A Legacy of Theft and Inflation...Roosevelt the fascist thief

[fastpat]

There are those who still believe in the Roosevelt myth, that he saved America from the Great Depression. I hope to dispel that myth by proving beyond doubt that Roosevelt, far from ending the depression, was actually the primary cause of it. In addition to that, Roosevelt was America's first fascist president, though sadly, not the last.

The New Deal and Roosevelt’s Seizure of Gold: A Legacy of Theft and Inflation

by William L. Anderson

In a recent discussion on the economy with a faculty colleague, I reminded her of some of the absurdities of New Deal economic policies (many of which have been laid out in previous issues of Freedom Daily and elsewhere). She reminded me that Franklin D. Roosevelt is a “hero” to her and other Democrats, which, translated, means that the New Deal cannot be criticized in any form.

Indeed, in May the New York Times op-ed page paid homage to Roosevelt. Ted Widmer wrote that a book by Newsweek’s Jonathan Alter, who he says “has nurtured a schoolboy crush on F.D.R.,” reflects “on the way that Roosevelt reinvented the presidency during his first hundred days in office, through bold policy innovations, brilliant speeches and broadcasts and a personal connection with the American people that has not been equaled since.”

Democrats today may think of themselves as belonging to a “modern” political party, but Roosevelt still is its central figure and any policy “innovations” that come forth from party intellectuals ultimately must be in line with the New Deal. The shocked Widmer writes that

Admirers of Roosevelt – including the editorialists at the New York Times – hold such thinking to be nonsense, especially the first part about the New Deal’s prolonging the Great Depression instead of ending it. After all, has not the Times’s favorite economist, Paul Krugman, himself said that capitalism had created conditions in which “inadequate” aggregate demand existed during the 1930s, leading Roosevelt to attempt to increase aggregate demand through government spending?

While most analyses of the New Deal look at the various programs and policies that expanded government bureaucracies, the New Deal as we know it would not have been possible without the issuance of Executive Order 6102 in 1933. With Roosevelt’s signature, gold as legal money disappeared in the United States, paving the way for the government to engage in near-unconstrained debasement of the currency. Historians generally pass by EO 6102, but without it Roosevelt’s economic programs never would have gained traction.
Understanding the New Deal

Most articles, books, and papers that cover the New Deal concentrate on the myriad of programs and policies of the Roosevelt administration, such as the National Industrial Recovery Act, the Agricultural Adjustment Act, and the Wagner Act, and the battles between Roosevelt and the U.S. Supreme Court, which had struck down some key elements of the New Deal in 1935. For the most part – and especially in those writings that are favorable to Roosevelt – authors tend to emphasize the vast unemployment and helplessness that gripped the United States (and much of the world) in 1933.

Certainly the horrifying numbers are there. In February 1933, a month before Roosevelt took office, the nation’s overall rate of unemployment stood at 28.3 percent. Nearly half the banks in the United States had failed, millions of people were homeless, and the country’s manufacturing facilities operated at perhaps two-thirds or less of their capacity. Farming communities were devastated, as commodity prices fell drastically, making it impossible for farmers to pay their debts and crippling the small rural banks that held the mortgages.

To right the economic ship, the Roosevelt administration proposed a set of programs that came to be known as the New Deal. The problem, however, was not with Roosevelt’s desire to halt the Depression but rather in the misjudging of its causes and with implementing policies that ultimately would prolong it. It is not surprising, then, that Roosevelt and his “brain trust” of intellectual advisors (mostly from Columbia University) blamed free-market capitalism for the economic free fall and set about to ensure that government would set the agenda for the economy.

Progressives who dominated the Roosevelt administration held that the principal cause of the economic downturn was falling prices, along with falling wages. Furthermore, they believed that the cause of falling prices was “overproduction,” so the “cure” was to find ways to limit the production of goods. Thus, in the minds of the New Dealers, the government needed to restrict production and force up prices. As prices rose, so would wages, and high wages would bring the country out of the Depression. For inspiration and direction, they used the economic programs of Italy’s fascist dictator, Benito Mussolini, as their model.

If one applies even simple logic to such a plan, it is obvious that restricting output also would mean that less labor would be required, which would translate into more unemployment. Yet that is exactly opposite from what Roosevelt and his “brain trust” claimed: that restricting production somehow would mean that fewer businesses would fail, thus eliminating unemployment.

