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Jun 05 2011

On This Day In History June 5

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

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June 5 is the 156th day of the year (157th in leap years) in the Gregorian calendar. There are 209 days remaining until the end of the year

1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. The United States had been on a gold standard since 1879, except for an embargo on gold exports during World War I, but bank failures during the Great Depression of the 1930s frightened the public into hoarding gold, making the policy untenable.

Soon after taking office in March 1933, Roosevelt declared a nationwide bank moratorium in order to prevent a run on the banks by consumers lacking confidence in the economy. He also forbade banks to pay out gold or to export it. According to Keynesian economic theory, one of the best ways to fight off an economic downturn is to inflate the money supply. And increasing the amount of gold held by the Federal Reserve would in turn increase its power to inflate the money supply. Facing similar pressures, Britain had dropped the gold standard in 1931, and Roosevelt had taken note.

Prolongation of the Great Depression

Some economic historians, such as American professor Barry Eichengreen, blame the gold standard of the 1920s for prolonging the Great Depression. Others including Federal Reserve Chairman Ben Bernanke and Nobel Prize winning economist Milton Friedman lay the blame at the feet of the Federal Reserve. The gold standard limited the flexibility of central banks’ monetary policy by limiting their ability to expand the money supply, and thus their ability to lower interest rates. In the US, the Federal Reserve was required by law to have 40% gold backing of its Federal Reserve demand notes, and thus, could not expand the money supply beyond what was allowed by the gold reserves held in their vaults.

In the early 1930s, the Federal Reserve defended the fixed price of dollars in respect to the gold standard by raising interest rates, trying to increase the demand for dollars. Its commitment and adherence to the gold standard explain why the U.S. did not engage in expansionary monetary policy. To compete in the international economy, the U.S. maintained high interest rates. This helped attract international investors who bought foreign assets with gold. Higher interest rates intensified the deflationary pressure on the dollar and reduced investment in U.S. banks. Commercial banks also converted Federal Reserve Notes to gold in 1931, reducing the Federal Reserve’s gold reserves, and forcing a corresponding reduction in the amount of Federal Reserve Notes in circulation. This speculative attack on the dollar created a panic in the U.S. banking system. Fearing imminent devaluation of the dollar, many foreign and domestic depositors withdrew funds from U.S. banks to convert them into gold or other assets.

The forced contraction of the money supply caused by people removing funds from the banking system during the bank panics resulted in deflation; and even as nominal interest rates dropped, inflation-adjusted real interest rates remained high, rewarding those that held onto money instead of spending it, causing a further slowdown in the economy. Recovery in the United States was slower than in Britain, in part due to Congressional reluctance to abandon the gold standard and float the U.S. currency as Britain had done.

Congress passed the Gold Reserve Act on 30 January 1934; the measure nationalized all gold by ordering the Federal Reserve banks to turn over their supply to the U.S. Treasury. In return the banks received gold certificates to be used as reserves against deposits and Federal Reserve notes. The act also authorized the president to devalue the gold dollar so that it would have no more than 60 percent of its existing weight. Under this authority the president, on 31 January 1934, fixed the value of the gold dollar at 59.06 cents.

 70 – Titus and his Roman legions breach the middle wall of Jerusalem in the Siege of Jerusalem.

1257 – Krakow, Poland receives city rights.

1798 – The Battle of New Ross: The attempt to spread United Irish Rebellion into Munster is defeated.

1817 – The first Great Lakes steamer, the Frontenac, is launched.

1829 – HMS Pickle captures the armed slave ship Voladora off the coast of Cuba.

1832 – The June Rebellion breaks out in Paris in an attempt to overthrow the monarchy of Louis-Philippe.

1837 – Houston, Texas is incorporated by the Republic of Texas.

1849 – Denmark becomes a constitutional monarchy by the signing of a new constitution.

1851 – Harriet Beecher Stowe’s anti-slavery serial, Uncle Tom’s Cabin or, Life Among the Lowly starts a ten-month run in the National Era abolitionist newspaper.

1862 – As the Treaty of Saigon is signed, ceding parts of southern Vietnam to France, the guerrilla leader Truong Dinh decides to defy Emperor Tu Duc of Vietnam and fight on against the Europeans.

