Money Makers
Forthcoming in September, from Basic Books

As readers of this blog know, Franklin Roosevelt declared he had taken the US off the gold standard on March 6, 1933, as the first substantial act of his presidency. But scholars have not been so quick to accept this date or, with firmness, any other.

When Roosevelt first said he had taken the US off the gold standard, he didn’t want to make too great a fuss about it because he was trying to quiet a panic that had nearly broken the Federal Reserve System. He hoped Americans would bring their gold back for deposit in the nation’s vaults. And they did. Even though the papers were reporting that the president might issue scrip for temporary currency; even though the Emergency Banking Act provided that Federal Reserve notes could be backed by commercial bank assets, people generally preferred paper money to gold, so long as they trusted the paper money – which, with Roosevelt’s assurances, they did, as you can see from the chart.Circgold

You can clearly see the increasing tendency to prefer holding gold during the Depression, culminating in the pre-inaugural panic – followed by a precipitous drop (it occurs almost entirely over the month of March, Roosevelt’s first month in office – at the end of February, there are $284m of gold coin in circulation, and at the end of march, there are $80m). Note that this is before the actual rules against hoarding gold go into effect; it reflects voluntary expression of preference.

But: although gold largely went out of domestic US circulation in March 1933, the world value of gold in dollars, though it took a slight spike up on Roosevelt’s inauguration, settled back down to the statutory rate, of about $20.67 to an ounce. Which meant no price rise for US farm commodities.

So in the middle of April, Roosevelt took further action. On April 19, he said he would back legislation permitting him, as president, to conduct his own monetary policy – to issue greenbacks, or to change the gold value of the dollar, and he said the US would no longer export gold. On April 20, he issued an executive order implementing the ban on exports.

We have, then, two (well, two-ish) moments at which the US could be said to have gone off the gold standard: March 6 and April 19-20.

Which was it?

First, there is the question of what Roosevelt thought he was doing. On March 6, he told aides, “We are now off the gold standard.” On April 18, he told aides – “with a chuckle” – that once he announced the embargo and the new legislation, the US would have “definitely abandoned the gold standard.” So the US was off on March 6, and then definitely off on April 19.

Roosevelt’s “definitely” began a long tradition of adverbs deployed to qualify his monetary actions in April 1933. On April 20, the New York Times echoed Roosevelt, reporting the president’s actions of April 19 were “taking the United States definitely off the international gold standard.” Writing in 1939, G. Griffith Johnson concurred: “The United States was now definitely off the gold standard.”2

But even the “definitely” camp were somewhat indefinite as to when this definite action happened. For example, Arthur Whipple Crawford in 1940 said it was not the president’s announcements of April 19, but the order “of April 20 by which the gold standard was definitely abandoned.”3

The distinction between the two days may seem a slight one. On April 19, the president said he would back the inflation legislation and start a gold embargo, and on April 20, he issued an executive order implementing the gold embargo. But the inconclusive state of scholarship on which of the two dates definitely marks the end of the gold standard blurs the definition of the April 19-20 decision.

Nor is “definitely” the only adverbial way to qualify what occurred. One hard-headed, quantitative study of the world price of gold in the early 1930s goes for litotes: “Before April 20, 1933, we were not unmistakably off the gold standard,” indicating that before that date a reasonable observer could be mistaken on this point. A recent, authoritative account of the Roosevelt presidency has it that “Roosevelt on April 19 officially took the United States off the gold standard,” suggesting the existence of a condition in which a nation can be unofficially off the gold standard.4

Some scholars use a different adverb, writing with apparent relief that by April 19, “The United States was finally off the gold standard,” or that “On the twentieth [of April] the President finally took the nation off the gold standard[.]” The use of “finally” indicates that whatever happened during the previous weeks, it was not until April 19 (or 20) that the process of taking the US dollar off gold had at last ended.5

The “finally” camp have allies in a group of historians who indicate that there was an extended process of taking the US off the gold standard. Charles and Mary Beard inaugurated this tradition in their 1939 analysis, saying that Roosevelt “gradually” took the nation off gold – though the Beards further qualify this statement by adding, “in some respects.” Another recent survey says that with the April embargo “It became clear that the temporary escape from gold might represent a new policy entirely” – indicating, without explicitly saying, that the process from March to April was one of clarifying and publicizing a decision Roosevelt had already made.6

As for Roosevelt himself, having flatly declared that the US was off the gold standard on March 6, and that in any case it would definitely be off the gold standard by April 19, the president himself took a third shot at the subject in 1934 with his book On Our Way. Now he shifted to a third date and a different adverb, writing in a section titled with apparent confidence “The United States Goes Off the Gold Standard,” that neverthless “Many useless volumes could be written as to whether on April twentieth the United States actually abandoned the gold standard.”7

No wonder one trio of economists embraced poetry rather than choose a date, saying the US went off the gold standard “about crocus-daffodil time, 1933.” With crocuses coming earlier than daffodils, and breaking earth at different times in different climes, this formula may perfectly capture the imperfect condition of American monetary policy in the first spring of Roosevelt’s presidency.8

One may ask whether I am not fulfilling Roosevelt’s prediction and producing useless volume (if not volumes) on the question of when the US went off gold. I do think it matters. If Roosevelt did not know what he was doing and felt or blundered his way to a policy, then his actions are much less worthy of study and emulation than if knew what he was doing, and began a successful course on March 6 that concluded on April 19 (or 20).

1This legislation was known, somewhat confusingly, as the Thomas Amendment. “Thomas,” after Elmer Thomas, the Oklahoma Senator who wrote the original version of the legislation, even though Roosevelt, with his aides, drafted the version that actually went to the floor. And “Amendment” because it was an amendment to the Agricultural Adjustment Act of 1933, which is better known for inaugurating a system of price subsidies by a processing tax, but which also included this legislation as its Title III.

2“President Takes Action,” NYT 4/20/1933, p. 1; G. Griffith Johnson, The Treasury and Monetary Policy, 1933-1938 (1939; New York: Russell and Russell, 1967). The NYT also uses “publicly” in this story, acknowledging that the president had privately said the US was already off gold.

3Arthur Whipple Crawford, Monetary Management under the New Deal: The Evolution of a Managed Currency System; Its Problems and Results(1940; New York: Da Capo, 1972). Arthur M. Schlesinger Jr. is also a “definitely” user.

4Bertrand Fox, “Gold Prices and Exchange Rates,” Review of Economics and Statistics 17:5 (August 1935): 72-78; David M. Kennedy, Freedom from Fear: The American People in Depression and War (Oxford University Press, 1999).

5Anthony Badger, FDR: The First Hundred Days (Hill & Wang, 2008); James Daniel Paris, Monetary Policies of the United States, 1932-1938 (New York: Columbia University Press, 1938).

6Charles A. and Mary R. Beard, America in Midpassage (Macmillan, 1939); Eric Rauchway, The Great Depression and the New Deal: A Very Short Introduction (Oxford University Press, 2008).

7Franklin D. Roosevelt, On Our Way (New York: John Day, 1934).

8F. A. Pearson, W. I. Myers, and A. R. Gans, Pearson, “Warren as Presidential Adviser,” Farm Economics 211 (December 1957): 5597-5676. Barry Eichengreen says in Golden Fetters that Roosevelt did not even mean to take the dollar off gold until April because at his first press conference, “Roosevelt asserted that the gold standard was safe.” Eichengreen relies for his account of this press conference on Johnson, but as we have seen, Johnson’s account is wrong.