The Myths and Reality of Gold Confiscation
by James Turk
There are a number of common misconceptions about the gold confiscation foisted on the American people by President Franklin Roosevelt in 1933. Most of these have been offered as justification for FDR’s nefarious deed, and over time have endured to become urban legends.
For example, perhaps the biggest and most enduring myth is that FDR had to confiscate gold because it was needed to back the dollar, which was still defined as 23.22 grains of fine gold, i.e., $20.67 per ounce. What the propagators of this popular myth conveniently ignore is basic math.
In December 1932, the US Gold Reserve equaled 204.5 million ounces. This weight was slightly more than the reserve’s average weight of 202.2 million ounces from the October 1929 stock market crash through December 1932, a period that covers the worst of the depression.
After FDR’s election victory in November 1932, rumors began circulating that once in office, FDR would seize the people’s gold. Because of these rumors, which perhaps originated from tips by White House insiders who knew of the confiscation scheme, dollars were redeemed for gold, as was possible at the time, and much of this gold was exported or simply hidden. This point is explained in detail in Milton Friedman’s The Monetary History of the United States.
As a result of these redemptions of paper dollars for physical gold, the US Gold Reserve dropped to 193.3 million ounces by FDR’s inauguration in March 1933. With the confiscation thereafter in place, the outflows stopped, and the reserve began to grow with the metal collected from the confiscation. The reserve reached 195.1 million ounces in January 1934 when FDR re-defined the dollar as only 13.71 grains. It was a 41% devaluation of the dollar, which meant that it thereafter took $35 to exchange for one ounce of gold. So here is the math.