G. Edward Griffin, in providing a chapter-by-chapter summary of his 1994 book, The Creature from Jekyll Island, started with this claim in the summary for chapter 15:
“The Constitution prohibits both the states and the federal government from issuing fiat money.“
Actually, it doesn’t. What it does do, as is later admitted by Griffin, is explicitly prohibit the States from issuing bills of credit, which was intended to mean — and still does mean — paper currency.
First of all, I don’t accept the definition of fiat money as money without any precious metal backing — usually defined only as gold and silver.
Fiat is Latin for “let it be done,” and as a result, gold and silver can also be fiat money, whenever, by law, they are assigned a value different from their market value, as was the case with the first Coinage Act of 1792, which Griffin references.
The Tenth Amendment to the U.S. Constitution states:
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.“
While bills of credit — that is, paper money — are examples of fiat money, they don’t account for the totality of fiat money.
Other examples of fiat money include state credit that is issued by a book entry, as the Bank of North Dakota does. This credit is a debt that functions as money.
For some reason, Griffin distinguishes between paper money and “bills of credit,” implying that they are somehow different. That is to be expected, if you want to argue that state-issued credit is also unconstitutional. A 1856 law dictionary entry by John Bouvier on “bills of credit” states that:
“The prohibition [against bills of credit], therefore, does not apply to the notes of a state bank, drawn on the credit of a particular fund set apart for the purpose.“
Further proof that “bills of credit” refers only to paper money is the statement by “The Father of the Constitution,” James Madison, who wrote in Federalist Paper No. 44:
“The power to make any thing but gold and silver a tender in payment of debts, is withdrawn from the States, on the same principle with that of issuing a paper currency.“
In order to disprove the claim that the Constitution prohibits both the states and federal government from issuing fiat money, all one has to do is show that one of them isn’t prohibited from issuing fiat money, and I have done just that.
For my other articles on what the Constitution really says about money and currency, see The U.S. Constitution doesn’t say money should be gold or silver coin, and The Constitution doesn’t insist on a gold or silver-backed currency.