In view of further intentions not yet disclosed it was imperative for the government to get possession of all the gold. With a lot of gold in private hands its control of money, banking, and credit could have been seriously challenged. All that the government asked for at first was possession of the gold, as if it were a trust. For their gold as they gave it up people received paper money, but this paper money was still gold standard money—that is to say, it had always been exchangeable for gold dollar for dollar, and people supposed that it would be so again, when the crisis passed. Not a word had yet been said about devaluing the dollar or repudiating the gold standard. The idea held out was that as people surrendered their gold they were supporting the nation's credit.
This decree calling in the gold was put forth on April 5 . There was then an awkward interlude. The Treasury was empty. It had to sell some bonds. If people knew what was going to happen they might hesitate to buy new Treasury bonds. Knowing that it was going to devalue the dollar, knowing that it was going to repudiate the gold redemption clause in its bonds, even while it was writing the law of repudiation, the government nevertheless issued and sold to the people bonds engraved as usual, that is, with the promise of the United States Government to pay the interest and redeem the principal "in United States gold coin of the present standard of value." . . . .
By resolution June 5, 1933, the Congress repudiated the gold redemption clause in all government obligations, saying they should be payable when due in any kind of money the government might see fit to provide; and, going further, it declared that the same traditional redemption clause in all private contracts, such, for example, as railroad and other corporation bonds, was contrary to public policy and therefore invalid. . . .
[What eventually followed] was a modern version of the act for which kings had been hated and sometimes hanged, namely to clip the coin of the realm and take the profit into the king's revenue. . .
At the President's request the Congress, on January 30, 1934, passed a law vesting in the Federal government absolute title to all that gold which people had been obliged to exchange for gold standard paper dollars the year before, thinking as they did that it was for the duration of the emergency only and that they were supporting the nation's credit. They believed the statement issued at the time by the Secretary of the Treasury, saying : "Those surrendering the gold of course receive an equivalent amount of other forms of currency and those other forms of currency may be used for obtaining gold in an equivalent amount when authorized for proper purposes."
Having by such means got physical possession of the gold, it was a very simple matter for the government to confiscate it. All that it had to do was to have Congress pass a law vesting title in the government.The following day, on January 31, 1934, the government devalued the dollar and pocketed the roughly $2 billion in profit. Relying on Americans' trust, Roosevelt had accomplished a revolutionary feat in four steps:
1. Give us your gold so we can build up the nation's credit. In exchange, we'll give you receipts you can later turn in to get your gold back. Incidentally, if you don't cooperate we'll hit you with a heavy fine and throw you in prison.
2. We've decided not to honor the gold clause in the bonds we've sold you. In other words, your bonds will be redeemable in paper money rather than gold. The same goes for private contracts that stipulate payment in gold. You can only use government paper money to meet contractual obligations.
3. Remember that promise we made about exchanging your paper gold for the gold you turned in? We've decided to break that promise. We're keeping the gold.
4. We hereby declare gold to exchange for more dollars than it did when we took it from you. We'll keep the profit. It will help the recovery.
In ruling on the subsequent "gold cases," the Supreme Court said yes, it was all done legally, if perhaps underhandedly. How could government get away with an immoral act? No one had the power to stop it.
Garrett later concludes (pp. 103-104):
Those who take the New Deal to have been the beginning of revolutionary change in the character of government are wont to cite its laws, and its many innovations within the law and to forget that if it had been without the means to enforce them all of its intentions would have died in the straw. It had to have money; and not only a great deal of money, but freedom from the conventional limitations of money. It knew that. [Emphasis added]