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Posts Tagged ‘Coinage Act of 1792’

Griffin's 1994 book, The Creature from Jekyll ...

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The power to make any thing but gold and silver a tender in payment of debts, is withdrawn from the States, on the same principle with that of issuing a paper currency.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.

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Painting, 1856, by Junius Brutus Stearns, Wash...

There are a lot of different things said about what the U.S. Constitution mandates regarding the monetary system, and to clarify, here is my analysis:

  • Congress has the sole public power to strike coins from any metal. The proof that it isn’t limited to gold and silver is the plain language, “coin money,” and the first Coinage Act of 1792, which provided for the coining of bronze coins as well as gold and silver.
  • Exercise of that power is optional, just as is their power to declare war.
  • Congress does not have the power to create any non coin-based money, based on an originalist interpretation of the Constitution and a strict interpretation of its enumerated power to coin money and the 10th Amendment.
  • Individuals and non-corporate associations of individuals retain the right to mint coins or issue paper currency, as per the 9th Amendment, so long as there is no counterfeiting.
  • States have the option of enacting legal tender laws, and if they do, gold and silver must be made legal tender in payment of debts.
  • People and even businesses are allowed to accept payment for goods and services in something other than gold and silver, regardless of legal tender laws, because of the distinction between payment for goods and services and payment of debts.
  • States are prohibited from issuing “bills of credit,” which specifically refers to paper currency. Due to the Tenth Amendment, the States retain powers not delegated to Congress, and, therefore, they have the power to issue credit that isn’t backed by anything, so long as there is no paper currency associated with it.

For my other writings about a constitutional monetary system, 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.

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American Gold Eagle

The documentary, Fiat Empire, makes the claim:

When you suggest to people that their money should be gold or silver coin, as it says in the Constitution, they sometimes stare at you with a blank expression, or make the most extraordinary comments.

In some cases, those responses are justified, since the Constitution doesn’t say money should be gold or silver coin.

Article I, Section 8 of the Constitution grants Congress the power “To coin Money,” but nowhere is the word “money” defined in the Constitution.

The Coinage Act of 1792 provided for the coining of copper, in addition to gold and silver, and made those coins lawful tender, showing that something other than gold and silver were coined as money by Congress during the era of the Founding Fathers.

Some cite Article I, Section 10 to claim the Constitution says money should be gold or silver coin.

[No State shall] make any Thing but gold and silver Coin a Tender in Payment of Debts;

But that is a restriction on the individual States of what they can make legal tender, and not a requirement that they make gold and silver coin legal tender. In the same section is the restriction which prohibits the States from coining money, so the only money that can be coined by government is by Congress, and includes more than just gold and silver.

For more misconceptions about gold and silver in the Constitution, please read The Constitution doesn’t insist on a gold or silver-backed currency.

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Coins

Both Congress’ enumerated power to coin money (from any metal), and the power of the States to only make gold and silver legal tender, were powers that didn’t necessarily have to be exercised.

A power is something you can exercise, or not exercise. This is clearly evidenced by Congress’ other enumerated powers, such as the power to declare war, or to borrow money on the credit of the United States.

There was an insidious nature to the Coinage Act of 1792, in that it forced American taxpayers to pay for the cost of minting the gold and silver brought to be minted (see Section 14 on page 249), which was overwhelmingly owned by wealthy interests.

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