Joint Resolution of June 5, 1933

Joint Resolution of June 5, 1933 was a pivotal legislative act of the New Deal that abrogated the gold clauses in public and private contracts. Enacted during the Great Depression under the administration of President Franklin D. Roosevelt, it declared such clauses contrary to public policy and unenforceable. This resolution was a cornerstone of the government's effort to devalue the United States dollar and implement a managed currency system, fundamentally altering the nation's monetary framework.

Background and Context

The global economic catastrophe of the Great Depression placed immense deflationary pressure on the United States economy, exacerbating debt burdens and bank failures. Upon taking office in 1933, President Franklin D. Roosevelt moved swiftly to address the financial crisis, declaring a national bank holiday and securing passage of the Emergency Banking Act. A central component of his strategy involved taking the country off the gold standard, initiated by Executive Order 6102 which prohibited the hoarding of gold. The Thomas Amendment to the Agricultural Adjustment Act had already granted the president authority to devalue the dollar. However, millions of existing bonds and contracts contained "gold clauses," which promised repayment in gold coin or its equivalent value, threatening to undermine devaluation efforts by vastly increasing government and private debts if enforced.

Provisions and Key Clauses

The resolution contained several decisive provisions aimed at nullifying gold-based obligations. Its core declaration stated that requiring payment in gold or a specific amount of money measured by gold was "against public policy." It rendered every obligation, whether incurred before or after its passage, "discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts." This applied to obligations of the United States Government as well as those between private parties. The resolution thus effectively voided the gold clause, ensuring that debtors—including the massive borrowing undertaken during World War I—could repay in devalued paper dollars.

Legislative History and Passage

The resolution was introduced as House Joint Resolution 192 during the first First 100 Days of the 73rd United States Congress. It moved rapidly through the legislative process, reflecting the urgency of the administration's economic program. The House passed the measure on May 26, 1933. After consideration, the Senate passed an amended version on June 3. The House agreed to the Senate's changes on June 5, 1933, and it was signed into law by President Franklin D. Roosevelt. Its passage was a key element in a series of actions that included the Emergency Banking Act and the abandonment of the gold standard.

Impact and Legal Challenges

The immediate impact was to facilitate the Gold Reserve Act of 1934, which formally devalued the dollar and raised the official price of gold. This devaluation aimed to create inflation to relieve debtors and stimulate the economy. The resolution's constitutionality was immediately challenged in a series of landmark Supreme Court cases known as the Gold Clause Cases. In 1935, the Supreme Court of the United States, in rulings such as Norman v. Baltimore & Ohio Railroad Co. and Perry v. United States, upheld the government's power to nullify gold clauses in private contracts as a valid exercise of its monetary authority under the Commerce Clause. However, in a nuanced decision on government bonds, the Court in Perry v. United States ruled that while Congress could abrogate the clause, the plaintiff had not proven actual damages.

Repeal and Legacy

The Joint Resolution of June 5, 1933, was effectively rendered obsolete by subsequent legislation but was never formally repealed. The Bretton Woods system established after World War II created a new international monetary order, and the final break with gold came under President Richard Nixon with the closure of the gold window in 1971. Congress later passed the Public Debt Act of 1982, which reaffirmed the ban on gold clauses for obligations issued after 1977. The resolution's legacy is profound, representing a permanent shift in monetary sovereignty where the Federal Reserve's fiat currency, not a metallic standard, became the basis of the United States dollar. It remains a critical case study in the expansive federal power over economic policy during a national emergency. Category:1933 in American law Category:New Deal legislation Category:United States federal banking legislation Category:73rd United States Congress