Just curious, but what was the rationale under which private posession of gold was made illegal in the US? It boggles the mind...
Roosevelt needed to in effect devalue the dollar during the Great Depression. In a deflationary depression, this acts as an inflationary force to cancel the negative effects of the deflation. Even libertarian monetarists such as Milton Friedman agree that this is the proper approach when dealing with a depression. Roosevelt did not have the advantage of modern economics and he made many economic mistakes which prolonged the depression, but devaluing the dollar was not one of them. However doing a straight devaluation was politically unacceptable at the time. Because the dollar was pegged to gold, devaluing the dollar meant in effect increasing the value of gold in terms of dollars. This would represent a tremendous windfall to holders of gold. And gold, by and large, is owned by the rich. At the time, the U.S. faced a significant chance of a Communist/Socialist revolution such as had been seen in several other countries. Class warfare was widespread, with armed violence between workers and management a common occurance. Transferring a huge bounty into the hands of the rich would have inflamed the working class and risked plunging the country into chaos and revolution. By eliminating private gold ownership, Roosevelt was able to take a necessary step to invigorate the economy, devaluing the dollar, while reducing the risk of a civil war. The rich protested, of course, but in practice they went along with the measure as they were terrified of a workers' revolution. Looking back, since there was, in fact, no revolution, it is easy to forget today how perilous the state of the country was in those times. For all those who curse Roosevelt's name, the U.S. at least ended up the decade in better shape than many countries, and things could have been far worse. Americans could be living in a People's Republic today. Confiscating gold was clearly the lesser of the evils.