America's Money Machine

190 PART III/DEBACLE OF AN IDEA
Senate bills would also have abolished the Federal Reserve Board and
created a new monetary authority.
Meantime Roosevelt was coming round to the views of George Warren
that the quickest way to restore prices was by raising the price of
gold, which would cause a similar movement in the prices of all other
commodities. Warren calculated and promised that a 75 per cent increase
in the price of gold from $20.67 to $36.17 an ounce would restore
prices to the 1926 leve1. 2 He was supported by the influential
Committee for the Nation, which was urging a $41.34 price for gold,
that is, a 50 cent dollar.
The chronology of the development of the gold policy is of interest.
On March 10, the day following the signing of the Emergency Banking
Act,· Roosevelt had issued an Executive Order prohibiting the export of
gold except under license. This had been followed by an Order on
April 5, that forbade the private holding of gold and gave the Secretary
of the Treasury authority to regulate by license all transactions in gold,
both domestic and foreign. On April 20, a further Order terminated the
export of gold and took the U. S. off the gold standard. Following the
April 20 Order, the dollar began to depreciate abroad; that is, the price
of gold began to rise, with the premium going to 23.2 per cent by June
10. At the same time the prices of basic commodities began to move
upward, and this was taken as confirmation of the Warren gold-price
theory.
On May 12 the Thomas amendment was enacted, which gave the President
authority to devalue the dollar by as much as 50 per cent, with
corresponding authority to revalue silver.
OnJune 5, by Public Resolution, all "gold clauses" contained in dollar
obligations, excepting currency, were declared to be against public policy;
and such obligations, whether or not they contained a "gold clause,"
were declared to be discharged upon payment, dollar for dollar, in any
coin or currency that was legal tender at the time of payment. The
Resolution also declared all coins and currency of the United States to
be legal tender.
The gold clause abrogation was pushed through the House in three
days (from May 26 when the Resolution was introduced to May 29) and
a little longer in the Senate. It represented a profound break in U. S.
banking practices. Since the Civil War currency depreciation it had been
customary in bond indentures to specify payment of principal and interest
in gold coin of "the present weight and fineness." It had become
federal practice by the Act ofFebruary 4, 1910, which provided that "any