The Untold Story of FDR and the Battle Over Gold – by Sebastian Edwards (Bloomberg News – May 22, 2018)

First of four excerpts from “American Default,” on one of the strangest and most enduring chapters of the Roosevelt era.

During the second half of 1933, George F. Warren was the most influential economist in the world. Almost every morning during November and December, he met with Franklin Roosevelt while the president was still in bed, and helped him decide the price at which the government would buy gold during the next 24 hours.

Henry Morgenthau Jr., who often attended these meetings, confided to his diary that the process had a cabalistic dimension to it. In selecting the daily price, FDR would, jokingly, consider the meaning of numbers, or flip coins.

On one occasion, he decided that the price would go up by 21 cents with respect to the previous day. He then asked the group assembled around his bed if they knew why he had chosen that figure.

When they said that they didn’t, the president smiled broadly and remarked that it was a lucky number — “It’s three times seven.” He would then write the new price on a piece of paper, which he handed to Jesse Jones, the chairman of the Reconstruction Finance Corporation.

According to Warren’s theories, higher domestic prices of gold would result in rapid and proportional increases in the price level and especially in commodity prices.

For the rest of this article: