Franklin D. Roosevelt

Excerpts from the Press Conference

January 15, 1934

THE PRESIDENT: Are these the only people out of all the White House correspondents who know anything about finance? (Laughter)

Q. We are the only ones who admit that we do not. (Laughter)

THE PRESIDENT: The easiest way, I think, is for me to read this release to you.

MR. EARLY: They already have it.

THE PRESIDENT: I just want to say one or two things. In the first place, Steve wanted me to stress that all this, is in confidence until the message is released and nothing is to be said in advance of the release.

Q. By the way, when will the release be made?

THE PRESIDENT: As soon as it gets up there to Congress. I don't know whether it is released up there before it is read by the Clerk or not, but I see by the heading "until its reading has begun in the Senate or in the House."

Now, in a nutshell, the first portion of this, down to the first line, might be called philosophical. In other words, it merely goes into the general theory that the issuance of money or currency or any medium of exchange is solely a Government prerogative and always has been since the days of Babylon or the time they used sea shells or coral beads in the South Sea Islands. In theory, coral beads are a perfectly good medium of exchange, perfectly good money as such, provided there is control over them. It becomes a question of control. Throughout history it has always been advisable, for the sake of stability, to have some basis behind the currency which, as a matter of practical fact through the ages, has been the precious metals, gold and silver.

Q. Might we assume that that is an argument against greenbacks—what you have just stated?

THE PRESIDENT: It certainly is an argument against starting of the printing presses. On the other hand, of course, as you know, there has been a very great difference of opinion as to what is a greenback and what is not a greenback. This is the easiest illustration—if we were to start tomorrow to pay off the deficit of this year just by printing greenbacks, they really would be greenbacks; there is no question about that.

On the other hand, a limited amount of non-interest-bearing five-and ten-dollar bonds to retire an outstanding debt and with provision for retirement of those new non-interest bearing bonds would not be greenbacks.

What people fear about greenbacks is, of course, that some future Congress may take Off the limit—take of[ the lid.

Then we come down to the next point which is the taking of the title to the gold by the Government. That follows out logically the theory that the Government is entitled to control the basis behind all currency.

Then the third point is the establishment of an upper limit within which I have to act. By that I mean that I could not stabilize at above 60 if this bill is put through. This bill does not stabilize at 60. It leaves me free to stabilize between 50 and 60.

And— this is just for information because I have noted one or two stories—there has been absolutely no doubt from the legal point of view of the authority under the previous Act to stabilize more than once and to put it at 50 or 60 or anything else I want, as often as I want.

Q. What Act is that?

THE PRESIDENT: Oh, last spring; the Banking bill. . . .

Then the third point in that same paragraph. It would set up a fund of two billion dollars for the purchase and sale of gold, foreign exchange, and Government securities.

Q. Might that be called a stabilization fund?

THE PRESIDENT: Well, that is only part of it. . . .

Q. The point I had in mind was this: that this would permit you to deal with foreign exchange without definitely fixing, permanently, the value of the dollar.

THE PRESIDENT: Let me give you a little background on this particular thing, because I think it is important. Last spring things went up much too fast in this country. Wheat went up to $1.25, which, undoubtedly, was altogether too high. That was caused by speculation. A great many manufacturers overproduced, the steel companies overproduced, the textile people overproduced, all for various reasons, trying to get in under the wire before the Code went into effect.

The result was a perfectly natural one. There was quite a big drop in commodity prices of all kinds around the middle of July. That was a perfectly healthy thing. But a little bit later on, somewhere around September, there began a very definite drift of commodity prices downward. That was caused by a great many factors. It was caused by people who did not approve of N.R.A. codes, it was caused by some of our foreign friends who were deliberately trying to increase the exchange value of the dollar and decrease the exchange value of the franc—there were a good many foreign elements that entered into it.

The result was that by the tenth or fifteenth of October we were in a definite downward drift which, if carried out, would have been a serious thing. Wheat, which should have a normal value of 85 or 90 cents had got down to 60. Cotton had got down to below 9 cents a pound and there was a rather determined drive against prices. The whole line was down.

That was when we took action on gold. I have forgotten what gold was at that particular point; it was around 4.60, as I remember it. It was around 4.60, and the tendency was for it to go to 4.50, 4.40 or 4.30; and because of the pressure on the other side, if left alone it might perhaps eventually have gone back to the figure that the British Treasury and the Bank of England were taking as the stabilization figure away back last May and June, about 3.90 to the pound.