1864 – American Civil War: Battle of Piedmont: Union forces under General David Hunter defeat a Confederate army at Piedmont, Virginia, taking nearly 1,000 prisoners.

1883 – The first regularly scheduled Orient Express departs Paris.

1888 – The Rio de la Plata Earthquake takes place.

1900 – Second Boer War: British soldiers take Pretoria.

1915 – Denmark amends its constitution to allow women’s suffrage.

1916 – Louis Brandeis is sworn in as a Justice of the United States Supreme Court.

1917 – World War I: Conscription begins in the United States as “Army registration day”.

1933 – The U.S. Congress abrogates the United States’ use of the gold standard by enacting a joint resolution (48 Stat. 112) nullifying the right of creditors to demand payment in gold.

1941 – Four thousand Chongqing residents are asphyxiated in a bomb shelter during the Bombing of Chongqing.

1942 – World War II: United States declares war on Bulgaria, Hungary, and Romania.

1944 – World War II: More than 1000 British bombers drop 5,000 tons of bombs on German gun batteries on the Normandy coast in preparation for D-Day.

1945 – The Allied Control Council, the military occupation governing body of Germany, formally takes power.

1947 – Marshall Plan: In a speech at Harvard University, United States Secretary of State George Marshall calls for economic aid to war-torn Europe.

1949 – Thailand elects Orapin Chaiyakan, the first Thai female member of Thailand’s Parliament.

1956 – Elvis Presley introduces his new single, “Hound Dog”, on The Milton Berle Show, scandalizing the audience with his suggestive hip movements.

1959 – The first government of the State of Singapore is sworn in.

1963 – British Secretary of State for War John Profumo resigns in a sex scandal known as the Profumo Affair.

1963 – Movement of 15 Khordad: Protest against arrest of Ayatollah Ruhollah Khomeini by Shah of Iran, Mohammad Reza Pahlavi. In several cities, masses of angry demonstrators are confronted by tanks and paratroopers.

1964 – DSV Alvin is commissioned.

1967 – Six-Day War begins: The Israeli air force launches simultaneous pre-emptive attacks on the air forces of Egypt, Jordan, and Syria.

1968 – U.S. presidential candidate Robert F. Kennedy is shot at the Ambassador Hotel in Los Angeles, California by Palestinian Sirhan Sirhan. Kennedy dies the next day.

1969 – The International communist conference begins in Moscow.

1975 – The Suez Canal opens for the first time since the Six-Day War.

1975 – The United Kingdom holds its first and only country-wide referendum, on remaining in the European Economic Community (EEC).

1976 – Collapse of the Teton Dam in Idaho, United States.

1977 – A coup takes place in Seychelles.

1977 – The Apple II, one of the first personal computers, goes on sale.

1981 – The Morbidity and Mortality Weekly Report of the Centers for Disease Control and Prevention report that five people in Los Angeles, California have a rare form of pneumonia seen only in patients with weakened immune systems, in what turns out to be the first recognized cases of AIDS.

1984 – Prime Minister of India Indira Gandhi orders an attack on the Golden Temple, the holiest site of the Sikh religion.

1989 – The Unknown Rebel halts the progress of a column of advancing tanks for over half an hour after the Tiananmen Square protests of 1989.

1995 – The Bose-Einstein condensate is first created.

1998 – A strike begins at the General Motors parts factory in Flint, Michigan, that quickly spreads to five other assembly plants (the strike lasted seven weeks).

2001 – Tropical Storm Allison makes landfall on the upper-Texas coastline as a strong tropical storm and dumps large amounts of rain over Houston. The storm caused $5.5 billion in damages, making Allison the costliest tropical storm in U.S history.

2003 – A severe heat wave across Pakistan and India reaches its peak, as temperatures exceed 50°C (122°F) in the region.

2006 – Serbia declares independence from the State Union of Serbia and Montenegro.

Holidays and observances

   * Arbor Day (New Zealand)

   * Christian Feast Day:

       * Boniface (Roman Catholic Church)

       * June 5 (Eastern Orthodox liturgics)

   * Constitution Day and Father’s Day (Denmark)

   * Indian Arrival Day (Suriname)

   * Khordad Movement Anniversary (Iran)

   * Liberation Day (Seychelles)

   * President’s Day (Equatorial Guinea)

   * World Environment Day (International)

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