The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury. It also prohibited the Treasury and financial institutions from redeeming dollar bills for gold, established the Exchange Stabilization Fund under control of the Treasury to control the dollar's value without the assistance (or approval) of the Federal Reserve, and authorized the president to establish the gold value of the dollar by proclamation. A year earlier, in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins.
Immediately following passage of the Act, the President, Franklin D. Roosevelt, changed the statutory price of gold from $20.67 per troy ounce to $35. This price change incentivized gold miners globally to expand production and foreigners to export their gold to the United States, while simultaneously devaluing the U.S. dollar by increasing inflation. The increase in gold reserves due to the price change resulted in a large accumulation of gold in the Federal Reserve and U.S. Treasury, much of which was stored in the United States Bullion Depository at Fort Knox and other locations. The increase in gold reserves increased the money supply, lowering real interest rates which in turn increased investment in durable goods.
The Gold Reserve Act limitations on private gold ownership were repealed in a rider to the International Development Association Appropriations Act of 1975, signed by President Gerald Ford on August 14, 1974, and effective December 31, 1974.
U.S. economic historical narrative
right|thumb|300px|President [[Franklin Delano Roosevelt signs the bill into law in 1934. Standing behind him are (L-R): Henry Morgenthau Jr. (Treasury secretary), Eugene R. Black (Fed chair), George Warren (economist and advisor), Samuel Rosman and James Harvey Rogers (economist and advisor)]]
The United States was still suffering the negative effects of the 1929 stock market crash in 1934 when the Gold Reserve Act was enacted. President Roosevelt was challenged to decrease unemployment, raise wages and increase the money supply, but was restricted in doing so by the United States' strict adherence to the gold standard. The Gold Reserve Act, which banned the export of gold, restricted the ownership of gold and halted the convertibility of paper money into gold helped him overcome this obstacle. This growth in real output is due primarily to a growth in the money supply M1, which grew at an average rate of 10 percent per year between 1933 and 1937. In other words, the Federal Reserve System had served more as a "technical instrument for effecting the Treasury’s policies", according to Johnson.
Roosevelt justified the Gold Reserve Act of 1934 by saying "Since there was not enough gold to pay all holders of gold obligations, ... the Government should in the interest of justice allow none to be paid in gold."
Litigation arising from GRA
The passage of the Gold Reserve Act of 1934 signified that the American people could no longer hold gold, with the exception of jewelry and collectors' coins. After the passage of the Gold Reserve Act several people were indicted for violating the clauses that restricted gold ownership and trade. Frederick Barber Campbell (who was actually convicted under the Gold Reserve Act's predecessor, Executive Order 6102), was convicted of hoarding gold when he tried to withdraw 5,000 troy ounces of gold he had at Chase National Bank. Gus Farber, a diamond and jewelry merchant was arrested with his father and 12 others for illegally selling $20 gold coins without a license. The Baraban family was arrested for operating a gold scrap business under a false license. Foreign companies even had their gold confiscated. The Uebersee Finanz-Korporation, a Swiss banking company, had $1,250,000 in gold coins that were being held in the United States.
In the Consolidated Gold Clause Cases (independently known as Perry v. U.S., U.S. v. Bankers Trust Co., Norman v. Baltimore & Ohio R. Co., Nortz v. U.S.), the Gold Reserve Act was subject to scrutiny by the United States Supreme Court, which narrowly upheld Roosevelt's gold confiscation policy.
The 1962 case United States v. One Solid Gold Object in Form of a Rooster concerned the seizure of a 14-pound golden statue of a rooster. The United States District Court for the District of Nevada decided that the artistic value of the rooster weighed in favor of the statue and its owner.
Recent events
The 2008 decision 216 Jamaica Avenue, LLC vs S&R Playhouse Realty Co. established that a gold clause in contracts signed before 1933 was only suspended, not erased, and under certain limited circumstances might be reactivated.
See also
- Executive Order 6102
- Gold standard
- New Deal