Some facts of gold during theDepression
"Because the world is round, what is right side up in the U.S. is upside down to China. Because of the geography of economics, gold miners like Chinese, are upside down compared to other men. Most businessmen worry about what price they will get for their product, but in normal times gold miners never worry, since an ounce of gold is (normally) the ‘makings’ of $20.67, the price they can get for their output never varies a penny. If other prices go up, other men are apt to profit, but for the gold miner that means only higher costs (no bigger income) and consequently smaller profits.
"Last March when Franklin Roosevelt ruled that money was not gold, he broke the old equation; $20.67 would no longer buy an ounce of gold. He cheapened the dollar to make prices go up to let businessmen profit. But he did not break the equation so far as gold miners were concerned. He would not let them sell their gold to anyone except the U.S. Government and the Government would pay only $20.67. Gold miners were out of luck - their costs mounted but the price of their product remained the same."
-- Time magazine, September 11, 1933 edition
This situation had become intolerable and grossly unfair to the gold mines. The costs were rising rapidly. The mere cost of living had jumped 9% since March of 1933. Therefore, Roosevelt decided to allow the gold mines to deliver their product to the Federal Reserve and the Fed would sell gold to foreign buyers at the world price. This tended to export inflation to other nations, such as France, that had remained on the gold standard. At the same time, this meant that gold was a commodity in that respect and the proceeds were then credited to the trade balance. The annual U.S. production was about 2.5 million ounces so this would add approximately $75 million to this economic statistic which previously had not been included.
However, along with that decision came a harsh rule as well. It had been estimated that $500 million in gold coin had not been returned to the government as the edict had demanded back in May. The Attorney General was then armed with another new law. Roosevelt could not declare it to be illegal outright to own gold since that would have been a flagrant violation of the Constitution.
So he took another approach which the courts ruled permissible. It was thereby ordered that all U.S. citizens file a report to declare how much gold they held. Failure to file the report carried a $10,000 fine or ten years in jail. So technically it was not illegal to hoard the gold, it was just illegal not to tell the Government that you were holding it. This was merely one example of the sumptuary laws which were being implemented through the clever tactics of switching a few words here and there to circumvent the true liberties which had been originally granted by the Constitution.
Although the free press in many cases was hard at work trying to protect the rights of the nation, it was a losing battle. Reprinted here is an advertisement which the New York Herald Tribune took out in the Wall Street Journal. This was one of eight advertisements in which the Tribune took upon itself to stand up and fight back. The headline "Time To Fight" was well taken.
The biggest crime perpetrated upon the nation was that the people voted for a man who had not revealed his true intentions of how his "New Deal" was going to achieve its goals.
-- 1933, from "The Greatest Bull Market In History", Martin Armstrong
"FLOWN DOLLARS"
"Dollars sank last week to the lowest level since the U.S. quit the gold standard, 63 cents. Because President Roosevelt had not yet seen fit to devalue the dollar, the price is determined by supply and demand in international exchange. And because the U.S. has a favorable trade balance, demand is normally greater than supply.
Whence the dollar flood has eaten away 35 cents of every 100 cents in each U.S. dollar since last April. Continental money-changers, canniest of whom are reputed to be ‘the Greeks,’ delight in selling dollars short, but bankers know that accounted for only a fraction of the drop. Last week from the British Commonwealth Relations Conference in Toronto came confirmation of what Wall Street has long suspected; that U.S. citizens have exported their dollars by the hundreds of millions.
"‘One of our problems,’ droned Viscount Cecil of Chelwood, chairman of Britain’s delegation, ‘is the flood of unwanted money that is pouring into our banks. These funds, deposited in the main by U.S. investors, are subject to withdrawal at 24- hour notice and are of little or no value, though it has not yet been discovered how to get rid of them.’
"Standard Statistics Co., Inc., world’s largest figure factory, estimated that $1,000,000,000 had flown the Atlantic, the bulk of it to London. France, whose tie to gold is none too secure, has received little, but Holland and Switzerland have been drowned in dollars. Unlike exports of gold which is strictly banned (for private citizens) the flight from the dollar has been quietly encouraged by Washington; it pushed down the price without requiring devaluation by Presidential decree."
-- Time magazine, September 25, 1933 edition