Abstract

"Reinventing the Dollar: Southern Lawyers and the Origins of the U.S. Gold Reserve Act of 1934"

Nathanael Mickelson, University of Georgia (nlmickelson@uga.edu)

From 1933 – 1935, the United States abandoned the gold standard in a controlled process. By revaluing gold, Roosevelt’s administration created modest inflation and significantly expanded credit. While it did not end the Great Depression, economic historians believe the inflationary policy marked the first step in the long road to economic recovery.

The origins of this policy are difficult to discern. Eric Rauchway argues that Franklin Delano Roosevelt intended to abandon the gold standard and developed a strategy to do so prior to his inauguration in 1933. Sebastian Edwards refutes this notion and contends that the archive is entirely absent of any evidence of a well-developed legislative strategy. Instead, he believes the Gold Reserve Act of 1934 resulted from a combination of Congressional pressure and Roosevelt’s penchant for experimentation.

The proposed paper resolves this tension by confirming Rauchway’s intuition that a pre-conceived monetary strategy existed while also supporting Edwards’s argument that revaluation did not originate within the Roosevelt administration. Drawing on original research in the Joseph T. Robinson Papers at the University of Arkansas Special Collections, this paper argues that lawyers associated with Rose Law Firm in Little Rock assisted Senate Majority Leader Joseph T. Robinson in designing a long-term strategy to revalue the dollar as early as 1932. The policy was embraced by Gold Democrats who feared “uncontrolled inflation” if silver were monetized but also recognized that the Gold Standard was inherently deflationary.

While the South seems an unexpected origin for this new monetary standard, its position on the periphery of American finance and reliance on agriculture meant the region experienced deflation prior to 1929. To combat this deflation, and inspired by Irving Fisher, Arkansas lawyers designed a policy sequence that limited both financial speculation and pre-emptively combatted legal challenges regarding “gold clauses,” suggesting the need to describe the New Deal in economic terms beyond Keynesianism.