When the US Declared Owning Gold Illegal & Why Bitcoin’s the Way to ‘Seize your Freedom’
On May 1, 1933, US President Franklin D. Roosevelt outlawed gold. He declared Americans withdrawing their gold and currency from the banking system a “national emergency” and ordered banks to close to prevent the export and hoarding of gold or currency.
These steps were taken in response to Roosevelt’s promise to end the Great Depression which drew national employment up to 25% and gutted the economy which began with the 1929 stock market crash.
But he couldn’t print enough money to tackle the situation, like today. The Federal Reserve Act of 1924 limited the amount of money that can be printed by the government as all paper money had to be backed by 40% of gold.
As such he declared a national emergency but even that couldn't prevent runs on banks and gold drain. By issuing Executive Order 6102, Roosevelt made gold ownership illegal and punishable up to ten years in prison on noncompliance.
But the Great Depression didn’t end and in 1937 the stock market collapsed by 90% and unemployment further soared.
The US government then removed the gold standard in 1971, the last remaining restraint on federal deficits.
The ban on owning gold wasn’t lifted until 1974.
The result of removing the gold standard was deficit mounting while the purchasing power of the US dollar continued to decline. A dollar in 1913 has the same buying power as $26 in 2020.
As for the current outlook, several US presidential candidates have said that “we can always print more money” as we have been seeing for the past couple of months in response to the coronavirus pandemic. This is already increasing the risk of currency debasement.
Bitcoin’s distinct advantage over gold
Historically, the government seized gold when the fiat currency became utterly devalued and gold is most valued.
Could it happen again? Given the fact we may be facing another financial crisis, “Yes, The U.S Government Can Still Confiscate Gold” according to GoldTelegraph. Maybe not in the near future but it could very well happen in the long term.
Pointing out how it has already happened in 1933, Dan Held, Director of Business Development at crypto exchange Kraken said, “Seize your freedom. Buy Bitcoin.”
The last quarter also revealed the physical delivery shortcoming of gold. Also, while “Bitcoin markets have been relatively efficient amid recent macroeconomic turmoil (…) global gold markets that have been dislocated for the duration of a few weeks,” observed Coinbase in its latest report.
Although both are scarce and globally accessible units of value, bitcoin doesn’t rely on fragile physical supply chains like gold. As a result, recently there have been severe shortages of gold coins and bars.
Coronavirus lockdown disrupted gold refineries, miners, and supply chains but Bitcoins protocol continues to function as designed and this halving will make Bitcoin about as scarce as gold which is already teleportable.