end the depression. Currently, Saudi Arabia won’t take the US dollar for debt payment. They are demanding gold. What will happen if China does the same. Bury your gold now and get it out of safe deposit boxes if you have any because the gov’t will raid them if it follows in the steps of FDR. I have seen at least 3 newsletters already from reputable groups that say the end of personal ownership of precious metals is about to end.

  11. Bob Baker August 24, 2010 at 10:20 pm #

    Hey Jim, great piece. I’m linking to it on my sight. I noticed after you had the trouble with your blog being unavailable for a bit about a month ago, that when the piece reappeared all the quotes and apostrophes appear as html code. It makes it hard to read.
    Still love the piece.

    Bob Baker

  12. Jim August 24, 2010 at 10:37 pm #

    Thanks for the kind words.

    Holy shizam! I had not noticed that the blog had the html code when it got reloaded on a new web server.

    Thanks for the heads-up – I’ll try to get that fixed dammit!


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