How Gold Ownership Was Made Illegal In The US & Lessons For Today
The spectre of COVID-19 has brought the potential for a new economic crisis to the world. Investors are nervous and looking to move their money into traditional safe havens such as gold. Sadly most of our population is woefully uneducated about history and economics. In this time of crisis, it is fitting that we take a look back at history and economics to see what may be in store for us in the future and the role that gold will play.
Corruption exists at all levels of our economy and the gold market is no exception. The actions of unscrupulous individuals cause the wider society to lose while benefiting the greed of those who manipulate the market. Blockchain technology brings opportunities for greater transparency and accountability which has been demonstrated in cryptocurrencies. As blockchains begin to be implemented across capital markets they have the capacity to bring those noble values to gold.
“The truth is obtained like gold, not by letting it grow bigger, but by washing off from it everything that isn’t gold.” — Leo Tolstoy
In 1933 President Franklin Delano Roosevelt issued Executive Order 6102 making private ownership of gold illegal in the United States. Before this time executive orders had only been used to mandate issues such as national mourning. Roosevelt issued 3,522 executive orders during his time as president, the first of which declared a bank holiday and forbade banks to release gold coin or bullion.
The provisions of Executive Order 6102 mandated that the public had to turn over their private stock of gold to the Federal Reserve bank. Under the law persons found to be in breach of the order could be subjected to fines of $10,000 ($200,000 in today’s currency) and/or imprisonment for up to 10 years! This was a telling move on behalf of the government and indicative of worse to come.
Although it is beyond the scope of this article it is worth noting here that the Federal Reserve is a private bank, owned by private individuals and not part of the US government. Further information on this fascinating subject can be found in this video.
During the confiscation process, the public was paid fiat currency amounting to $20.67 ($405.47 in today’s currency) per troy ounce of gold. However, directly after all the gold was collected by the Federal Reserve the government passed the Gold Reserve Act which immediately raised the price of gold from the previous $20.67 per troy ounce to $35.00, an increase of over 69%. This made a healthy profit of $14.77 per troy ounce for the new owners of the gold.
The stated reason for this unprecedented action was to protect the economy because a lack of trust in the banking system was leading people to hoard gold. However many commentators have noted that in fact these actions were undertaken to bail out the fraudulent actions of the Federal Reserve. US currency was meant to be backed by physical gold and Federal Reserve Notes were supposed to be able to be redeemable for physical gold.
In a “fireside chat” on May 7th 1933, Roosevelt admitted that far more paper money had been printed by the Federal Reserve than there was gold to back that money. In this statement, he exposed the financial corruption which had been swindling the people. He said:
“Behind government currency, we have, in addition to the promise to pay, a reserve of gold and a small reserve of silver, neither of them anything like the total amount of currency.” — FDR
Although many online transcripts of this “chat” omit this fascinating and truthful statement you can listen to it for yourself in this youtube recording of Roosevelt’s comment at minute 16:01.
It is clear that the Federal Reserve had been printing more money than there was gold to back it. To cover their tracks they needed to confiscate the public’s gold for which they would pay the public fiat paper money that they could print for virtually nothing. Raising the price of gold with the Gold Reserve Act was a way to balance the amount of fiat money in circulation with the volume of gold reserves. There were clearly a few winners in this scheme and an untold amount of losers.
It is hard to conclude that Roosevelt was acting in the interests of the American public with his executive orders and we are left wondering whose interests he was really representing.
This history lesson is valuable for us today as there is currently discussion in the mainstream media of the potential for governments to enact a similar gold seizure scheme. Due to the economic situation caused by the COVID-19 many investors are moving their money back into physical gold. Making private gold ownership illegal would deny the public the financial security represented by owning physical gold and potentially allow governments to cover up similar scams and financial trickery.
Should governments choose to ban physical gold ownership one potential option for investors might be security tokens such as MetalStream’s MSGLD which are backed by gold bullion. Security tokens such as these represent physical gold stored in vaults and give investors the chance to benefit from the security of gold without having to store the physical gold themselves. The security tokens themselves represent an immutable receipt for ownership of that gold.
Whatever laws governments enact concerning gold it is important to remember and understand our history and be cognizant of economic processes. Without this knowledge, we are open to the same manipulation and theft that was used against our forbearers.
“Those who do not remember the past are condemned to repeat it.” — George Santayana
MetalStream is the issuer of the innovative gold-backed MSGLD token. Please visit our website for more information, and contact firstname.lastname@example.org for enquires related to the purchase of tokens.