Executive Order 6102

Executive Order 6102 was a directive issued by President Franklin D. Roosevelt in 1933 during the Great Depression. The order, issued under the authority of the Trading with the Enemy Act of 1917, required all persons in the United States to deliver most forms of gold coin, gold bullion, and gold certificates to the Federal Reserve in exchange for paper currency. This controversial measure was a pivotal part of Roosevelt's New Deal economic program, aiming to combat deflation and stabilize the banking system.

Background and context

The order was enacted amidst the severe financial crisis of the Great Depression, which saw widespread bank runs and a collapse in the money supply. A key element of the crisis was the gold standard, which many economists and officials, including Secretary of the Treasury Henry Morgenthau Jr., believed constrained the government's ability to increase the money supply and fight deflation. Preceding actions, such as the Emergency Banking Act and a prior executive order that had halted gold exports, set the stage for this more drastic step. The legal justification was rooted in the Trading with the Enemy Act of 1917, a World War I-era statute granting the president broad powers during times of national emergency.

Provisions of the order

The order mandated that all individuals, partnerships, associations, and corporations deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates to any Federal Reserve Bank or member bank of the Federal Reserve System. The exchange rate was set at $20.67 per troy ounce. Exemptions were made for customary use in industry, profession, or art, as well as for gold coins with recognized special value to collectors. Individuals were allowed to retain up to $100 in gold coin, and the order explicitly exempted gold already held by the Federal Reserve or held for foreign central banks. The Department of the Treasury was authorized to issue regulations to enforce the order.

Impact and effects

The immediate effect was a massive transfer of monetary gold from private hands to the Federal Reserve, effectively nationalizing the metal. This action allowed the administration, particularly through the Gold Reserve Act of 1934, to devalue the dollar by raising the official price of gold to $35 per ounce. The devaluation aimed to create inflation to relieve debtors and stimulate economic activity. The policy was a decisive break from the gold standard and was supported by economists like John Maynard Keynes but criticized by proponents of sound money and classical liberalism. It significantly increased the gold holdings of the Treasury at Fort Knox.

Legal challenges and repeal

The order faced several legal challenges, most notably in the 1935 Supreme Court case Gold Clause Cases. While the Court upheld the government's power to regulate gold ownership and void gold clauses in contracts, it delivered a complex set of rulings. The case of Nortz v. United States specifically dealt with the government's liability for redeemed gold certificates. The core provisions of the order were effectively repealed by the Gold Reserve Act of 1934, which formalized the ban on private gold ownership. The legal ability for Americans to own gold bullion was not restored until President Gerald Ford signed legislation in 1974.

Legacy and historical significance

Executive Order 6102 remains a landmark and contentious action in American economic history. It represents a major expansion of federal economic power during a crisis and a fundamental shift in monetary policy away from the gold standard. The order is frequently cited in debates about executive power, property rights, and monetary policy. It established a precedent for government control over monetary metals that lasted for four decades and is often discussed in the context of the Bretton Woods system and the eventual move to fiat money following the Nixon shock in 1971. Its history is frequently referenced by advocates of gold investment and critics of expansive government authority.

Category:1933 in American law Category:Executive orders of Franklin D. Roosevelt Category:Great Depression in the United States Category:History of the United States dollar Category:1933 in economics