"An Act To Provide Relief In The Existing National Emergency In Banking, And For Other Purposes."
Those words were actually an explanation for a noble sounding law that at first glance seemed like an incredible medicine that could cure the sickness of the Great Depression. Franklin D. Roosevelt wasted no time after his inauguration in 1933 in calling for an emergency session of Congress to address the panic and the pain that engulfed the nation.
No one disputed the fact that there was a national economic emergency. Most people felt that a new law or some sort of legislation could provide relief for the banking debacle that had a stranglehold on the economy. Responsible citizens looked for government assistance in those uncertain times. Beleaguered citizens knew the government had played a major role in creating the problem but nonetheless looked for a solution from the very governing body that had hindered individual prosperity.
Roosevelt signed Executive Order 6102 on 5 April 1933, and Executive Order 6260 on 28 August. Those two orders made it illegal for any citizen to possess gold bullion or gold coins.
The term "confiscation" did not mean that the government used armed force to uphold the law; citizens who did not abide by the Confiscation Act of 1933 were subject to a $10,000 fine and/or a 10-year prison sentence. Gold coins had to be exchanged for Federal Reserve notes and gold bullion was evaluated for its fineness and purity and exchanged for $20.67 per ounce of fine gold, a value determined by the government.
The speed of enactment surprised most citizens. The law required all citizens to turn over all gold, bullion (which included bars, dust and nuggets), gold certificates, as well as gold US and foreign coins just a few weeks after the order was issued. There were exceptions to the rule. Special licenses were available from the Secretary of the Treasury and those licenses were issued by Federal Reserve bank.
The special groups that could keep some gold were professionals who used gold in their businesses. The licenses said they could have "reasonable quantities" on hand but were not a free ticket to hoard gold, which some businesses learned the hard way. Every US citizen was allowed to keep $100 in gold coins or US Gold Certificates; a family of four could legally have $400 at face value in coins or certificates.
Banks could still make deals with gold after the law was passed, and gold mining, refining and exporting operations could function normally. The wealthy financiers could still play with gold in various ways but the typical citizen could not legally save or spend gold. Of course, illegal activities increased and it was business as usual for the wealthy who had connections that put them above the law in one way or another. The law stayed in force until early 1975.
Governments have the power to use the word emergency in a plethora of ways so modern day gold collectors and hoarders may be surprised to learn that gold does have the risk of confiscation attached to it. That risk might surface if the government plays the emergency card again.