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IPFS News Link • Gold and Silver

Fixing FDR's Biggest Blunder: From Gold Standard To Fiat Folly And Back

•, by Jp Cortez

To understand how we got here, it's important to understand the policy that initiated our monetary decline.

More than ninety years ago today, April 5, 1933, President Franklin D. Roosevelt issued Executive Order 6102, forever reshaping America's monetary system.

This controversial order marked a pivotal moment in the nation's financial history. Executive Order 6102 banned private ownership of gold coins, bullion, and gold certificates with the penalty for noncompliance being up to ten years in prison, a fine of $10,000, or both. This draconian edict also signaled the effective end of the gold standard.

America did not always have unbacked paper money. In fact, America's founders spilled a lot of ink warning against the risks and ravages of fiat currencies.

In 1786, George Washington wrote to Thomas Jefferson: "Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice."

James Madison wrote that "paper money is unjust" and "unconstitutional."

To enshrine honest money, they considered gold and silver to be the foundation. Gold and silver are notably the only form of money mentioned in the United States Constitution (Article I, Section 10): "No State shall . . . make any Thing but gold and silver coin a tender in payment of debts."

The Coinage Act of 1792 established the US Mint and regulated the coinage of gold, silver, and copper coins. The dollar was defined in terms of a specific weight of silver or gold, providing a tangible link between the currency and precious metals.