I was educated as a monetary Economist (non-practicing) and have had discussions with Dr. Milton Friedman, Nobel Prize winner for his monetarist theories from the Chicago School of Economics.
Technically and legally Roosevelt didn't take the US off the gold standard, not monetarily. He did it for the common citizen, but the monetarily and internationally we were still pegged to the gold dollar. He abolished the ability for the average citizen to own bullion, to exchange a Cold Certificate for a gold coin, and permitted ownership of gold only for jewelry, collecting of coins, industry, and dentistry. . . but the value of the dollar was still pegged to the value of gold. What he did do was seize the gold, reimbursing people at a government set price, and then RAISE the price of gold after the government owned it, thus DEVALUING the dollar by about 43% . . . in 1933. In hopes of stimulating INFLATION.
The new government price caused FOREIGN gold dealers, arbitrage bankers really, to buy on the world market at low prices and import tons of gold to the US and sell it to the US government at the high artificial price Roosevelt had set. Most likely what he did was unconstitutional. Liberal Economists will swear this pulled us out of the depression, but it actually PUT US IN A DEEPER AND LONGER ONE, that only WWII pulled us out of.
Only one problem with using "inflation" to cure the depression, the problem that in fact deepened and lengthened the depression, and Dr. Milton Friedman will tell you what that was and why. . . the Federal Reserve did not provide an equivalent amount of CURRENCY to make up the difference to handle that much inflation of the money supply!
They did not replace the actual gold coins and gold certificates that were in circulation AND they did not put in circulation any where enough new Federal Reserve Notes to account for the expected inflation the new policy was supposed to create! Oops!
This was a time when people were NOT paid with checks for their pay which they would, as today, dutifully deposit into a checking account. They received a pay envelop with actual cash in it at the pay window and then paid their household expenses in cash. They, at best, had a savings account at the bank where they'd deposit what was left over, but checking was for large businesses.
The inflation DID happen, and the prices of goods and services went up, but the money to buy them was LITERALLY NOT AVAILABLE!
The people hearing the banks were running out of money, ran to the banks and exacerbated the problem. . . and. . . a small bank with one branch in New York State that had the unfortunate name of The Bank of the United States FAILED during one of those runs! Immigrants hearing about that bank failure, used to banks in their native countries being named for their nations, assumed the COUNTRY was going bankrupt, and RAN on their banks to withdraw their savings. In fact the banks literally did not have the currency to issue to the factories and stores to pay their employees on pay day AND keep enough cash on hand for demand withdrawals. THIS is what caused the runs on the banks. . . a lack of liquidity.
There is nothing in this long post that I did not already know. Nor am I trying to disagree with any of it. Perhaps it’ll be informative for the others on the thread, even if it’s not a subject most people are dying to read about.
I did take quite a bit of economics in college, had a double major in math and chemistry. Went back for additional degree In Finance, Accounting, and economics.
I Worked as Bank Auditor, internal accounting, Certified Treasury Officer, and Certified Financial planner. I have also read Milton Friedman’s Writings, but never had a chance to discuss them with him.
I am not a total illiterate on the subject.
As I said, I think it’s more or less semantics used by people other than economists.
For Example, below you’ll see an excerpt from this day in history:
“On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold.”
And here’s an excerpt from Bloomberg:
“To bring the economy out of the Great Depression, President Franklin D. Roosevelt took the U.S. off the gold standard in 1933.”
Then there’s this from the Richmond Fed:
When did the United States go off the gold standard?
“H.J. Res. 192, approved by President Roosevelt on June 5, 1933, provided that obligations payable in gold or specific coin or currency are contrary to public policy, and that those obligations could be discharged dollar for dollar in legal tender.
Because the dollar was no longer freely convertible, one could consider that the United States was no longer on the gold standard at that time.
If, however, one considers the gold standard as a monetary system in which the unit of money is backed by gold even if the monetary unit cannot be converted into gold, one could argue that the United States went off of the gold standard on August 15, 1971 when President Nixon announced that the U.S. dollar would no longer be convertible into gold in the international markets.”
And of course almost nobody specifies whether they are talking about gold species standard, gold bullion standard, or gold exchange standard - No they just say the gold standard.
So like I said, it’s semantics to a great extent. So if someone says Roosevelt took us off the gold standard, that’s fine with me, and I don’t feel the need to list all the crap he did and didn’t do or tell them they are wrong.
Same with Nixon, as I’ve read elsewhere, that technically he didn’t take us off the gold standard, that was a process that started in 1910 and really most of it happened under FDR, until Nixon defacto ended it.
Well, one could argue with that point of view, and certainly I’ve seen arguments pro and con - but I wouldn’t.
For me it’s fine if someone says Nixon took us off the gold standard, or if they say he ended the Breton Woods agreement. Makes me no never mind.
I do think it’s important for people to know that both Nixon and FDR had issues with the gold standard, and a little bit about what those problems were.
However, 1-3 sentences on each is more than enough for most people I run into. Obviously YMMV