American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold

Came across this book while doing work on the 1933 Saints and the confiscation of American's gold holdings.

This book goes into the personalities (FDR, the Supreme Court), the law, the policies, the debates, etc. It focuses on the consolidated 4 cases known as the Gold Clause Cases, which asked if the government could abrogate the clauses in bond indentures requiring payment in gold coin (or gold value) to protect against inflation and/or devaluation of the dollar. It's a fascinating case and alot closer than most realize (mostly 5-4 decisions).

If you are a collector of gold coins...or are just interested in their history (especially Saint-Gaudens DEs)....or are a lover of history....student of economic or monetary policies.....conspiracy theorist .....then this book is for you.

An excellent review of the book which touches upon the political and legal issues is here:

https://eh.net/book_reviews/american-default-the-untold-story-of-fdr-the-supreme-court-and-the-battle-over-gold/

Without history turning out the way it did, the government may not have been able to force compulsory sales of gold from the American people....the 1933 DEs might have been released....and even 1934, 1935, and later years would have seen mintages.

 

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You would benefit from reading Bernard Baruch.

 

Ah, but would we still be the world's reserve currency these 90 years later?

Nobody can know, I'd say. But while I don't believe anybody understands all the factors here, I suspect that I understand fewer of them than a lot of you, so I'll be watching the thread with interest.

 

Interesting financier, my uncle had dealings with him, but not sure he was more than a bit player in FDR's decisions regarding gold.

Do you know something I haven't yet come across (he's only mentioned in passing 2 times in the book) ?

 

I am less upset with going off the gold standard and inflating monetary policy as I am with the heavy-handed tactics regarding the seizure of American's gold.

Inflate, devalue, print money, whatever -- that is CLEARLY under the government's control. Telling the American people to turn in their gold was theft, IMO.

 

A bit player that was the largest owner of physical gold and was blind sided. More than a bit player. Revisionist history and lack of mention...there is always a reason.

 

I don't believe the book mentions him as any large holder of gold. It's possible.

Do you have a source ?

 

Sure.
Bernard Baruch: Adventures Of A Wall Street Legend.
James Grant.

Baruch owned 75,000 OZ.

A man that was so important to the U.S. War Effort in 1917 and a key advisor to Roosevelt prior, during and after 29, and the War years, and a close friend of Churchill, was blindsided by the 5 April 33 announcement, and the $20.67/OZ. surrender Order, when it was $29 in Europe. He was right that gold would increase at least 60%. In 35 the price went to 35.00.

He advised every POTUS until his death in 1965-including Ike, Kennedy, Johnson. Interestingly, he advised all to stay out of Indochina.

His sworn testimony before the Secretary Of the Treasury concerning his gold purchases are a matter of Record, as are the testimony of the Mining Co. that sold him the Bars and the Euro source that sold him the Bars. It was a vindictive attempt to smear him and Roosevelt and Churchill.

There are many reasons he does not get much Play.

There is no surprise that Edwards skirts the issue; not the least being the Chile connection. Maybe you are unaware of his view of economy.

Truth in editing: added a "t" where appropriate.

 

I did have to go off and search on Baruch after @charley's first post. I'd heard of him, but knew nothing about him. He lost out on a million-dollar speculative win (tens of millions in today's dollars) as a result of the surrender order.

 

$2.67 Mil, but who is counting....and yet his contributions to the U.S. never waivered and he was never bitter, and his astute advice was instrumental in preparing and executing WWII.

On our way to school, he would be walking in the park, and was very friendly and unassuming, would chat with us and anyone passing by. i did not know anything about him personally, and one day he was in Walter Reed when I went to get a ride home with my father, and I mentioned to my father I saw him in the park all the time, and that is when I was told about him. I was hooked.

 

75000 ounces at $20.67 was $1,550,250, right? He was forced to turn it in for that same price, instead of the $2,625,000 it was worth post-revaluation. They didn't seize gold, they made everyone exchange it for cash.

 

Yep, so 2.67 mil. Wait a minute....I thought he was a bit player.
BTW, you have a funny way of counting. I have 4 million worth of monopoly $. I demand you give me $10,000 U.S. Cash for it. Now.
I am just speculating, because I don't know stuff.

 

If all the groceries, businesses, real estate, and politicians I want to buy are priced in monopoly money, and monopoly money is the only legal tender for those transactions, yeah, I need monopoly money, not "U.S. Cash".

Baruch lost no nominal dollars in this scenario. He lost value to the same extent as anyone else stuck holding US greenbacks, but that loss was not 100%.

Or am I still misunderstanding your point? (FWIW, I'm not one of the people calling him a "bit player" -- certainly not in American politics.)

 

It is not important.

 

Love it Just read QDB's Golden anniversary book check out chapter 49 and 50 and the likes of scrupulous mint cashier's (the black demon) Frank Leland Howard and topics on Farouk 33 Dbl Eagle followed by the dealers treatment to the grandmother of Coins. Mrs. Emery Mae Norweb! Reminds me of DC politics as recent! Getting that book ASAP better than coins lately! Thanks for sharing!!!

 

One of the few James Grant books I haven't read (reading his 1921 Depression book right now).

But I don't think Edwards ignores Baruch, he simply doesn't figure into the debate. It appears that Baruch probably would have counseled FDR to NOT go off the gold standard. If he owned 75,000 ounces -- no reason to doubt you -- he lost out on some nice gains. The book focuses on The Gold Clauses, and as a sound-money man I am sure that BB would not have favored a judicial or political attempt to abrgogate.

Not sure the relevance of Chile.

 

Got a link ? Didn't know he wrote a new book !

Gotta check this book out when I find out the title, thanks for the heads-up, DB !

 

Coins & Collectors: Golden Anniversary Edition by Q. David Bowers: Good (2014) | Books Unplugged (abebooks.com)
Thanks Goldfinger just got Amer. Defaults for $4.47 at Abe Books!

 

Nice !! We can discuss the book as we each finish it !!

 

Some interesting tidbits from American Default ; I've made it through a few chapters so far:

• FDR while campaigning in the final weeks of the 1932 campaign...was cagey and deceptive and objected when attacked as being a "devaulationist" or willing to tinker with the value of gold. While he did not offer any outright hard policy prescriptions or promises or red lines, he did cover his you-know-what by saying he had no plans to do what the Hoover campaign attacked him on. Of course, once in office he did a 180.

• Once FDR was elected but before sworn-in, lame-duck Hoover tried to coordinate policies with the incoming FDR team to stop bank failures, currency and gold drain, etc. But FDR wouldn't commit to anything so Hoover's hands were tied. FDR's team really didn't look good as they ended up doing pretty much what the Hoover folks were saying they could have done weeks or months sooner.

• A week after the Emergency Banking Act was passed by FDR during his first days, the government sold $800 MM in Treasuries....WITH the gold clause they were eliminating elsewhere ! .

• After the EBA was passed, gold holdings continued to decline. By mid-March it was estimated that about $1 BB was being hoarded in gold coins, gold certificates, and currency. They fell $188 MM in 3 weeks from the time of the EBA.

• On March 3rd, 1933.....the FRB NY lost $250 MM in gold and $150 MM in currency and fell below the 40% backing of currency with gold ($250 MM short of the target).

Really enjoying this book. Could have thicker/additional data in the footnotes, which would also be better at the bottom of the book instead of at the end. Minor quibbles, though.