It’s often cited that the dollar has lost 95-98% of its value since the creation of the Federal Reserve in 1913. While Fed policies have contributed to the devaluation of the dollar over the past 100 years, two U.S. Presidents did more in single actions to debase the dollar than the Fed ever did.
The Dollar Destroyers: President Franklin Delano Roosevelt and Richard Milhous Nixon.
Pursuant to Roosevelt’s Executive Order 6102 U.S. citizens were required to turn in their gold to the U.S. Government
In April 1933 with a stroke of the pen, FDR issued Executive Order 6102, requiring U.S. citizens to turn in their gold coins (like the $5 and $10 gold coins pictured below), gold bullion and gold certificates to the government. At the time gold coins were circulating in the United States and gold was considered money. The dollar’s value was tied to gold rate of $20.67 an ounce. Under Roosevelt’s order the government honored the $20.67 an ounce price in exchange for its citizens gold.
After issuing executive order 6102, Roosevelt began stockpiling gold from mining companies and from foreigners. In the month following the issuance of the EO6201 Roosevelt himself, in consultation with his future secretary of the treasury Henry Morgenthau, would set the gold price nudging it ever higher.*
Dollar Devalued 41% in 1934
In January 1934 Congress passed the Gold Reserve Act which, among other things, changed the nominal price of gold from $20.67 an ounce to $35 an ounce providing Roosevelt’s government with a tidy 69% gain on their confiscated gold and a loss of 41% in purchasing power of the dollars people received in exchange for their gold. (see chart below).
The fixed price of gold of $35 an ounce remained in place until 1971 when Nixon unilaterally took the United States off the gold standard and closed the gold window.
A year later, FDR signed Executive Order 6814 confiscating silver.Learn more here.
Richard Milhous Nixon – Executive Order 11615
On August 15, 1971 Richard Nixon signed Executive Order 11615. Pursuant to that order Nixon instituted wage and price freezes to combat inflation and imposed a 10% surcharge on imports to support American industry.
Later that evening President Nixon appeared on national television (preempting the popular “Bonanza” show) to announce that he was unilaterally ripping up the Bretton Woods Agreement of 1944 that provided that foreign central banks could redeem their dollars at the U.S. Treasury for gold. Click here for background on the Bretton Woods Agreement.
Nixon announced that he was suspending the convertibility of dollars into gold. The measure was necessary, as Nixon explained, to protect the United States against “international speculators” that were harming the American worker. In reality, Nixon closed the gold window to prevent an all out run on the United States’ gold reserves.**
In this short video you can hear Richard Nixon explain that taking the U.S. off the gold standard was good for the United States, good for the world and wouldn’t result in inflation:
Dollar Devalued 51% 1971-1972
Stocks soared the next day with the Dow Jones turning in a 33 point gain-the largest ever to date. Nixon and his Treasury Secretary John Connoly had turned a collapsing dollar in to a show a strength! The dollar, however, immediately lost ground against gold and in a few months the price of gold rose from $35 to well past $50 an ounce resulting in a 51% devaluation of the dollar. As inflation raged during the 1970’s, gold continued its ascent until 1980 when it reached an then all time high of $800 an ounce.
The Executive Orders of Roosevelt and Nixon resulted in dollar devaluations of 41% and 52%, respectively
Lost Dollar Purchasing Power Relative To Gold
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* an interesting account of how Roosevelt and Morgenthau fixed the price of gold can be found in “New Deal or Raw Deal” by Burton Folsom, Jr. In one instance Morgenthau suggested a price rise of 19 to 22 cents per ounce. Roosevelt thought 21 cents was the appropriate amount for gold to rise because 21 “was a lucky number”.
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