Roosevelt Case
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Several progressives visited the Soviet Union and came away more persuaded than ever that a government-run economy, offered the best solution. Stuart Chase wrote A New Deal (1932), in which he said that communists didnt need “further incentive than the burning zeal to create a new heaven and a new earth.” Chase closed his book by asking, “Why should Russians have all the fun of remaking a world?” (2-3)
FDR, who embraced “progressive ideas,” certainly wasnt a thinker. “Roosevelt responded less to principles than to personalities, and these could be presented best in conversation,” observed historian George Martin. Indeed, FDR appeared to be completely unaware of money matters. He seemed willing to try practically anything as long as it involved more government control over the economy. He was apparently unaware that such policies had been tried before in many other countries 8and failed. (5)
On June 17, 1930, Hoover signed the Smoot-Hawley tariff, which raised import duties an average of 59 percent on more than 25,000 agricultural commodities and manufactured goods. The U.S. stock market plunged, and more than sixty countries retaliated, with restrictions against whichever products would inflict the worst losses on Americans–typically products very different from those affected by Smoot-Hawley. In this way, the tariff led to random damage to economies everywhere. (43)
The best known tax revolt was in Chicago. On a single day, November 29, 1930, some 4,000 taxpayers filed protests with the Board of Review. Tax collections were suspended for two years, but it proved difficult to get people back in the habit of paying. (50)
Title II of FDRs Emergency Banking Act gave considerable discretionary power to the comptroller of the currency, who, as conservator of national banks, could reorganize banks without going through established bankruptcy proceedings. The Emergency Banking Act also authorized the printing of Federal Reserve notes backed not by gold but by government bonds, which meant that the government could print as much money as it wanted and wouldnt be limited by the amount of gold available. In addition, the Emergency Banking Act authorized the Fed to lend banks money against a wider range of bank assets. (54)
FDR was under significant pressure to pursue inflation, especially from farmers who wanted higher agricultural prices. But inflation was difficult as long as the United States remained on the gold standard. The U.S. Treasury was obligated to give anybody as much gold as they wished at $20.67 per ounce. If the federal government began inflating the supply of paper dollars, people would naturally anticipate devaluation and begin turning in dollars, hoping to get as much gold as possible before the price went up. (66)
In Presidential Proclamation 2039, March 6, 1933, which declared the national “bank holiday,” FDR asserted that gold “hoarding” was “unwarranted” and had brought on the “emergency.” The proclamation claimed the legal authority of the Trading with the Enemy Act (October 6, 1917), which provided fines of $10,000 or as much as ten years in prison for anyone convicted of doing business with an “enemy” of the United States. A subsection of the Trading with the Enemy Act authorized the president “under such rules and regulations as he may prescribe” to ban “any transactions in foreign exchange, export or ear markings of gold or silver coin or bullion or currency by any person within the United States.” Presidential Proclamation 2039 made it against the law until March 9 for any bank to “pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever of any gold.” Thus did FDR make outlaws of ordinary citizens whose “crime” was to protect their assets with gold? (66)
Less than -a month later, on April 5, 1933, FDR issued Executive Order 6012, which expropriated privately owned gold. He ordered Americans to surrender their gold to the government by May, 1933. Violators would be subject to a $10,000 fine or as much as ten years in prison. (67)
What about existing contracts that people had voluntarily agreed to, specifying payment in gold? FDR persuaded Congress to overturn those contracts and wipe out the gold clause. (68)
FDR imagined he could fix the world gold price from his bedroom. Morgenthau reported that when he visited FDR on Friday, November 3, he suggested a 10- or 15-cent rise from the previous day, and FDR decided on a 21-cent rise. Morgenthau asked the rationale for 21 cents, and FDR reportedly replied that “three times seven” is a lucky number. (71-2)
Even though his gold-buying scheme failed, the government kept all the gold it had taken from private individuals. FDR ranked among historys biggest hoarders, with an estimated 190 million ounces of gold worth $7 billion after the dollar devaluation. FDR undoubtedly hoarded gold for the same reasons that the mercantilist kings of the sixteenth, seventeenth, and eighteenth centuries hoarded it: Gold was the ultimate money, and for a ruler money meant power. (74)
National Recovery Administration Director Hugh Johnson, Richberg, and their cohorts occupied offices in the Department of Commerce Building where Herbert Hoover had once worked. Johnson described his quarters as “the worst-planned and least efficient modern office building in the world.” It was curious that Johnson didnt wonder how the very same government, which he believed could save the world, couldnt even get a building right. (116-17)
There were some 1,400 NRA compliance enforcers at fifty-four state and branch offices. They were empowered to recommend fines up to $500 and imprisonment up to six months for each violation. On December 11, 1933, for instance, the NRA launched its biggest crackdown, summoning about 150 dry cleaners to Washington for alleged discounting. In April 1934, forty-nine-year-old immigrant Jacob Maged of Jersey City, New Jersey, was jailed for three months and fined for charging 35 cents to press a suit, rather than the 40 cents mandated by the NRA dry cleaning code. (121)
During the 1920s, farmers had tried a number of schemes aimed at raising their incomes. They formed cooperative associations that would control the marketing of their crops in hopes of realizing higher prices than they would expect on their own, but these associations invariably failed. There were always mavericks that could make more money selling outside the associations. What farmers wanted was compulsion, some way of limiting what everybody produced, to force prices above market levels. (130)
[U.S. Supreme Court associate justice James Clark] McReynoldss opinions focused on protecting private property,