The Shocking Reason Our Money Is Worth So Much Less Today

|December 23, 2021

Here’s a story you can share at your holiday gatherings. We’ve been telling it to anybody who can stand to hear it.

While most folks talk politics, Hollywood and other trivial nothings over the holiday dinner table… this is a rich story that shows how we got here.

In short, it’s worth retelling.

Not only will you look smarter for sharing it, but you’ll also do the world some good.

It has to do with our money and why it’s worth so much less today than it was yesterday. Once you understand what started the slide, you’ll have a much better grasp on the monumental task it will take to stop it.

The Big Fix

Many readers know that FDR issued a bold mandate on April 5, 1933. He forced all Americans to sell their gold to the government, promising them $20.67 per ounce for it.

The rather sudden mandate was blasted over the airwaves. It was printed in all major newspapers. And signs were posted in post offices across the nation.

Those who didn’t comply faced a $10,000 fine, 10 years in prison… or both.

The secretary of the Treasury at the time, Will Woodin, said, “Gold in private hoards serves no useful purpose under current circumstances.”

And he didn’t stop there…

“When added to the stock of the Federal Reserve banks,” Woodin said, “it serves as a basis for currency and credit. This further strengthening of the banking structure adds to its power of service toward recovery.”

Ah… what’s good for the goose isn’t good for the gander. Gold is a store of wealth for the government and its chosen banks… but not for the people.

Go figure.

Just over a month after the decree, Washington took more than $300 million worth of gold and another $470 million worth of gold certificates off the streets.

That’s bad, but the tale gets darker.

Breaking the Dollar

Just days after announcing his confiscation scheme, FDR held a press conference. On April 19, 1933, he told the world he’d signed an order to break the nation from the gold standard.

Why should currency be backed by gold, after all, if gold was illegal to own?

Americans were stunned. But the president said it was in the best interest of the nation and its economy.

It was all about farmers, he said at the time. They’ve got too much debt and not enough income.

Untie the dollar, let commodity prices rise freely… and the nation’s problems will be solved.

Hardly.

Decades later, farmers are still in debt and few make enough to pay their bills. But now the man in charge points the same finger at even more folks: student debtors… renters who can’t pay… and state and local governments that dug holes a bit too deep.

“The whole problem before us is to raise commodity prices,” FDR said.

By unhinging the dollar from gold, the former could be devalued and inflation could slowly wipe away the pain of massive debt.

Sound familiar?

Shredding the Contract

But there was a hitch – perhaps something the new president (he did all of this within the first few months of his term, by the way) didn’t think through. Perhaps his aides hid it from him. Or perhaps he simply didn’t care.

Whatever the case, much of the nation’s debt at the time had something quite smart included in the contract… something a lot of folks would love to have today.

It was a “gold clause” – a form of checks and balances for the monetary world.

A gold clause ensured the lender was repaid with real money – money that wasn’t devalued due to any government shenanigans… like massive money printing.

With the gold clause intact, borrowers were put in a jam. FDR’s devalued dollar left them with two options to pay off their debt – pay the “real” price in gold or pay the lesser “new” price in dollars that were now worth less.

The difference between the price of gold and devalued dollars was a whopping 69%.

So of course lenders demanded the gold. It was still worth what they had lent out.

It was a mess. But FDR’s power was limited.

He couldn’t sign an executive order as he’d done to outlaw gold. He needed Congress to wield its power.

And even then its lawful ability to remove a key clause from a private contract was highly debatable.

But as a weak, party-led Congress tends to do… it bowed to the president’s pressure and voted in favor of Public Resolution No. 10.

With the president’s signature, the idea of a “gold clause” in a contract was null and void. In an instant, more than $100 billion worth of government and corporate bonds lost much of their value.

Lenders got screwed.

Proponents of killing gold clauses argued that forcing debtors to pay in gold not only was impossible now that the metal was outlawed… but also would kick off a wave of personal bankruptcies as the devalued dollar made the relative price of gold soar.

If allowed to happen, it would ensure that the Great Depression the government was fighting would get even greater.

FDR, of course, said he had no choice in all of this. It was America’s economic doom and, eventually, Britain’s devaluation of the sterling that forced his hand.

But the causes don’t matter. Only the effects do.

We know today that this rigging of the monetary market and, more importantly, cutting ties with gold, launched the start of the race to the bottom that still plagues the world today.

Despite radical measures, the same problems still exist.

Meddling with the money doesn’t fix them. Only meddling with the spending will.

Be warned as talks of forgiving debt and bailing out the suffering continue to grow. Eventually, it will lead to another shocking announcement that makes life tougher for all of us… at least all of us who dare to build wealth for ourselves.

The year ahead stands to be quite interesting.

History is daring to repeat.

Andy Snyder
Andy Snyder|Founder

Andy Snyder is the founder of Manward Press, the nation’s premier source of unfiltered, unorthodox views on money and what it means for a free society. An American author, investor and serial entrepreneur, Andy cut his teeth at an esteemed financial firm with nearly $100 billion in assets under management. Andy and his ideas have been featured on Fox News, on countless radio stations, and in numerous print and online outlets. He’s been a keynote speaker and panelist at events all over the world, from four-star ballrooms to Senate hearing rooms. Today, Andy’s dissident thoughts on life, liberty and investing can be found in his popular daily newsletter,  Manward Financial Digest.