How it Will Work
John Francis Knott – October 1933
This cartoon comes in response to an address to the nation President Roosevelt made in October of 1933, in the midst of the Great Depression. He declared that the United States no longer should rely on outside countries to influence the value of gold in the US, and that the government would be setting up a market where the price of gold and the purchasing power of the dollar would be fixed.
In the previous March, the United States stopped using gold payments and effectively went off the gold standard, but gold was still relevant in trade, both domestic and international. Previously, the Federal Reserve was required to hold gold equal to 40% of the value of the currency it issued (the dollar), and to convert those dollars into gold at a fixed price of a little over $20 per ounce. The Federal Reserve held more than enough gold to convert to currency typically, and this was called “free gold.” In early to mid 1933, large quantities of gold left the Federal Reserve, both domestically and internationally. Experts say individuals and businesses preferred having metallic gold instead of paper currency, and that foreign investors feared that the dollar itself was devaluating. Both of these combined are reasons the Federal Reserve Bank of New York could no longer carry out its’ commitment of handing out gold instead of paper currency, and so the National Banking Holiday was created.
Throughout the next few months, the Roosevelt administration gradually weakened the US’s tie to gold through a series of actions. Beginning in April, the administration prohibited exports of gold and prohibited the Treasury department and other institutions from converting currency into gold. The next month, congress passed the Thomas amendment to the Agricultural Relief Act, which gave the president the power to reduce the content of gold in the dollar by as much as 50%. Silver was also added as an option to back the dollar, instead of just gold. In June, a resolution repealed gold clauses in contracts, both governmental and private. Gold clauses were guarantees in contracts that the parties involved would be repaid in gold or the monetary equivalent, as set by the value from 1900. These three initiatives together evolved the Roosevelt gold policy, leading up to the second phase, which was introduced in October of 1933 (for which the political cartoon is a reaction to).
In simple terms, the purpose of this second phase was to devaluate the dollar. The government authorized the Reconstruction Finance Corporation to buy gold at increasing prices, which raised the value of gold in terms of dollars, but lowered the value of dollars in terms of gold and foreign currencies. The ultimate goal of this was to raise prices of American commodities, which would counteract the deflation that pulled the economy into the state it was currently in. This reflation would hypothetically help those in debt, help banks, and businesses. The reflation would also hopefully lower prices of American goods internationally, which would encourage exports, and raise prices of foreign goods, which would discourage imports.
The cartoon by John Knott in the October 24th edition of the Dallas Morning News is a depiction of President Roosevelt flying and raising a gold dollar coin higher and higher, as if it was a kite. The editorial that accompanies the cartoon, A Market for Gold, says “the establishment of the gold market puts the President in position to push consistently toward a price level which may be acceptable as equitable to both creditors and debtors, without an unnecessary amount of interference because of manipulation abroad.” This quote quite possibly depicts most clearly what the cartoon is trying to show. While the editorial seems to be supportive of the new gold market, it is also skeptical in some ways, mostly about the President mostly ignoring the devaluation of the dollar. The United States had been under the gold standard for so long, and so as it weaned off it, many were nervous and dubious about the results. The editorial ends by saying “All that remains to be done is the announcement and the stabilization that the President in due time will make.” So while the Dallas Morning News supports President Roosevelt’s idea, they are still waiting for more.
A reason the dollar coin is depicted as a kite is because of the uncertainty of the value of the actual currency. It is easy to think you’re flying a kite excellently, but all of a sudden a gust of wind could arrive, or anything of that nature, and the kite will crash to the ground. The editorial board acknowledges that Roosevelt can now control the price of their currency, but that the dollar in due time will devaluate, or fall to the ground (as a kite does).
Knott, John. “How it Works” Cartoon. The Dallas Morning News [Dallas] 24 October, 1933: n. pag. Dolph Briscoe Center for American History. Web. 23 November, 2014.
“A Market for Gold” The Dallas Morning News [Dallas] 24 October, 1933: n. pag. Dolph Briscoe Center for American History. Web. 23 November, 2014.
Gary Richardson, Alejandro Komai, and Michael Gou. “Roosevelt’s Gold Program – A Detailed Essay on an Important Event in the History of the Federal Reserve.” Roosevelt’s Gold Program – A Detailed Essay on an Important Event in the History of the Federal Reserve. 1933. Web. 2 Dec. 2014.