President Franklin D. Roosevelt, with the help of Congress, enacted the Gold Reserve Act, this week on January 31st, 1934.

With farmers rioting over deflationary commodity prices, Franklin D. Roosevelt and Congress green-lighted ‘cheaper’ dollars… and inflation… to help fight the Great Depression, and enacted the Gold Reserve Act, this week on January 31st, 1934.

The measure essentially nationalized gold holdings by requiring the Federal Reserve to surrender all gold and gold certificates…and vest the cache in sole title of the United States Department of the Treasury. The Act also authorized the Exchange Stabilization Fund to function as a currency exchange stabilizing mechanism, and raised the price of gold from $20.67 to $35.00.

A year prior, Executive Order 6102 deemed it illegal for Americans to own or trade gold anywhere in the world-with the exception of jewelry and collector’s gold coins. The Gold Reserve Act went further, placing the dollar in the realms of speculation that greatly upset numerous government types and Wall Street financiers who clung to the monetary religion of the gold standard. However, it did receive the public support of J.P. Morgan and the stock market closed up on the day with heavy volume. Additionally, the Act’s intentions placated the domestic markets with higher prices… though off the gold standard Britain feared the cheaper greenback…while France and other nations feared it would force them off gold.

It was not until 1975 that U.S. citizens could completely and freely trade gold again.

This Week in Wall Street History

1/28/08