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

Discussion in 'Coin Chat' started by GoldFinger1969, Mar 1, 2023.

  1. David Betts

    David Betts Elle Mae Clampett cruising with Dad

    Ty Can't wait to get it!
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  3. Cheech9712

    Cheech9712 Every thing is a guess

    Glad you said that
  4. Cheech9712

    Cheech9712 Every thing is a guess

    That’s so nice
  5. GoldFinger1969

    GoldFinger1969 Supporter! Supporter

    I don't know how you can be the world's reserve currency AND be on the gold standard AND not drain gold. o_O

    Being the world's reserve currency implies running trade deficits and current account surpluses....which means monetary growth is higher than normal (interest rates LOWER than normal)....which means if you were on the gold standard (like we were post-Bretton Woods) you'd lose gold.

    Maybe if the price of gold were set artificially high it would be tolerable for a while. But that would entail other problems surfacing.
    -jeffB and David Betts like this.
  6. calcol

    calcol Supporter! Supporter

    I read the whole thing and learned more than I needed about FDR’s monetary policy in the early 1930s. Pretty well written and very well documented. But unless you’re a student of monetary policy and its history, it’s tedious. A tipoff to this is that the reviews on the cover are all by university professors!

    There never was a real default; it was a devaluation. FDR was unnecessarily overzealous in going off the gold standard. It had to be done sooner or later. No way money today could be backed by any precious metal … the sum total of the PM holdings of all governments is way less than the money supply. Precious metals are pipsqueaks compared to the huge world economy.

    However, the economy in the 1930s would have improved just as fast, maybe faster, if the gold clause in existing contracts and bonds had been left intact and only prohibited in the future. Gold certificates and coins when voluntarily deposited in banks or paid to the government would be exchanged for fiat dollars. All new printed currency would be in fiat dollars. And no need to confiscate gold. The gold-based economy would have withered without the prolonged, distracting and expensive legal and political battles that took place.

    Going off the gold standard was only part of the resolution effort by FDR, there were many other programs … some of which were helpful, some not. I give the guy credit though that he was willing to experiment because something had to be done. Trying different new things was better than doing nothing. The book repeatedly discusses FDR’s obsession with agricultural commodity prices. This is explained by the fact that over half the labor force was employed in agriculture in 1930; it's less than 5% today.

    Just as important was creating new laws and regulations to address the main cause of the depression which was unregulated and uninsured lending by banks and brokers. Wasn’t addressed or enforced adequately which led to the great recession of recent times.

    GoldFinger1969 likes this.
  7. imrich

    imrich Supporter! Supporter

    The truths could be told, as I recently did in response to a query post, to earn my first warning/deletion,

    I described a possible coin that would probably be as popular around the world, as our current leaders' efforts.

    Beware of what you post, as others may not appreciate!

    GoldFinger1969 likes this.
  8. GoldFinger1969

    GoldFinger1969 Supporter! Supporter

    Yeah, I had other items pop up over the last month that slowed me down and on those nights -- like last night -- that I read it late at night, I conked out and fell asleep !! :D
    calcol likes this.
  9. GoldFinger1969

    GoldFinger1969 Supporter! Supporter

    What did you think about the focus on the "gold clauses" in bonds ? That was something new to me (I'm just now getting to the arguments before SCOTUS).
    That's what the consensus thought would happen; that you couldn't make it retroactive but could prohibit it going forward. I haven't read the actual decisions yet but did read FDR's arguments that they could change monetary policy at will.
    So basically you had 3 items that comprised the War On Gold:
    1. Prohibition on holding gold coins and gold bars (the metal) except 5 coins per adult excluding numismatic coins with special value.
    2. Prohibition on gold certificates.
    3. Prohibition on gold clauses being followed in bonds.
    Less than 2%, I believe. Maybe even less (I think it was 2% when I was in college in the 1980's).

    100% agreement on commodity price obsession -- again, we were mostly a rural agricultural economy back then.
    Could have used more than footnotes to talk about all the bank failures in 1932-33 (about 7,000 I believe) and relate this to the falling money supply as talked about by Friedman/Schwartz in A Monetary History.

    Note the turf wars alluded to in the book between the Fed and Treasury. Back then, the Fed was basically under the Treasury's thumb. It wasn't until 1951 when you had the Fed-Treasury Accord of 1951 that the Fed was truly independent and in charge of monetary policy.
    calcol likes this.
  10. GoldFinger1969

    GoldFinger1969 Supporter! Supporter

    Very interesting how much attention was paid to the pending decisions on the Gold Clauses by the markets and financial press. They were expecting HUGE moves in both bond and stock prices if the court KO'd the abrogation of the gold clauses.
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