EXCERPTS:
"Over the summer of 1933, FDR found himself relying increasingly on someone he was sure would say "yes"—Morgenthau, his timid old Dutchess County neighbor who held a post at the Farm Credit Administration. With the aid of his "yes" man, Roosevelt launched a novel gold purchase program. The plan was to drive up the general price level by buying gold. Each morning, FDR set the gold price target, personally. This in turn was supposed to help farmers, who would get higher prices for commodities.
Theoretically, Roosevelt's idea of reflating can be defended. More money might mean more growth.
But the exposure to investors that Morgenthau was getting through the gold purchase project of 1933 was already teaching him something. Investors didn't like the arbitrariness. It took away their confidence. One day Morgenthau asked FDR why the president had chosen to drive up the price of gold by 21 cents. The president cavalierly said he'd done that because 21 was seven times three, and three was a lucky number. "If anyone ever knew how we really set the gold price through a combination of lucky numbers etc., I think they would be frightened," Morgenthau wrote in his diary. And they were: In the second half of 1933 a powerful stock rally flattened.
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Morgenthau remained torn between loyalty to FDR and loyalty to office. But from then on, he expressed his disgust for arbitrary intervention. Referring to an agriculture department program that killed swine in order to reduce supply and drive up prices, Morgenthau once commented, "I think from the day we started killing pigs there has been a curse on this administration."
