FDR's Great Gold Heist of 1933

That Time the Government Tried to Take Everybody's Gold

Mike Maharrey Mike Maharrey
Midweek Memo
May 15th, 2024 Comments

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Some people will tell you there is no sense in owning gold or silver because the government will just take it from you. They base this notion on FDR's gold confiscation order in 1933. But the truth is that gold confiscation didn't go as well as the government hoped. In this episode of the Money Metals' Midweek Memo, host Mike Maharrey explains the gold confiscation order, why the government wanted everybody's gold, and why the confiscation scheme fell flat.

Mike kicks off the show remembering how he was a relatively obedient kid. 

"That’s because I was convinced my mom would 'kill me' if I violated any of her many rules. ... Looking back, that fear was misplaced. Mom wasn’t going to kill me. And the fact of the matter is, once I got passed about 10, she really couldn’t hurt me. The reality is that my obedience was purely self-imposed. I obeyed because at some level I wanted to obey."

People comply with the government for the exact same reasons.

Mike lets us in on a little secret: government doesn't have nearly as much enforcement power as most people think.

As an example, Mike notes the fact that virtually nobody drives the speed limit on the interstate. 

"The speed limit is effectively nullified every day because the vast majority of people just shrug and drive however fast they want. Sure, the cops can pull over a few people, but it would require an army to make every driver drive 55 or 65 or whatever the limit happens to be."

This is important to keep in mind when looking back at FDR's gold confiscation order in 1933.

"It’s true -- FDR tried to take everybody’s gold. What you may not realize is the government only got a fraction of the gold held in private hands because the vast majority of people just ignored the order."

Mike goes on to give an overview of Roosevelt's EO 6102, explaining the provisions of the order, the penalties for non-compliance, and how the president claimed the authority to issue it. He also put the order in context with other moves Roosevelt made in 1933 and 1934 relating to gold and the financial system.

That leaves the most important question: why did the government want everybody's gold?

The president sold the order as an effort to stop gold "hoarders," but in reality, the Federal Reserve needed to increase its gold holdings in order to print more money. 

"The dollar was backed by gold. That meant the Fed couldn’t significantly increase the money supply. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required the central bank to hold enough gold to back at least 40 percent of the notes in circulation. But the central bank was low on gold and up against the limit."

Keep in mind the nation was mired in the Great Depression. 

"Since monetary and fiscal stimulus - an increase in the supply of money and government spending - is the Keynesian response to an economic downturn, Roosevelt was between a rock and a hard place. He wanted the Fed to increase the money supply and support government spending but was limited by the gold standard.  By transferring gold from the public to the Fed, the central bank boosted its reserves, allowing it to print more money than it was previously able to do."

But did Roosevelt's order kick off an era of gold confiscation?

Mike thinks "confiscation" is too strong of a term.

"Roosevelt effectively nationalized gold. But the word “confiscation” conjures up images of police breaking down doors to forcibly take people's gold. That never happened."

That's not to say the government didn't collect a lot of gold. But it wasn't because federal agents went and found it. Americans by and large turned gold in voluntarily. 

The point I’m driving at is there is no evidence that federal agents went door to door searching for private holdings or seizing gold by force. People took their gold to the bank and received the promised compensation. 

It's unclear exactly how much gold the Federal Reserve collected but the best estimates put the total at between 20 and 25 percent of the publicly held gold.

"In other words, About three-quarters of people didn't comply. It’s like I said earlier, most federal actions depend on the cooperation of the people. And a lot of people just quietly ignored the order. They kept their gold and nobody was the wiser."

There were some prosecutions, but they were few and far between.

"It’s unclear exactly how many people were prosecuted under the various orders and laws, but there weren’t a lot. Most criminal actions involved individuals trying to sell gold. There are no recorded cases of individuals being prosecuted merely because they had gold in their homes. By and large, Roosevelt’s gold confiscation relied on voluntary compliance. The federal government made no effort to hunt down people who quietly ignored the order."

Mike said we can draw the following conclusion from the era of gold confiscation.

"As for gold confiscation, don’t let people scare you out of holding real money because of this EO. The lesson isn’t that the government is going to come for your gold. The lesson is the government probably can’t get your gold if you keep your mouth shut and keep it secure in your own possession."

Mike Maharrey

About the Author:

Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.