Wednesday, January 12, 2011

F.D.R.'s Domestic Policies Revisited

Despite what many of us are taught in school, more are starting to acknowledge that F.D.R's domestic policies exacerbated, compounded, and prolonged The Great Depression.  Another misconception is that President Herbert Hoover "did nothing" before F.D.R. "saved the day".  This could not be further from the truth, as Jonah Norberg writes in Financial Fiasco (page 105):

"One of the architects of Roosevelt's new policy program, Rexford Guy Tugwell, confessed years later, 'We didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started'."

Further perspective on F.D.R.'s arrogant central planning can be found in the following books:
Burton Folsom:  New Deal or Raw Deal
Jim Powell:  FDR's Folly
Amity Shlaes:  The Forgotten Man

In the third and final installment (Part 1, Part 2, Part 3) of an article regarding the history of U.S. monetary policy, Jacob Hornberger states:

"It is impossible to overstate the significance of the Franklin Roosevelt administration’s confiscation of gold and its nullification of gold clauses in contracts. It is one of the most sordid episodes in American history. To get an accurate sense of Roosevelt’s actions, it would not be inappropriate to compare what he did with the domestic economic policies of a later 20th-century ruler, Cuba’s socialist president, Fidel Castro.

On April 5, 1933, newly inaugurated President Roosevelt issued Executive Order 6102, which prohibited the “hoarding” of gold by U.S. citizens. Americans were required to turn their gold holdings over to the federal government at the prevailing price of $20.67 per ounce.

Pursuant to Roosevelt’s executive order, anyone caught violating the law was subject to a federal felony conviction, 10 years’ confinement in a federal penitentiary, and a $10,000 fine. Soon after the confiscation, U.S. officials announced that the government would sell its gold in international markets for $35 an ounce, thereby devaluing the dollar by almost 70 percent and immediately “earning” a potential profit of almost $15 an ounce on the gold it had confiscated.

Two months later, Congress enacted legislation nullifying gold clauses in both government and private contracts, thereby requiring creditors in such contracts to accept devalued paper money in payment of such contractual obligations, even though the contract itself stipulated payment tied to gold.

Reflect for a moment on the significance of what Roosevelt did. Gold coins and gold bullion were private property, just like a person’s automobile, clothing, home, and food. On the mere command of the president of the United States, federal authorities simply confiscated gold holdings that were the private property of the American people and made it a grave federal offense to own such property in the future.

The gold seizure was no different in principle from Fidel Castro’s seizure of homes and businesses more than 25 years later in Cuba, an episode that U.S. officials still rail against while praising what Roosevelt did. Sure, Roosevelt paid Americans more money for the gold he seized than Castro paid Cubans and American companies for the property he seized, but the principle was the same: the rulers in both Cuba and the United States could appropriate people’s property at their whim."


Alissa said...

Patriotism does not automatically equate to willingness to part with gold. If I buy gold coins I would want to keep them for myself. I understand that the country needed all the gold it can get at the time. Still, some kind of exchange would have been better.

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