Executive Orders and Gold Mines
By Matt Marine
October 27, 2012
I spend a lot of time exploring in Arizona. I love finding old buildings, mines and equipment. When I discover an old mine (or mining town), I always ask myself one question: where did all the buildings and equipment go? And why did they stop mining? Okay, that's really two questions, but who'se counting?
The logical answer is: the ore ran out, the people picked up their stuff and left. Or, time, natural disasters (fire, flood and mud), ranchers, treasure hunters, the Forest Service or others had taken the equipment from these places.
While I believe that's true for many cases, I recently found information on some presidential policies that may have led to many of these mine's early demise.
Before we get to that, I think it's important for a quick history lesson on gold mining in Arizona. The Indians and Spaniards knew about precious metals in Arizona long before any large scale mining was performed. The Arizona Territory began to see white settlers in earnest starting in the 1850s. But due to the hazards at the time: Indian raids, lack of roads, maps, water and general knowledge of the area, only small amounts of prospecting was done in the 1850s. Most mining was done near the Mexican towns to Tucson, Tubac and Dome (now Gila City) after rich placer deposits were found in the late 1850s.
During the Civil War, a few other rich deposits were discovered near Rich Hill, Lynx Creek, Hassayampa and in the Bradshaw Mountains. But, due to the Civil War, the troops that had been sent to the Territory to protect the settlers were recalled to the east. This was the beginning of a decade of brutal Indian Wars. Many miners and ranchers were killed by the Indians, so most people either left or stayed in well-protected towns. Some mining happening, but not much.
It wasn't until the end of the majority of these wars ended (~1872) that mining resumed. With the addition of a large scale transcontinental railways constructed through Arizona, a large boom in gold mining began in the 1880s. This boom would keep production increasing until the early 1900s (see graph at bottom of the page). Click here for more information on the history of gold mining in Arizona. Now, on to the Executive Orders...
In the 1930's, the U.S. was in the middle of the Great Depression. In actuality, since March 9, 1933, the United States has been in a permanent state of declared national emergency, but that's another story. Things in 1933 were tough. On April 5, 1933, President Franklin D. Roosevelt invoked Executive Order 6102, making it illegal for any US citizen to possess more than $100 in gold or to use gold as legal tender. Citizens were required to send all their gold into the Federal Reserve Bank by May 1, 1933 or within 3 days of coming into possession of it, and the bank would then pay the citizen for the gold at a rate of $20.67 per troy ounce. Having gold was punishable by a $10,000 fine (more than $150,000 in 2010 dollars) up to ten years in prison, or both.
This order did not stop foreigners or other banks to hold and keep gold. Many people who owned large amounts of gold had it transferred to other countries like Switzerland.
The Executive Order did have some exemptions that allowed some gold to be kept under special circumstances:
- If you used gold for that was customary for industry, profession or art
- If you had less than $100 in gold coins
- Or if you had gold coins that were recognized as collectable's
The last exemption protected known gold collections from being seized and melted.
One ramification from the order that I don't believe was thought out, was its impact to the small producer of gold. The small scale miner (and one that was honest) could no longer trade his little bits of gold in to the local grocer for supplies. Nor could he afford to send it to the Federal Reserve Bank after only three days, then wait for a receipt for payment.
Another outcome of this order was stopping production and melting down of all (well almost all) of the 1933 double eagle gold coins by the government. About 20 of these coins were stolen before they were destroyed. A long and drawn out investigation by the US Secret Service was conducted and about 10 of the coins were eventually found many years later. An interesting story about the missing coins, how some were recovered and who possibly took them can be found here. About 10 years ago and after a long legal battle, the owner of one of the coins was allowed to sell it at auction as long as he split the take with the US Mint. It sold for about $7.5 million, the highest price ever paid for a US coin.
There was only one prosecution for failing to observe the order. A man by the name of Frederick Barber Campbell (a New York attorney) had about 5,000 ounces of gold held in Chase National Bank. The bank refused to give Campbell his gold on September 27, 1933. The next day, federal prosecutors indicted Campbell for failing to surrender his gold. Campbell won his case, but his gold was confiscated by the government anyway.
A myth regarding this Executive Order was that the order read that all safety deposit boxes were going to be sealed and searched for gold. This was never in the order, nor was it carried out.
Another policy implemented by FDR on January 31, 1934 actually was a boost to gold mines. He increased the value of gold from $20.67 per troy ounce to $35 per ounce. This immediate increase of about 70% initially brought more people to turn in their gold, but due to massive inflation, this was short-lived.
The policy change, however, did encourage large-scale gold mining. Gold mining increased dramatically in some areas of the country. Some mines produced record amounts of gold in the next few years.
Then, in 1942 everything changed. We were at war, against two seemingly unbeatable foes. In October, 1942, FDR signed Executive Order L-208 making it "illegal" to mine gold. The War Labor Board deemed gold mining as "non-essential", only strategic minerals like iron, copper, nickel, chrome, cobalt and tungsten were allowed.
Not only was it illegal to mine gold, but it was illegal to operate, transport or purchase gold mining equipment. Only mines that could prove they produced strategic minerals were allowed to operate.
Finally, another perhaps unforeseen demise for gold mines was the big scrap metal drives held for WWII. Some perhaps overly ambitious and patriotic souls ransacked abandoned (and even working) mines for rail cars, equipment, train tracks and anything else made of metal. The infrastructure for many mines were literally picked up and removed.
I wonder what the mining remains would have been like if these two executive orders were never indicted. I'm not here to judge if they were right or wrong, just wondering how different things would be. What do you think?
Courtesy of Western Mining History. You can see how production in Arizona drops due in the early 1930s, then goes way up when the price of gold increases by 70%, then drops again after EO L-208 during WWII
Western Mining History
Double Eagle Coins
The American Presidency Project: Executive Order 6102
United States Legal Action: Suspension of the Gold Standard
Nolan Chart: the End of Oregon's Golden Years
Wikepedia: Executive Order 6102