FDR: Sowing the Seeds of Chaos
(Excerpt from THE GREAT DEFORMATION: The Corruption of Capitalism
in America by David A. Stockman. Published by PublicAffairs.)
The long-lasting imprint from FDR’s famous “Hundred Days” did not stem from the bank holiday, national industrial recovery act, the farm adjustment act, the Tennessee Valley Authority, or the public works administration.
Instead, it is lodged in the footnotes of standard histories; namely, FDR’s April 1933 order confiscating every ounce of gold held by private citizens and businesses throughout the United States. Shortly thereafter he also embraced the Thomas Amendment, giving him open-ended authority to drastically reduce the gold content of the dollar; that is, to trash the nation’s currency.
These actions did not constitute merely a belated burial of the “barbarous relic.” In the larger scheme of monetary history, they marked a crucial tipping point. They initiated a process of monetary deformation that led straight to Nixon’s abomination at Camp David, Greenspan’s panic at the time of the 1998 Long-Term Capital Management crisis, and the final destruction of monetary integrity and financial discipline during the BlackBerry Panic of 2008.
The radical nature of this break with the past is underscored by a singular fact virtually unknown in the present era of inflationary central bank money; namely, that the dollar’s gold content had been set at $20.67 per ounce in 1832 and had never been altered. There had been zero net domestic inflation for a century and the dollar’s gold value in international commerce had never varied except during war.
The Thomas Amendment nullified this rock-solid monetary foundation and instead permitted the president on his own whim to cut the dollar’s gold content by up to 50 percent. So doing, it signaled that money would no longer exist fixed, immutable, and outside the machinations of the state, but would now be an artifact of its whims and expedients.
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