Executive Order 6102, the Spring Americans Were Ordered to Turn In Their Gold

Imagine that the government sent you a letter that said, in effect: that money you saved, the kind that has been money since the pharaohs, is now a crime to keep. Please bring it to the bank by the first of May. We will give you paper in exchange. The paper is as good as gold, we promise. By the way, within the year the price of the gold you turned in will go up by about two-thirds, and the profit will belong to us.

That is not a dystopian novel. That is the spring of 1933, and the story is told in the fine print of the Statutes at Large. It is the kind of history that should be taught in every civics class and almost never is, because it is awkward for everyone who would like to believe that Washington's promises about money are rock solid.

I am going to tell it in order, with the dates, because the dates are the argument. Then I will try to say what it means, fairly, because the people who defended this policy were not cartoon villains, and the strongest case for what they did deserves a hearing before I answer it.

The setting: a country without a bank

By the winter of 1932 and 1933, the American banking system was coming apart. The Depression was in its fourth year. Banks had failed by the thousands, and depositors who had seen their neighbors lose their savings were lining up to take their money out. Many of them took it in gold. States began declaring bank holidays to stop the runs, and by early March 1933 the system was effectively paralyzed.

Franklin Roosevelt was inaugurated on March 4, 1933. On March 6 he declared a national bank holiday, closing every bank in the country for several days. On March 9, Congress passed the Emergency Banking Act in a single day, with little debate. That law did several things, and one of them would matter enormously. It amended a World War I statute, the Trading with the Enemy Act of 1917, so that its emergency powers over gold could be used by the President in a national emergency, in peacetime. A law written to deal with wartime enemies was turned on American citizens.

Keep that in mind, because the pattern recurs through the whole story: an emergency, a broad delegation of power, and a statute written for one purpose put to use for another.

April 5, 1933: Executive Order 6102

On April 5, 1933, President Roosevelt signed Executive Order 6102, titled "Forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates." Its text is short and its reach was enormous. In summary:

1. It required people to deliver their gold to the Federal Reserve system. All persons in the United States had to hand over, to a Federal Reserve Bank or a member bank, all gold coin, gold bullion and gold certificates they held, by May 1, 1933.
2. It carved out some exceptions. An individual could keep up to $100 in gold coin and certificates, along with gold used in industry, a profession or the arts within reasonable limits, and rare coins of special value to collectors.
3. It set a price. The government would pay for what it collected at the statutory rate of $20.67 an ounce, the long-standing price of gold in dollars.
4. It attached a penalty. A person who violated the order faced a fine of up to $10,000, imprisonment of up to ten years, or both.

Let me give you the arithmetic of what that meant to one household, and I will label it plainly as a hypothetical. Picture a family in Pennsylvania that kept 100 ounces of gold in a strongbox, a figure invented for the example. At the government's price of $20.67 an ounce, 100 ounces brought $2,067 in paper. Hold that number. We will come back to it.

The legal theory was that gold hoarding was a drain on the banking system, which was in crisis. The practical effect was that, for the first time in the nation's history, private ownership of the monetary metal was made a crime for most citizens.

What the Constitution says, and what it was doing

Let me bring in the measuring stick, because it is the heart of the matter. Article I, Section 8, gives Congress the power "To coin Money, regulate the Value thereof, and of foreign Coin." Article I, Section 10 forbids the states from making "any Thing but gold and silver Coin a Tender in Payment of Debts." The framers had seen the Continental dollar collapse. They wrote a monetary constitution built around hard money, and they gave the power over it to the legislature, not the President.

Executive Order 6102 was, formally, an exercise of delegated power from Congress under the amended Trading with the Enemy Act. That is the defense. The critique, and I think it is a strong one, is that this is the modern pattern in miniature: a legislature hands a sweeping power to the executive in a moment of panic, and the executive then uses it to reach into the ordinary property of citizens. You will notice the same pattern in the discussions on No Money Shall Be Drawn but by Appropriation, Congress's Power of the Purse about who holds the purse, and in the long argument about a government that can reprogram money, which comes up in A central bank digital currency is a dollar Washington could program.

