The True Story of the Time the Government Printed a $100,000 Bill

[Editor’s note: The following is a cross post by Rob Wile that originally appeared on Business Insider]:

A $1 trillion-dollar coin seems like a high denomination to ask the government to print. Some say its weight could sink the Titanic! (This is benightedly ludicrous).

But one time, the U.S. government actually got 1/10,000,000th of the way there — by printing a $100,000 bill.

And it really helped the economy.

The year was 1933. We were in the midst of a worldwide depression characterized by massive deflation.

St. Louis Fed

President Roosevelt ordered Americans to surrender any gold they held to the government.

Wikimedia

The reason: no one was buying anything with cash.

Library of Congress

Gold hoarding and bartering were also reducing the amount of funds flowing into the government.

Library of Congress

Americans agreed to surrender their gold, but it wasn’t enough…

St. Louis Fed

…Because Roosevelt also agreed to bail out the banks. That was good news for consumers but bad news for currency control.

Wikimedia

So Roosevelt proposed the Treasury take over the Federal Reserve’s gold supplies.

By Infrogmation on flickr

The pluses: Once the federal government controlled all the gold, it could better enforce its plans to devalue the dollar (thus reflating the economy).

Library of Congress

The costs: end of Fed independence.

Library of Congress

Fed Chairman Gene Black was sympathetic but wary. He advised the decision was best left up to Congress.

(Gene Black, left, with David Ben Gurion, Wikimedia)

Congress took up the measure in January 1933. The Democrat-controlled Senate — a first since World War I — helped get the measure passed Jan. 31.

Library of Congress

The Gold Reserve Act of 1934 set a new federal exchange rate for gold at $35, but only for the purposes of foreign exchange.

New York Times

It also allowed the Treasury to print bills to pay for the Federal Reserve’s gold.

Library of Congress

And one of them was worth $100,000. (It had Woodrow Wilson on the face).

Wikimedia

Spoiler alert: It worked.

EconomistView

©2013 Business Insider, Inc, Rob Wile.

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