For example, his vaunted National Industrial Recovery Act attempted to organize the entire U.S. economy into a series of cartels that would restrict production, force up prices, and keep wages high. Ironically, the NIRA was a comprehensive plan of what Herbert Hoover’s administration had tried to do in a piecemeal fashion – with disastrous results.

The Agricultural Adjustment Act, while aimed at keeping crop prices high, did so by ordering the mass destruction of crops, as well as animals such as pigs and chickens. In order to pay for the destruction of crops, the Roosevelt administration had Congress enact a tax on agricultural products. Thus, the economic ethos of the New Deal was that production was bad and nonproduction was good.

While many economists and astute journalists such as H.L. Mencken immediately pointed out the folly of such policies, the New Dealers believed that they had an ace in the hole: inflation. Yes, they reasoned, these are restrictive policies, but if the government could find a way to massively inflate the currency, then somehow people would start buying more goods as their dollars depreciated, and the ensuing spending spree would wipe out unemployment.

The monetary system of the United States at the time of the Depression could not sustain inflation very long because the country was on a gold standard. If people sensed that the government was printing too many paper dollars, by law they could redeem those dollars from the government’s store of gold. Moreover, gold coins circulated along with silver dollars, half-dollars, quarters, and dimes.

If people were exchanging their dollars for gold, then the government’s own gold supply would be diminished. Since the gold standard included requirements that the country’s money supply have at least a 40 percent gold backing, a drain on gold reserves would have forced the government to stop printing so many dollars. Therefore, the plans of the New Dealers ran headlong into the reality of the gold standard and its check on inflation.

Thus, early in his presidency, on April 5, 1933, Roosevelt signed Executive Order 6102, which ordered people to turn in their gold to the government at payment of $20.67 per ounce. While there were some exceptions for dental use, jewelry, and artists and others who used gold in their jobs, most people were not covered. (Individuals could hold up to $100 in gold coins, but the government confiscated the rest.) Furthermore, the president’s order nullified all private contracts that called for payment in gold, something that led Sen. Carter Glass of Virginia to declare that the whole thing was “dishonor.”

Roosevelt based his order on the 1917 Trading with the Enemy Act, which gave the president the power to prevent people from “hoarding gold” during a time of war. Of course, the United States was not at war in 1933, but Roosevelt claimed that it was a “national emergency” and Congress and the courts meekly bowed to the executive.

End Part One



William L. Anderson, Ph.D., teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute.

[fastpat]

In earlier times, such an order would have been met with outrage, as freedom-loving Americans would have rebelled against such a confiscatory order from Washington. Certainly, no president before the Progressive Era would have ordered such action for fear of impeachment or being voted out of office at the next election. However, by the time Roosevelt took office in 1933, the courts already had upheld government restrictions on freedom of speech (especially during World War I) and Congress had begun the unconstitutional delegation of some of its lawmaking powers to the executive branch.

Furthermore, given the economic calamity that prevailed when Roosevelt issued EO 6102, many Americans had become convinced that economic and political freedom meant freedom to starve and were willing to give the president whatever he wanted.

Roosevelt attempted to put “teeth” in his order by means of Section 9 of the order, which said that anyone who refused to comply could be fined as much as $10,000 or be sentenced to a maximum of 10 years in prison. (Most Americans did not resist, although some simply hid their gold until the order was repealed 41 years later.) To understand the magnitude of Roosevelt’s actions against individuals, he was threatening serious fines and prison terms against anyone who held on to what historically had been the money of the American people.

Although Roosevelt made it illegal for Americans to redeem their dollars for gold, he also realized that he could not make the same threats against people from other countries. Therefore, representatives of foreign governments still could trade in their dollars for gold, although shortly after issuing his order, Roosevelt increased the price to $35 an ounce. However, given the state of international trade at the time, foreign holdings of dollars were relatively small, something that would not be the case a half century later.

The small burst of inflation generated by Roosevelt’s move did create a bit of an economic boom, as usually occurs in the early stages of inflation, although unemployment remained at about 15 percent. However, Roosevelt’s twin pillars of what historians call the First New Deal were causing havoc among some producers and entrepreneurs, who realized that the NIRA and AAA were stifling entrepreneurship and productivity. In 1935, the U.S. Supreme Court declared both the NIRA and AAA unconstitutional, but by then the New Dealers had shifted from endorsing business cartels to promoting labor cartels through the unionization of workers.