January 1934: the Gold Reserve Act and the revaluation

The second act came the following winter. Congress passed the Gold Reserve Act, signed on January 30, 1934. It did the following:

• It transferred title to all the gold held by the Federal Reserve Banks to the United States Treasury.
• It ended the circulation of gold coin and made it clear that gold would no longer be money in ordinary American hands.
• It authorized the President to change the dollar's gold content by proclamation.

The next day, January 31, 1934, Roosevelt used that authority and fixed the price of gold at $35 an ounce. Before 1933 the price had been $20.67. So the government had collected the people's gold at $20.67 and then raised the official price to $35.

Now return to the family in Pennsylvania. Their 100 ounces, handed over at $20.67, brought $2,067. At $35 an ounce, those same 100 ounces were worth $3,500. The difference, $3,500 minus $2,067, is $1,433. That sum did not go to the family. It went to the Treasury's books. A rise from $20.67 to $35 is an increase of about 69 percent (35 divided by 20.67 is about 1.69). The people who had obeyed the order took a loss in purchasing power relative to gold, and the government captured the gain.

I want to be fair here, because there is a serious defense. The administration argued that the dollar had to be devalued against gold to raise prices, ease the debt burden on farmers and workers, and end the deflation that was crushing the country. Many economists, then and later, agreed that the old gold standard had worsened the Depression by forcing deflation, and the countries that left gold earliest tended to recover earliest. That is a real argument, and it is one I discuss in the context of sound money in Gold standard, Friedman's rule or today's Fed, three answers compared.

But notice what the defense does not answer. Even if devaluation was wise, the method was to order citizens to sell at the old price and then to change the price. A policy can be defended on its merits and still be condemned for its manner. The state took the benefit of the revaluation for itself.

The gold clauses and the 1935 cases

There was a second piece. Many contracts, including bonds, mortgages and government securities, contained "gold clauses," promises to pay in gold dollars of a specified weight and fineness, or the equivalent. They were a defense against exactly the inflation the revaluation was designed to produce. On June 5, 1933, Congress passed a joint resolution declaring all gold clauses against public policy and voiding them, both in future and existing contracts.

That raised a stark question: could Congress cancel a promise to pay in gold that it had itself made in government bonds? The Supreme Court decided the Gold Clause Cases in February 1935. In Norman v. Baltimore & Ohio Railroad Co., the Court upheld, by a vote of five to four, Congress's power to void the gold clauses in private contracts under its monetary powers. In Nortz v. United States the Court likewise ruled for the government. And in Perry v. United States, the Court said that Congress had no power to repudiate its own bond obligation, a statement of principle that sounds reassuring, but then held that the bondholder, having been paid in dollars that still bought as much as the gold would have, had suffered no actual monetary loss and could not recover.

Read that again. The government was told it had acted wrongfully and then won because the bondholder could not show a monetary loss. Four Justices dissented in the Norman case, and their anger was plain. What I am certain of is that the cases left the principle bruised and the money power firmly in the government's hands.

The long road to 1971

Gold remained the anchor of the international system after the war. At Bretton Woods in 1944, the Allies built a system in which other currencies were pegged to the dollar and the dollar was convertible into gold at $35 an ounce for foreign governments and central banks, though not for ordinary Americans. For about a quarter century the arrangement held, but the United States spent more abroad than it could back with gold, and foreign governments began to ask for their gold.

On August 15, 1971, President Nixon announced that the United States would no longer convert dollars into gold for foreign governments. This is called "closing the gold window." It was presented as a temporary measure. It was not. From that day, the dollar was a pure fiat currency, backed by nothing but the government's authority and the public's willingness to accept it. The decade that followed, with its double-digit inflation, is a story for another column, and I have told it in The Great Inflation of the 1970s was a policy choice, not bad luck.

