The current monetary system of the United States is unconstitutional from start to finish. The Constitution does not provide a detailed explanation of which monetary system the United States should use, but what it does say is unequivocally lucid. Article I, Section 8, clause 2 says: “Congress shall have power … to borrow money on the credit of the United States … [clause 5:] to mint money, regulate its value and foreign currency, and set the norms of weights and measures … [and clause 6:] to provide for the punishment of counterfeiting of United States currency and securities … “In addition, Article I, section 10, clause 1 states:” No state … shall mint money; issue credit invoices; or do something other than a gold and silver coin in a debt settlement offer … “
The writing of the Constitution in the summer of 1787 was not carried out long enough after the end of the Revolutionary War for the Founding Fathers to forget the calamity of paper money printed and issued by the Continental Congress during the war. The paper notes known as “continental” were eventually reduced to zero percent of their original value because they could not be exchanged for either silver or gold. They were “greenbacks” and, as such, they were the first of three great experiments with “greenbacks” that this nation has carried out. The continental dollar failed so terribly that it gave rise to the saying “not worth a continental.”
Thus, there was hostility towards paper money when the Constitutional Convention met in 1787. A Virginia delegate by the name of George Mason declared that he had a “deadly hatred of paper money.” Delegate Oliver Ellsworth from Connecticut believed that the Convention was “a favorable time to close and lock the door against paper money.” James Wilson, a delegate from Pennsylvania, argued, “It will have a healthier influence on America’s credit to eliminate the possibility of paper money.” South Carolina delegate Pierce Butler noted that the paper is not legal tender in any European country and should not be manufactured in the United States. John Langdon of New Hampshire said he would rather reject the entire Constitution than allow the federal government the power to issue paper money. When the time came for the final vote on the issue, nine states opposed giving the federal government the power to issue paper money, and only two were in favor of such power.
The Founder’s intentions were obviously made using the word “currency” instead of the word “print” or the phrase “issue credit invoices.” Thomas M. Cooley’s Principles of Constitutional Law state on this point: “Coining money is stamping pieces of metal for use as a medium of exchange in commerce according to fixed standards of value.”
Congress was given the exclusive power to mint money, while states were prohibited from doing so. Additionally, states were prohibited from bidding anything other than gold and silver coins as debt settlement, while the federal government was not given the power to make anything legal tender.
In James Madison’s explanation of the constitutional provisions on money, Federalist No. 44, Madison referred to the “foul effects of paper money on the necessary trust between man and man, on the necessary trust in public councils, on industry and the moral of the people and the character of the republican government. ” The Founders’ intention was to avoid the paper-based monetary system that has been used in the United States since Richard Nixon closed the gold window in 1971.
This intention was understood even throughout the 19th century. Daniel Webster wrote:
“If we understand, by currency, the legal money of the country, and what constitutes a legal offer for debts, and is the legal measure of value, then, without a doubt, nothing but gold and silver is included. More undoubtedly, there is no legal tender, and there can be no legal tender in this country under the authority of this government or any other, except gold and silver, whether it be the minting of our mints or foreign coins. at rates regulated by Congress … States are expressly prohibited from bidding anything other than gold and silver in payment of debts, and although such express prohibition does not apply to Congress, Congress has no vested power in this regard other than to mint money and regulate the value of foreign currencies, it is evident that it has no power to substitute paper or anything else for currencies as an offer in the payment of debts in a discharge of contracts … The legal tender, the In addition , the constitutional standard Final value is set and cannot be overthrown. Toppling him would shake the whole system. “
In 1832, the Select Committee on Coins of the House of Representatives, in a report to Congress, concluded that “the losses and deprivations inflicted by experiments with paper money, especially during the Revolution; the knowledge of similar attempts in other countries. … were equally deceptive, fruitless and damaging; they had probably produced the conviction that only gold and silver could be trusted as safe and effective money. “
In 1844, the Ways and Means Committee of the House of Representatives concluded: “The framers of the Constitution intended to avoid the paper money system. In particular, they intended to prevent the paper of government from circulating as money, as had been practiced during the War of Independence.of the various dossiers that had been made were fresh in the public mind, and were said to have displeased respectable part of America … the editors … designed to avoid the adoption of the paper system under any pretext or for any purpose, and if it had not been supposed that such an object was effectively assured, in all probability the rejection of the Constitution would have followed. “
In 1884, in the case Julliard v. Greenman, Judge Stephen Field wrote: “There have been times in our memory when legal United States banknotes were not redeemable for more than half their face value. The possibility of such depreciation will always be present in paper money. disease, no simple legislative statement can cure. If Congress has the power to convert banknotes into legal tender and pass them on as money or its equivalent, why should not enough be issued to pay for the bonds of the United States as they mature? pay interest on the millions of dollars in bonds now owed when Congress can in one day make the money to pay the principal; and why should there be any restrictions on unlimited appropriations by government for all imaginary public improvement schemes if the printing press can provide the money that is needed for them? “
It is noteworthy that this power to mint money is mentioned in the same sentence of the Constitution as the power to “set the standards of weights and measures”, because the drafters considered money as a weight of metal and a measure of value. Roger Sherman, delegate to the Constitutional Convention, wrote that “if what is used as a medium of exchange fluctuates in value, it is no better than unfair weights and measures … which are condemned by the Laws of God and of man. .. “
The current system of paper money, issued by a coercive banking monopoly, has no basis in the Constitution. It is precisely the kind of government institution that can forcibly demand financial support from the people without their consent. As such, it is a form of taxation without representation, and a denial of the principle of consent before paying taxes, earned and fought hard. It is a form of embezzlement.
Surprisingly, the Supreme Court has never ruled on any case that challenges the constitutionality of our current system of irredeemable paper money; in fact, such a case has not yet been resolved before the Court or at the federal level of appeal.
The argument against an irredeemable paper money system is more than a constitutional argument. It is also a moral argument. Furthermore, this system has led to a division in the field of economics between the monetarists and the new Austrian school of economics. This division lies mainly in the concept of inflation. Monetarists describe inflation as “the rise in prices over a period of time”, while Austrian economists describe inflation as “the reckless over-expansion of the supply of money and credit.” Austrian economists seem to have won this argument, but the Federal Reserve continues to operate under the monetarist definition of inflation. This leads to lower interest rates once the bubbles (like the Dotcom bubble or the 2008 subprime crisis) burst from the boom-bust cycle. This leads to a further expansion of credit in the system and the creation of a new bubble and, therefore, to the perpetuity and greater severity of the boom-bust cycle. This inflationary monetary policy facilitates the transfer of wealth from the poor to the very rich and politicians and the consolidation of wealth in the hands of a few.
I believe that several years from now, when the next bubble bursts, the monetarist theory of economics will be thrown in the trash and the United States and consequently the world will again embrace healthy and honest money.