When the U.S. Supreme Court in 1937 upheld the 1935 Fair Labor Standards Act (or Wagner Act), the inflation-induced “boom” ended soon afterward and the economy tumbled into a recession within a depression, a first for the U.S. economy, as unemployment climbed to nearly 20 percent. But while Roosevelt’s seizure of privately held American gold failed to regenerate the economy, it did lay the foundation for further economic deterioration.
The 1971 collapse of the dollar

Following the Bretton Woods agreement of 1944, currencies were fixed against each other and the dollar still could be redeemed by foreign governments at $35 an ounce. For about 20 years after World War II ended, the arrangement seemed to work. However, in order to pay for the vast expansion of government welfare programs associated with Lyndon Johnson’s Great Society and the escalating Vietnam War, the Federal Reserve System aggressively expanded the supply of money, which not only depreciated the currency at home but also flooded the rest of the world with dollars.

France’s government, under Charles de Gaulle, recognized the situation at hand and began to redeem its dollars in U.S. gold, which was stuck at its 1933 price. While U.S. representatives at first denied there was a problem, by mid-1971 U.S. gold reserves were disappearing quickly, leading Richard Nixon to close the gold window and impose wage and price controls. While some price controls were lifted within the year, oil and gasoline controls remained through the decade, causing untold havoc in the economy.

Conclusion

The presidency of Franklin Roosevelt was characterized by arrogance and outright fraud. Unfortunately, much of the Roosevelt legacy stands. Many historians and economists continue to insist that his economic programs “saved capitalism” when, in fact, they were based on confiscation of property and on the false notion that inflation is the source of prosperity.

Today, the U.S. monetary system is adrift in inflated dollars. Gold prices at this writing are nearly $650 an ounce and the dollar has been falling against other international currencies. The only constraints on the Federal Reserve System’s determination to continue this inflation are political, and the vast majority of politicians and Americans have come to believe that the Fed creates prosperity when it creates new dollars.

Franklin Roosevelt in 1932 campaigned on a platform of restrained government spending and sound money. His legacy, however, is one of runaway spending, government intrusion into peaceful economic exchange, and the utter debasement of U.S. money. To this day, his successors in the executive branch have only extended the worst aspects of the New Deal presidency. Historians might regard his 1933 seizure of gold as a minor point in history, but in many ways it was every bit as significant as all the other New Deal measures put together.
December 9, 2006

William L. Anderson

[MRM]

After reading Will Andersen, I think I've changed my mind on Roosevelt.

My grandparents were proud to have voted four times against "That Man in the White House." I was always quite proud of them for that. We always talked about the good Roosevelt - Teddy; and the bad one - Franklin.

But after reading Anderson, I'm thinking anyone as delusional as him who gets that worked up about FDR, it probably means that FDR wasn't so bad.

[fastpat]

Originally posted by MRM
After reading Will Andersen, I think I've changed my mind on Roosevelt.

My grandparents were proud to have voted four times against "That Man in the White House." I was always quite proud of them for that. We always talked about the good Roosevelt - Teddy; and the bad one - Franklin.

But after reading Anderson, I'm thinking anyone as delusional as him who gets that worked up about FDR, it probably means that FDR wasn't so bad.

Was there something that Bill Anderson wrote that you have supporting facts to write a rebuttal, or are you just demonstrating petulance?

[Moneyguy1]

pat:

You are indeed the angriest, most unhappy poster here. You even beat out Major Chip Hazard. Why?

What is over, is over. What is important is what comes next and that we at least take the lessons of history with us. All the ranting of the evils of former leaders will not change things one iota.

You are wearing out your soapbox, bucko.....

[fastpat]

Originally posted by Moneyguy1
pat:

You are indeed the angriest, most unhappy poster here. You even beat out Major Chip Hazard. Why?

What is over, is over. What is important is what comes next and that we at least take the lessons of history with us. All the ranting of the evils of former leaders will not change things one iota.

You are wearing out your soapbox, bucko.....

Bob, first of all, I'm not angry, and I have no idea why you think so. I'd suggest self examination first though, perhaps the answer is there.

Second, since I post things with which people take exception or say isn't true, I post supporting documentation for my positions.

