sábado, 3 de julio de 2010

GOLD RESERVE ACT OF 1934 (UNITED STATES)



I did find the source Radhika was looking for. What a little persistence won't yield...

Sumitra Shah


The Gold Reserve Act of 1934 nationalized
all monetary gold in the United
States. Only the U.S. Treasury could
own gold and buy and sell gold. The act
also limited the power of the president to
reduce the gold weight equivalent of a
dollar, and the day after the passage of
the Gold Reserve Act President Roosevelt
fixed the gold equivalent of the
dollar at $35 per ounce of gold, where it
remained until 1971.
Gold Reserve Act of 1934 (United States) | 175
The act also established a stabilization
fund of $2 billion, put at the disposal
of the secretary of the treasury, to support
the purchase and sale of foreign currencies
as needed to stabilize the value
of the dollar.
The groundwork for the enactment of
the Gold Reserve Act began with the
banking crisis in March 1933 that led
President Roosevelt to suspend banking
operations for four days. Before banks
were reopened, the government required
that all commercial banks turn over to
the Federal Reserve System all gold and
gold certificates and furnish lists of all
persons who had withdrawn gold or gold
certificates since February 1. The Federal
Reserve issued Federal Reserve
Notes in exchange for gold and gold certificates.
The export of gold and speculation
in foreign exchange was banned,
and one month later individual ownership
of gold and gold certificates was
likewise banned. The treasury purchased
privately held gold in the United States
at a price of $20.67 per ounce, the price
that had prevailed with few fluctuations
for 100 years. The value of the dollar on
foreign exchange markets depreciated 15
percent when the U.S. dollar was no
longer redeemable in gold.
The World Economic and Monetary
Conference, held in London during June
and July 1933, sought to forge an agreement
for the stabilization of international
currencies and the eventual return to an
international gold standard. Even members
of the United States delegation could
not agree among themselves, and President
Roosevelt undermined the conference
by announcing that the United
States would manage its monetary policy
to meet the needs of its domestic economy
rather than fulfill conditions set for
international monetary cooperation.
Abandonment of the gold standard in
the United States aroused fears of inflation,
inspiring references to the French
Revolution and post–World War I Germany.
Nevertheless, there were voices of
support. Winston Churchill, responding
to the United States severance from the
gold standard, called the action “noble
and heroic sanity.” On July 3, 1933, John
Maynard Keynes responded to Roosevelt’s
announcement in an article (with
the headline “President Roosevelt is
magnificently right”), referring to the
new law as a “challenge to us to decide
whether we propose to tread the old
unfortunate ways, or to paths new to
statesmen and to bankers but not new to
thought. For they lead to the managed
currency of the future” (Schlesinger,
1959, 223).
Churchill later observed, perhaps
overstating the case:
The Roosevelt adventure claims
sympathy and admiration from all
. . . who are convinced that the fixing
of a universal measure of value
not based on rarity or abundance of
any commodity but conforming to
the advancing powers of mankind,
is the supreme achievement which
at this time lies before the intellect
of man. (Schlesinger, 1959, 224)
The treasury began, through the New
Deal–era Reconstruction Finance Corporation,
to purchase gold, at first
domestically and later in international
markets, driving up the price of gold in
dollars, which effectively devalued the
dollar in terms of gold. As the price of
gold was rising, Roosevelt fixed the
price officially at $35 per ounce. The
increase in the dollar price of gold substantially
increased the value of the
176 | Gold Reserve Act of 1934 (United States)
government’s gold holdings, creating a
windfall profit for the government that
supplied funds for the treasury’s stabilization
fund and later for the U.S. contribution
to the World Bank and
International Monetary Fund.
In the 1970s, the United States government
stopped selling gold to foreign
central banks at $35 per ounce, ending
the fixed exchange rate between dollars,
gold, and foreign currencies. The price
of gold was allowed to fluctuate freely,
and the ban on the domestic ownership
of gold was lifted.

References
Chandler, Lester V. 1971. American Monetary
Policy, 1928–1941.
Myers, Margaret G. 1970. A Financial History
of the United States.
Schlesinger, Arthur M., Jr. 1959. The Coming
of the New Deal.
Schwartz, Anna J. “From Obscurity to Notoriety:
A Biography of the Exchange Stabilization
Fund.” Journal of Money, Credit,
and Banking, vol. 29, no. 2 (May 1997):
135–153.
Publicado por Luis Leighton<http://www.blogger.com/profile/12114596932549829166>

________________________________
From: Societies for the History of Economics [[log in to unmask]] On Behalf Of Radhika Desai [[log in to unmask]]
Sent: Sunday, June 24, 2012 9:33 AM
To: [log in to unmask]
Subject: [SHOE] Mr Roosevelt is Magnificently Right!

I think I am right in thinking that Keynes said “Mr Roosevelt is Magnificently Right!” around the time Roosevelt refused to attend the 1933 London Economic Conference. But I cannot find the reference. Could someone please help?
Best
Radika



Radhika Desai
Professor
Department of Political Studies
527 Fletcher Argue
University of Manitoba
Winnipeg MB
R3M 5V5

Tel:    204-474-9818
Fax:    204-474-7585

http://umanitoba.academia.edu/RadhikaDesai