We then started to purchase gold. There are various ways of maintaining foreign exchange. You can either purchase bills of exchange, etc., or actually buy the gold. This move today was in prospect at that time, and obviously it was to the interest of the United States to buy gold. So we bought gold and have been buying it ever since in fairly large quantities and the result has been that the exchange has gone up to well over five dollars and has maintained itself there largely because of the American purchase of gold.

It has, I think, been felt by people on the other side as well as here that if we had not pursued the gold-purchase policy, the actual exchange-value rate on gold would be four dollars instead of five dollars.

The other result of maintaining the dollar-pound and dollar-franc ratio as high as it has been was our ability to get rid of a great many of our export surpluses. Cotton has been moving out. Of course, you know one of our objectives is to eliminate the very large surplus which has been overhanging the domestic prices. The same thing applies to wheat and everything else. Our objective has been to get rid of the surpluses. We got rid of a great deal of cotton and we got rid of a great deal of copper, for instance. At the same time the import trade has increased enormously during the past three months, since the dollar has gone down in terms of pounds. The result has been a very excellent one from a general economic domestic point of view.

This revaluation of not more than 60 percent and not below 50 percent should enable us to maintain a fairly reasonable exchange ratio with other Nations. The reason it has to be done this way is what I said in the message to Congress, that there is at the present time no willingness on the part of the other Nations to go back on a fixed basis. In other words, to put it the other way around, Great Britain has been pursuing what you call the Professor Warren theory for perhaps two and a half years. That is the thing that some of our people forget very definitely. They have a managed pound, absolutely managed, far more so than we have ever thought of managing the dollar. . . .

Q. What is the purpose of purchasing Government securities along with gold and exchange?

THE PRESIDENT: I suppose the easiest way to answer that, the purchase of Government securities, is to ask the question, "Is it right or proper that a handful of people who did not happen to like what was going on or who wanted to use a club in order to get something of their own through—that such private individuals should have the right, without check, at their own sweet will, to dump Government bonds into the market and artificially depreciate the price of Government bonds? Is it moral that private individuals should have that right?"

Q. Was there short-selling of Government bonds?

THE PRESIDENT: I couldn't tell you whether there was short-selling or not but there were, undoubtedly, certain individuals-this does not by any means apply to the overwhelming majority of the bankers in the United States—but there were individuals who recommended to their clients that they should get rid of Government bonds and in most of those cases there were ulterior motives.

Now, the fact that the Government would be given the right to purchase Government bonds means that a private effort of that kind could be check-mated right away. This is protective armor for any Government, and we ought to have it.

Q. Does the setting up of that two-billion-dollar fund depend on the profits of revaluation?


The last part of the message relates to silver. It expresses the thought that silver has also been used from time immemorial as a metallic base, that it is still used by half the population of the world as such, that it is used by us and is a crucial factor in international trade, and that it cannot be neglected. Further on, I say that Governments can well employ silver as a basis for currency and I look for a greatly increased use. I also describe the existing situation with respect to the agreement among the 66 Nations and the fact that we have put our part of the agreement into effect. I also say that I am withholding any recommendations to the Congress for further extension at this time because I want to know the results of the London agreement and the results of the rest of our monetary measures.

Q. Can you tell us anything about the legislation that is to be offered in connection with this?

THE PRESIDENT: There has been drafted what might be called a purely tentative method of arriving at the things recommended in the message. I am perfectly frank in telling you that I haven't even read it. In other words, it is to save the committees trouble and to give them something to "chew on" in order to carry out the recommendations. It is not an Administration bill. It is just to help the committees.

Q. On this gold policy, there is no thought in mind of the Treasury, with its gold stocks, issuing money on the basis of 40 percent reserve?

THE PRESIDENT: No. The idea is, of course, that for this money turned in the Federal Reserve Banks are given certificates that there is gold in the Treasury, dollar for dollar, and that on those certificates the Federal Reserve Banks can issue their own currency to their member banks.

Q. Do you look for any immediate effect on domestic prices from the mere passage of this legislation?

THE PRESIDENT: I don't know; I have no idea.