And last, past is prologue, Bob.

[Joeaksa]

Originally posted by Moneyguy1
pat:

You are indeed the angriest, most unhappy poster here. You even beat out Major Chip Hazard. Why?

What is over, is over. What is important is what comes next and that we at least take the lessons of history with us. All the ranting of the evils of former leaders will not change things one iota.

You are wearing out your soapbox, bucko.....

Bob,

Totally agree and if slopat is not angry and posts like this, just think what he would be like when he is really mad!

To tell the truth FDR gave away the Far East and waffled on many other major issues. He did do some great things but he also sure screwed us in other areas.

One of his major cock-up's was not giving Harry Truman any heads up on numerous things and projects that were going on, so that when FDR died Truman had crisis after crisis to deal with and no time to prepare for them. A leader does not do this but FDR did it again and again.

[MRM]

I couldn't agree with you more, Joe. That's where my confusion comes from. I don't think Roosevelt was a good president. He prolonged the Depression and passed on historic oportunities that if handled correctly would have made the world a better place. And it wouldn't have cost him anything more than the effort to do it right.

But Paste starts a rant against him, and now I'm conflicted. Anyone Paste dislikes that much has to have something going for him.

[fastpat]

Originally posted by MRM
I couldn't agree with you more, Joe. That's where my confusion comes from. I don't think Roosevelt was a good president. He prolonged the Depression and passed on historic oportunities that if handled correctly would have made the world a better place. And it wouldn't have cost him anything more than the effort to do it right.

But Paste starts a rant against him, and now I'm conflicted. Anyone Paste dislikes that much has to have something going for him.

Yeah, it's not like you might want to burden yourself with the facts, or anything like that.

Joe is an un- or undereducated person posing as a mover and shaker. A sophisticated world traveler is the persona he dons out here; he doesn't realize that it's laughable.

So, align yourself with him, please. That way it'll one boy leading another.

[Eric 951]

Originally posted by fastpat
Joe is an un- or undereducated person posing as a mover and shaker. A sophisticated world traveler is the persona he dons out here; he doesn't realize that it's laughable.

So, align yourself with him, please. That way it'll one boy leading another.

Yeah. laughable.

If only he donned the persona of an elitist-minded, smarter- than- everyone- in- the- room- on -all- subjects and I have degrees to prove it, self-proclaimed ideal of what a real american should be, anti-government in all its forms dinosaur. We would all be ahead of the game.

[fastpat]

Originally posted by Eric 951
Yeah. laughable.

If only he donned the persona of an elitist-minded, smarter- than- everyone- in- the- room- on -all- subjects and I have degrees to prove it, self-proclaimed ideal of what a real american should be, anti-government in all its forms dinosaur. We would all be ahead of the game.

No, he'd have to be "elitist-minded, smarter- than- everyone- in- the- room- on -all- subjects and I have degrees to prove it, self-proclaimed ideal of what a real american should be, anti-government" and that's not possible for either you, him, or several others who post here.

[Eric 951]

Originally posted by fastpat
No, he'd have to be "elitist-minded, smarter- than- everyone- in- the- room- on -all- subjects and I have degrees to prove it, self-proclaimed ideal of what a real american should be, anti-government" and that's not possible for either you, him, or several others who post here.

You write that as if it is a bad thing.

[fastpat]

Originally posted by Eric 951
You write that as if it is a bad thing.

Being an ignorant lout is generally considered undesirable, perhaps not in your culture, but it is in mine.

[Eric 951]

Originally posted by fastpat
Being an ignorant lout is generally considered undesirable, perhaps not in your culture, but it is in mine.

Don't be so hard on yourself. I am sure your friends are accepting of you regardless of these shortcomings.

[m21sniper]

Originally posted by fastpat
Being an ignorant lout is generally considered undesirable, perhaps not in your culture, but it is in mine.

What culture precisely do you profess to belong to Pat?

[fastpat]

Originally posted by m21sniper
What culture precisely do you profess to belong to Pat?

I'm an American from the old South. We have had a culture of educated men and women that's among the oldest in America.

There are those that will mention Dartmouth and Harvard, and indeed those are the oldest colleges or universities in the land; but those have been traditionally restricted to the wealthy and politically connected, while the institutions in the south have had a much more open admissions policy with people from all walks of life welcomed.