Executive Order Banning Gold Ownership

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CaptainDan

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Imagine this: you own a bunch of gold coins. Perhaps your father or grandfather gave them to you. Whatever the case, they're your private property and they were lawfully obtained. Essentially, they're no one's business but your own. All around you, economic chaos is erupting. The dollar is being viewed with skepticism and deflation is taking root. People everywhere are closing out their bank accounts and hoarding their cash. Around the country, faith is being lost in the money we use every day. The only thing that gives you comfort is the fact that you own your gold. If push comes to shove, you could either trade that gold for whatever the dollar is currently worth or you could trade it for something you need, such as food, clothes, house, etc...

Now imagine that you wake up one morning to learn that your government just made gold ownership illegal and it ordered you to hand any that you currently have in your possession to the Federal Reserve, a privately owned bank. They'll give you dollars for it, don't worry. The same dollars that are crashing around you and that people are losing faith in. They tell you your gold is no good and that it's not real money, yet they take it from you. Why? Because they want to. If you don't hand over your private property, that act will instantly make you a criminal. Welcome to the USA in 1933. This is exactly what happened when President Franklin D. Roosevelt signed Executive Order 6102 on April 5. Pretty crazy, huh? Talk about a transfer of wealth from the poor and middle class to the rich. Somehow, someway, someone just took something that didn't belong to them and it was completely legal.

Before this, the president also signed a bunch of executive orders that closed the banks for a "holiday" and upon reopening, forbade them from giving out gold in return for Federal Reserve notes. And after this, he signed some orders that forbade citizens from moving their money out of the country and from trading foreign currencies. And nearby, congress received an amendment that reduced the gold value of the dollar by 50% and that gave Federal Reserve notes full status as lawful and legal money.

What's even more interesting is this: have you ever heard of the "gold clause"? I'll need to tell you what this is so you can appreciate everything that occurred back then. During the Civil War, President Abraham Lincoln introduced a new fiat currency called the "greenback" which was used to pay the troops. Initially, this new money's worth was equivalent to that of the gold notes that were also floating around the economy. By the end of the war though, these greenbacks had been depreciated (why? money printing) and had only a worth of one-third of the gold notes (gold backed currency), yet, the government was attempting to pay off debts and contract with them. So essentially, the government of the United States had decided to print a currency made completely of paper; one that had no inherent value and one that wasn't backed by anything, and use it to pay off anyone and everyone who it was in debt to. Obviously, this didn't go over very well. Those who were wise challenged this form of payment in court and won. This ushered in the era of the gold clause. This clause said that any obligations that the U.S. government had after the war were to be paid back with gold or the equivalent of what the gold was worth. This clause protected debt holders and those who were doing business with the government from being swindled by a shady currency that was losing any value it originally had.

The problem for Roosevelt was that the gold clause was still in effect when he allowed the dollar to be devalued. And because government contracts included this clause, the government was paying a fortune out to vendors and debt holders. It's goal was to devalue the dollar to pay less in real terms, not pay the same amount as it had been previously. To deal with this issue, on June 5 of the same year, the president and congress passed a law that got rid of the gold clause. It said that it wasn't responsible for adhering to it past, present, and future. Nada. Nothing. No more. The public as well as a few senators made some noise, but that noise made little difference. What was done, was done. The dollar was no longer linked to gold as it once had been.

To recap, over the span of just a few years during the Great Depression, congress and the president of the United States devalued the currency used by the United States, gave that currency full legal status, confiscated the lawfully owned private property (gold) of the average and ordinary citizen, made owning gold a crime, and tossed the gold clause out with the trash. So if you ever thought that the people of this nation had a say with the things that truly matter, you've been terribly mistaken. What will happen will happen, regardless of how much anyone kicks and screams. Interesting, isn't it?

This post is part of a series: Guide to Investing in Gold & Silver by Michael Maloney
 
Executive Order Banning Gold Ownership was posted on 06-03-2021 by CaptainDan in the Economics Forum forum.

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