Private ownership restored

The last chapter is a quiet one. In 1974, Congress passed and President Ford signed a law, Public Law 93-373, repealing the ban on private ownership of gold. It took effect on December 31, 1974. For the first time in more than forty years, Americans could legally hold gold bullion and coins again.

The restoration took forty-one years, which tells you how reluctant a government is to give back a power once it has it. If the executive order was an emergency measure, it was the longest emergency in the history of the Republic.

Steelmanning the other side

Let me state the best case for what Roosevelt did, as its defenders would state it.

They say the banking system was collapsing; depositors converting deposits to gold made it worse; the gold standard was a strait-jacket that forced deflation on a country already drowning in it; and decisive action was needed. They say that the order saved the banks, stopped the runs and let the government reflate. They say Americans lived through it and went on to prosper.

And some of that is true. The bank holiday and the Emergency Banking Act did restore confidence, and the departure from the old gold standard did end the deflation.

Now the answer, in numbered points.

1. The problem was the standard, not the savers. If a gold standard forces a government to choose between its people and its promise, then the fault lies in the promise. The government chose to change its own promise, and it ordered citizens to bear the cost.
2. The method treated ordinary property as a public resource. A citizen who had committed no offense, who simply owned what the law had always allowed him to own, was told to hand it over under threat of ten years in prison.
3. The government took the profit. Whatever the merits of devaluation, the gain from the change in the price went to the Treasury and not to the people from whom the gold had been collected.
4. The courts blessed it by technicality. The Gold Clause Cases condemned the principle and then upheld the result.
5. It took more than four decades to undo. A power taken in an emergency became part of the toolkit of the state.

I do not conclude that gold is the only sound money, or that a restoration of the old standard is necessary. Honest people argue about that. My point is narrower. When the government says that your paper claim is as good as the real thing, the history of 1933 to 1974 is a reason to read the fine print.

What it says about government and money

Here is the lesson I draw, and I will state it as a value judgment because it is one. A free people's savings should not depend on the goodwill of the government that controls the money supply. That does not mean you should stuff gold in a mattress. It means you should understand that the value of money is a political fact as well as an economic one, and that the people who run the printing press can change the terms of your savings without your vote. That is why conservatives care about sound money, about limits on delegated power, and about the Federal Reserve's accountability, which you can follow in inflation hurts the poor most, and the arithmetic of a fixed paycheck.

It also means the practical side matters. If you want to understand what metal can and cannot do for a saver, read Gold and Silver as Savings, How They Work and the Risks Sellers Don't Mention, which covers the costs and risks that sellers rarely mention. History is a good teacher, and a poor salesman. The 1933 story shows what the government can do. It does not tell you what will happen next.

The case in brief

1. On April 5, 1933, Executive Order 6102, issued under the Trading with the Enemy Act as amended by the Emergency Banking Act, ordered Americans to surrender most of their gold coin, bullion and certificates by May 1 at $20.67 an ounce, on pain of a fine of up to $10,000 and ten years in prison.
2. The Gold Reserve Act of January 30, 1934 and the proclamation of January 31 revalued gold to $35 an ounce, about a 69 percent rise, with the gain going to the Treasury.
3. The Gold Clause Cases of 1935 let Congress void gold clauses in private contracts by a five to four vote and left bondholders without a remedy in practice.
4. Nixon closed the gold window on August 15, 1971, and private ownership was restored effective December 31, 1974, forty-one years after the order.
5. The lesson is not that gold is the only sound money but that the power to define money is the power to rewrite your savings, which is why citizens should watch delegated emergency powers closely.

What you can do: read Article I, Section 8, Clause 5 on the Constitution page, then look up the Trading with the Enemy Act of 1917 and ask your representative's office whether it favors limiting emergency powers delegated to the executive.