Great Depression in the United States

1933-34

When international reaction to Roosevelt's election led to a run on the dollar, the Federal Reserve Bank of New York asked him to close the banking system in order to stem the drain on its reserves , and soon after his inauguration he decared a four-day "bank holiday". Also in early 1933, the President took action to revive the financial sector, tackling the problems facing both creditors and debtors. With the reopening of the banks in 1933 and the restoration of confidence in the banking system, deposits and money supply rose sharply .

Roosevelt had undertaken to allow the dollar exchange rate to fall in order to reverse the deflationary fall in domestic prices, and on the 5th of June, by a joint resolution of Congress, his administration was relieved of its obligation to convert dollars into gold. There was an immediate fall of about 30 per cent in the exchange rate between the dollar and the pound sterling. The period of a variable price of gold came to an end on 31 January 1934, when the President, acting under the authority of the Gold Reserve Act of 1933, fixed the dollar at $35 an ounce for gold thereby devaluing the gold dollar to 59 per cent of its former weight in gold .

(The New Deal is described in detail in an article with that title, and its economic implications are discussed in the article on the Great Depression.)