“ You shall not press down upon the hilltop of british labour party this peak of thorns—you shall not crucify world upon a cross of gold ” !
He was addressing the definition of money .
What the U.S. Constitution says about the definition of money is compendious. article I, Section 8 gives Congress the express might :
“ To coin money [ and ] to regulate the value thence. ”
As writers on the subject have pointed out countless times, to “ coin ” is obviously not the same as to “ print. ”
How then does it come about that the american english government issues irredeemable, decree, paper money, and this is the only kind of money we have today ?
The Constitution expressly prohibits the states from issuing such paper money, but is dumb about the national politics on this point .
Considering original purpose through the Constitutional debates, the founding fathers were closely consentaneous in their strong enemy to newspaper money, as the Notes of the Debates in the Federal Convention make completely clear. In general, they shared the watch belated expressed by James Madison about :
“ The rage for composition money…or any other improper or severe project. ”
Although this was the dominant allele public opinion of the members of the convention, and although they debated an express prohibition of national paper money, they decided not to include it. Of course, neither was there an authority .
In the discussion, George Mason explained :
“ Though he had a mortal hate to paper money, yet…he could not foresee all the emergencies ” of the future and was “ unwilling to tie the hands of the legislature. ”
Paper money in this see is a matter lone for emergencies .
The Constitutional result was the press out might “ to coin ” and muteness on “ to print. ” Should one conclude that there is an imply might for the government to print pure newspaper money ? Further, is there an entail power to make it a legal bid in payment of debts, even if those debts had been previously contracted for and explicitly want payment in gold coin ?
A distribute of supreme judicial ink would later be devoted to debating and ultimately deciding this question.
In the Constitutional Convention debates, Gouverneur Morris :
“ Recited the history of newspaper emissions and the doggedness of the legislative assemblies in repeating them, with all the distressing effects. ”
He far predicted :
“ If a war was now to break out, this blasting expedient would again be resorted to. ”
This prediction was proved correctly when the Civil War did break out, and the Lincoln administration soon turned to wallpaper money to pay the costs of the Union Army .
In 1861, faced with the astonishing expenses of the war, Congress authorized the issue of newspaper money, or “ greenbacks, ” as they were called. In 1862, it made them a legal tender. predictably, the greenbacks went to a large deduction against gold—their value fluctuated with the military fortunes of the ultimately triumphant Union .
As another war measure, national bank notes were created by the National Currency Acts of 1863 and 1864, which we immediately know as the National Bank Act. The chief item was to use the new national banks to monetize the Treasury ’ second debt. Governments always like the baron to monetize their deficits.
After the Civil War, the expedient of paper money as legal tender resulted in a series of Supreme Court cases in which :
first, making newspaper money a legal bid for debts previously contracted in gold was found unconstitutional in a 4-3 decision .
then, soon afterwards, the Court reversed itself 5-4, after the addition of two new justices, finding that it was constituent, after all. The fresh majority stressed the autonomous right of a government to do what was necessary to preserve itself .
About the legal tender cases it has been said :
“ Measured by the intensity of the public argument at the time, it was one of the leading constituent controversies in american english history. ”
yet they are now largely forgotten .
In one of the series of legal sensitive decisions, one by and by overruled, the Court wrote :
“ Express contracts to pay in coin dollars can only be satisfied by the requital of coined dollars…not by crank of United States notes. ”
That this decisiveness did not stand was handy for the United States government later—in 1933, when it defaulted on its express promise to pay Treasury gold bonds in gold. alternatively it paid in paper money .
This action the Supreme Court upheld in 1935 by 5-4, although no matchless doubted the clarity of the promise to pay that was broken. Among the majority ’ s arguments were the autonomous right of the government to default if it wanted to and the autonomous right of the national government to regulate money .
Coming to nowadays : We have a pure decree money organization of the newspaper Federal Reserve notes in your wallet and bookkeeping entries on the books of the Fed .
This newspaper currency, the Federal Reserve on its own has committed to depreciate by 2 % per year forever, in hurt of the fact that the Federal Reserve Act instructs it to pursue “ stable prices. ”
By promising ageless 2 % inflation, the Fed keeps promising to make average prices quintet in a convention life. ( That is plainly the mathematics of intensify interest. )
The Fed made this momentous, inherently political, decisiveness on its own, without the blessing of the Congress. It did not ask Congress for legislative blessing and no hearings on this debatable marriage proposal about the nature of money were held .
Where, under the Constitution, did the Fed get this right to proceed without Congress ? That the Fed presumed to do this on its own authority was a highly questionable action of the administrative state .
I believe one could correctly argue that this was an unconstitutional misdemeanor of Article I, section 8. unfortunately, we have no lawsuit about it, so we can alone observe it .
One scholar of the legal tender cases concluded :
“ There remains the scheme interview of the Constitutional footing for nowadays ’ s legal affectionate paper… today ’ mho decree money. ”
indeed there does. But the political footing rules and life goes on .
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