Q. The profit from this operation clearly is to go to the Treasury?

THE PRESIDENT: Yes. Right on that point, there has been a divergence of opinion amongst some of the bankers—not by any means all and on the part of a few politicians who have wondered whether the Government had any right to take this profit or whether the profit should accrue to the stockholders of the banks. Of course, so far as I can see, there is no question on that at all. We asked individuals to turn in their gold and get paper money for it. We also asked all the corporations to do it, and substantially all did as requested. I cannot see a great deal of difference between a bank and a private corporation. The constituent bank is owned by private individuals, and if we were to pursue that policy of letting the stockholders of the banks take this profit, it would mean that the Government would be handing them a great big Christmas present.

I am very careful to point out in this message that such legislation places the right, title and ownership of our gold reserves in the Government itself. It makes clear the Government's ownership of any added dollar value of the country's stock of gold which would result from any decrease of the gold content of the dollar which may be made in the public interest.

But, in order to be fair, I point out that the Government would lose such dollar value if the public interest in the future should require an increase in the amount of gold designated as a dollar.

Q. It is your idea to have a permanent policy, retaining the limits within the 50 and 60, revaluing within those limits from time to time?

THE PRESIDENT: As far as any human being can say "permanent."

Q. And continue to hold all the gold?

THE PRESIDENT: Certainly, to hold all the gold. .. .

Q. This would not increase the currency-issuing power of the Federal Reserve at all?

THE PRESIDENT: The thing to remember is that every bank statement-the statements of the member banks, the State banks, and the twelve Federal Reserve Banks, their statements are in terms of dollars and there is absolutely no change in their statements. It does not give them less reserve or more. They have the same number of dollars.

Q. Would you mind phrasing in words of one syllable to millions of unlettered people, to most of whom this would be Greek, how the Government would derive these profits that there is so much talk about?

THE PRESIDENT: Let's put it this way: We have been trying to bring the purchasing power of the dollar back, approximately, to the level in which the average of the debts of the country were incurred so that the average of people can pay off those debts in a dollar that has approximately that same purchasing power. One method—the most practical method—of doing it, is to cut the theoretical gold content of the dollar. Now, you can only make that practical and fair if the Government has all the gold. The number of dollars in the banks of the country will be exactly the same as they were before and the Government—as the currency-issuing power-will have the same weight of gold in the Treasury, but in terms of actual dollars for the Treasury, it will represent 80 percent more or 100 percent more, depending on what we revalue at. . . .

Now, there is one other thing. Of course, in terms of foreign exchange, the dollar is today worth, in terms of gold, only about 63 cents.

Q. Can you make any use of this profit other than the two-billion-dollar fund you set up?

THE PRESIDENT: That is for the future.

Q. Have you any authority to issue currency against it?


Q. And the profit does not represent a base of currency in the Federal Reserve?

THE PRESIDENT: No. We keep it in the Treasury.

Now, off the record, just for your information—I have to keep it off the record because it involves another branch of the Government—we do not intend to encourage Congress to spend the billions of the profit. (Laughter)

Q. If anything like that were done, it would be up to Congress to take action?

THE PRESIDENT: We asked them to take action on the two billions.

Q. Congress would have to pass further legislation if you wanted to make use of the profit?


Q. Do you hope that this will encourage international stabilization?


Q. If you use a bullion system—

THE PRESIDENT: This is a bullion system. We will not coin any gold coins except such as might be necessary to make up small amounts less than a bar of gold. Loose change.

Q. In other words, I don't see how you can make an artificial gold price effective unless exchangeable in some form.

THE PRESIDENT: The bullion and small change would be used for foreign settlements. Those take place every six months or a year.

Q. Did you say that the export embargo was removed?

THE PRESIDENT: No, no. Of course, after the whole system gets into bullion, obviously the export embargo would be removed to the extent that if we do have an unfavorable trade balance at the end of the period, we would ship out bullion to pay unfavorable trade balances.

Q. There is no relaxation of the order, then?


Q. Everybody in the country is wanting to know how it is going to affect him.


Q. He wants to know whether it is going to increase his buying power or increase his wages- how much it is going to be felt.

THE PRESIDENT: Probably very little. Probably certain commodity prices will go up to a certain extent and it will enable people, knowing that Congress has said between 50 and 60, to make contracts ahead with far greater assurance than at the present time, because today it is between 50 and 100.

Q. And now it will be definitely between 50 and 60?

THE PRESIDENT: That bill makes it between 50 and 60.

Franklin D. Roosevelt, Excerpts from the Press Conference Online by Gerhard Peters and John T. Woolley, The American Presidency Project

Simple Search of Our Archives