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What is Executive Order 6102 and Gold Reserve Act?

Mon, 03/26/2018 - 17:30

Executive Order 6102

is an Executive Order signed on April 5, 1933 by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates." It required all persons to deliver on or before May 1, 1933 all gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve. Under the Trading With the Enemy Act of October 6, 1917, as amended on March 9, 1933, violation of Executive Order 6102 was punishable by fine up to $10,000 ($166,640 if adjusted for inflation as of 2008) or up to ten years in prison, or both. Because of this forced immediate sale of gold to the Federal Reserve at the government set price of $20.67 per troy ounce, this Executive Order is often referred to as the Gold Confiscation of 1933. Shortly after this forced sale, the price of gold from the treasury for international transactions was raised to $35 an ounce; the U.S. government thereby devalued the U.S. dollar by 41%.

Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 (consumer price index, adjusted value of $382 today) per troy ounce. Under the Trading with the Enemy Act of 1917, as amended by the recently passed Emergency Banking Act of March 9, 1933, violation of the order was punishable by fine up to $10,000 (equivalent to $185013 today) or up to ten years in prison, or both.

Order 6102 specifically exempted "customary use in industry, profession or art"--a provision that covered artists, jewelers, dentists, and electricians among others. The order further permitted any person to own up to $100 in gold coins (a face value equivalent to five troy ounces of Gold).

Despite the dire threat of ten years in prison there was only one prosecution under the order and the order was ruled invalid by federal judge John Wolsey in this case on the technical grounds that the order was signed by the President, not the Secretary of the Treasury as required. The circumstances of the case were that a New York attorney, Frederick Barber Campbell had on deposit at Chase National over 5000 ounces of gold. When Campbell attempted to withdraw the gold Chase refused and Campbell sued Chase. A federal prosecutor then indicted Campbell on the following day (September 27, 1933) for failing to register his gold. Ultimately the prosecution of Campbell failed but the authority of federal government to seize gold was upheld. The case forced the Roosevelt administration to issue a new order under the signature of the Secretary of the Treasury, Henry Morgenthau, which was in force for a few months until the passage of Gold Reserve Act on January 30th, 1934.

The Gold Reserve Act

The Gold Reserve Act of 1934 abrogated the gold clause in government and private contracts and changed the value of the dollar in gold from $20.67 to $35 per ounce. This price remained until August 15, 1971 when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus abandoning the gold standard for foreign exchange (see Nixon Shock).

The limitation on gold ownership in the U.S. was repealed after President Gerald Ford signed a bill legalizing private ownership of gold coins, bars and certificates by an act of Congress codified in Pub.L. 93-373 which went into effect December 31, 1974. P.L. 93-373 does not repeal the Gold Clause Resolution of 1933, which makes unlawful any contracts which specify payment in a fixed amount of money or a fixed amount of gold. That is, contracts are unenforceable if they use gold monetarily rather than as a commodity of trade.