There are few people left who remember when gold and silver were money.
Prior to the 1930s, banks were required to exchange your cash for gold and vice versa. Dimes, quarters, half dollars and dollar coins were made of silver. Dollars were backed by silver and gold.
That is when money was real.
Unfortunately, the gold standard effectively ended in the 1930s. President Franklin Delano Roosevelt claimed to fear that gold imposed a straitjacket on the banking system and credit creation. And if Americans hoarded gold, the economic crisis might deepen.
On March 6, 1933, two days after his inauguration, Roosevelt barred banks from paying gold to depositors.
On April 5, he outlawed “hoarding” — Americans had to redeem all gold coins above $100. “They [the people] came with little bags, briefcases, paper bundles, boxes or bulging pockets,” reported one newspaper.
Roosevelt also devalued the dollar in terms of gold. For years, it had been $20.67 an ounce; the government would buy or sell gold at that price. On Jan. 30, 1934, he set a price at $35 an ounce for foreigners. In practice, the nearly 70 percent devaluation meant that the gold backing for the paper currency was so ample that money and credit could expand without encountering legal restrictions.
Many people know about FDR’s Executive Order 6102, which confiscated gold from the people and criminalized the possession of monetary gold by “any individual, partnership, association or corporation.” But not as many people know about FDR’s Executive Order 6814, signed on August 9, 1934, that “required all persons to deliver [their silver] to the U.S. government.”
In exchange for the silver, people received a payment of $1.29 per ounce in the form of “standard silver dollars, silver certificates or any other currency of the United States.” But government placed a “fee” (read tax) of 61.32 percent taken out of the $1.29 per ounce for “seigniorage, brassage, coinage, and other mint charges” that reduced the payment to about 50 cents per ounce.
The order required that all silver situated in the U.S. with a fineness of 80 percent or more; and silver held in quantities over 500 troy ounces by any one person, be turned in to government. It exempted unprocessed silver of less than 80 percent fineness, silver contained in articles fabricated and held in good faith for a specific and customary use and not for their value as silver bullion (presumably silver ornaments, jewelry and/or silverware); and silver held for industrial, professional, or artistic use in amounts less than 500 troy ounces per person.
The government “nationalized” nearly 113 million ounces with this scheme and acquired an additional 1.353 billion ounces under the Silver Purchase Act of 1934. As Bill Walker wrote for LewRockwell.com:
This Act instructed the United States Treasury to purchase silver until the world price of silver rose above $1.29 per ounce, or until the monetary value of the U.S. silver stock reached one-third the monetary value of the gold stock. This huge U.S. government expenditure occurred at the worst time in the U.S. Great Depression, when most ordinary Americans were struggling desperately to avoid bankruptcy). As a result of the U.S. manipulation, from early 1933 to the middle of 1935 the price of silver had tripled.
Like the gold confiscation — which was sold to Americans as a way to stimulate the economy but was instead a scheme to allow the Federal Reserve to print more money — the silver confiscation allowed the Fed to print more money (in this case, make coins).
Most people think that a dollar is a dollar. Not so. Today’s dollars (nominal dollars) are quicksand money that financially destroys all who trust it.
Those unaware of the inflating debasing nature of nominal dollars live in a fickle and imaginary world. They believe all is well and all is safe. They are further deceived by rising stock prices in nominal dollars. One can be up 100 percent in a stock portfolio but still be losing in real dollars — very deceptive! How many investors in Warren Buffett’s famous Berkshire Hathaway realize they have been losing in real dollars for years? I don’t believe they mention this in their sensational annual reports.
Look at the nominal dollars in your pocket. They are nowhere near the value of the dollars you had as a child or that you have under your mattress.
We have had paper money since 1913, and most of that time it was being debased (inflated). The debasing accelerated after FDR and then again after money was totally removed from the gold standard by President Richard Nixon, who created the “Nixon shock” by ending the Bretton Woods agreement in August 1971. Now it’s at a 97 percent loss. We are only as rich or as poor as the purchasing power of our money.
Have you ever wondered why banks and politicians love paper money? Because they profit from it!
All modern money is nominal dollars. Look at the money in your pocket or your savings account or your retirement. You are being deceptively impoverished, and the fact that you are unaware of it makes your eventual impoverishment certain.
What can we do? Until there is a change in the monetary regime of the United States, we must get out of U.S. dollars as much as we can. Buy farmland, buy food to store, buy gold and silver, buy precious stones.
Wealth managers are often asked when recommending gold and silver for wealth protection whether a similar order will be signed to confiscate gold and silver from the people. Of course, politicians can do and will do whatever pleases them. The laws forbidding things from being done are either repealed or ignored.
But I don’t believe the total amount of gold and silver in circulation is sufficient to warrant the effort. More likely, government will just steal the more than $22 trillion in private pension funds, IRAs and 401(k) accounts.
This comes under discussion from time to time.