Precedent for the Devil

Sitting here in the eye of the storm of GD II, I've made the claim that devaluation is the only way out.

Radical? Perhaps. Unprecedented? No.

It turns out that precedent for this GD II policy action can be found in, of all places, GD I.

In 1933, in the depths of GD I, FDR issued Executive Order 6102, confiscating all privately held gold, and gave the victims $20.67 per ounce in compensation, which was then the equivalent value in U.S. dollars, still on the gold standard. The following year, Congress passed the Gold Reserve Act of 1934, which devalued the dollar by 41%, setting the new gold standard at $35 per ounce. In one year, FDR had stolen 41% of the purchasing power of gold savers.

This is remarkably similar to what happened in Argentina in 2002, when U.S. dollar (gold-like hard money, at least relative to the peso) bank accounts were forcibly converted on a 1:1 basis into pesos before the peso was devalued to 3:1. In one fell swoop, Argentina had stolen 67% of the purchasing power of dollar savers. History doesn't repeat, but it rhymes.

Devaluation would actually be easier in the U.S. than in Argentina; they had a lot of dollar-denominated contracts that they had to order converted to pesos. We already have all our contracts in the currency we want to devalue.

Will Obama or his successor confiscate all private gold before he and Zimbabwe Ben devalue the currency? He (or, rather, some lobbyist who wrote the bill) did sneak a Big Brother gold tracking clause into the ObamaCare bill. But I doubt he'll do an outright confiscation, because there's not enough privately held gold in the U.S. to make a dent in the national debt, and it would probably be politically and operationally difficult to get his hands on it. If Obama issues the order, I'm heading to Canada, Switzerland, or Central America with a bunch of gold up my ass.


Independent Accountant said...

As a practical matter, FDR confiscated no privately held gold. The only gold confiscated was that held by banks.


Water Stud said...

As a reality matter, FDR confiscated PRIVATELY held gold. Just look at Ex Order 6102 (...all persons).

W.C. Varones said...

Water Stud,

I asked IA about that.

What he means is that most individuals ignored the order.

I hope that's true and I hope individuals will have the courage and patriotism to resist again if another confiscation comes.

Happy Super Tuesday!