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The Enumerated Powers Series: The Evolution of the Coinage Power – Part 1

cash coins money pattern
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If you read my first article on the coinage clause, then you’re aware that the coinage clause, which gave the federal government exclusive authority over the coining of money and the regulation of its value, did not give the federal government the specific power to create “legal tender notes”, or as we know it today, paper dollars.

This particular subject has been incredibly eye opening, confusing, and frustrating to me. I’m no economist, but as a Constitutionalist, it’s important that I understand the Constitutionality surrounding how the current federal government uses it’s enumerated power to “coin money”, while also understanding the evolution of the power and how it turned into what it is today.

Turns out that’s much more complicated than I’d originally believed.

I’ll begin with this quote by Edwin Vieira, Jr.:

"Why is the Constitution, which in other contexts is easily--indeed, flippantly--invoked to advance 'rights' unheard of the day before their assertion, not applied rigorously to an institution the actions of which are pregnant with such serious consequences for the economy of the United States?"

Ok friends, put your thinking hats on because this is going to be a ride and this is only Part One.

Historical Context

heap of golden coins

The framers of the Constitution knew the importance of maintaining a dollar of constant purchasing power, one that has intrinsic value. In order to do so, the framers believed the government should not have the power to “emit bills” (i.e. issue paper currency). The men in the Constitutional Convention debated this subject and chose the Constitutional language carefully, choosing to delete the power to “emit bills” from the Constitution, when it had existed in Article IX of the Articles of Confederation.

This means that, after the ratification of the Constitution in 1789 and the start of the United States of America as we know it now, all money was attached to some form of gold or silver or metal with intrinsic value because Congress was only given the power to “coin money”, the full intention of the Constitution’s writers made apparent in that one small phrase. (“Regulating the value thereof” came from the need for the currency to hold the same value across state lines, which before the Constitution, it is did not.)

Need I remind you that the Constitution is the government’s job description? It lays out the specific parameters within which Congress and the rest of government can operate. Thus, the founders did not want to give Congress the ability to regulate currency and “emit bills” carte blanche.

As Vieira puts it, “The silence about the Constitution by people who are otherwise staunch friends of sound money and honest banking is strange. Why, without citing a definitive interpretation of the monetary powers and disabilities of the Constitution, do they assume that the Constitution does not already subject the grant of the government’s power to issue money to rules that limit that power?”

Indeed, the framers did subject the government’s power over currency to strict limitations and Alexander Hamilton worked within those limitations as the country’s first Secretary of Treasury. One of his key goals in setting up a sound Department of Treasury for the country was this: “There is scarcely any point, in the economy of national affairs, of greater moment than the uniform preservation of the intrinsic value of the money unit. On this the security and steady value of property essentially depend”.

In other words, there is perhaps no greater attribute of money than attaching it to something with intrinsic value, otherwise, the money is worthless and hence property is worthless.

Given this, Congress operated within the Constitutionally laid out parameters of “coining money” until the Civil War. Ah, and this is where things began to change.

Hepburn v. Griswold (1869)

It’s important to lay out a few definitions before moving forward. Specifically, what is “legal tender”?

Legal tender according to the dictionary is: “money that is legally valid for the payment of debts and that must be accepted for that purpose when offered.”

In short, it’s a paper note that, by law, must be accepted as payment for all debts, public charges, taxes and dues. If you look at any paper money you may have you’ll see this: “Legal Tender for X amount of dollars” at the top. You’ll also see FRN on it, which is the official name of the current legal tender: Federal Reserve Note.

Ok, so with that definition laid out, let’s see how we got there.

Crisis is the friend of government–all governments love a good crisis because the people defer to them and even demand of them complete, limitless and arbitrary power. And what government doesn’t love possessing complete, limitless and arbitrary power?

crop man getting dollars from wallet

During the Civil War, perhaps the greatest crisis in American history, the country struggled to pay all the debts incurred from the war. Essentially, war costs and so Congress tried to find a solution. In 1862, they passed several Legal Tender Acts that empowered the U.S. Treasury to begin issuing non-interest bearing notes or “greenbacks”. The law said:

Be it enacted …, That the Secretary of the Treasury is hereby authorized to issue on the credit of the United States, one hundred and fifty millions of dollars of United States notes, not bearing interest, payable to bearer, …, and such notes herein authorized shall be receivable in payment of all taxes, internal duties, excises, debts, and demands of every kind due to the United States,…, and shall also be lawful money and a legal tender in payment of all debts, public and private, within the United States,…”

And so, in one swift motion, during a crisis, Congress undid all the work Hamilton and the founders had done to limit the government’s power over currency to intrinsic “coinage” by giving themselves the power to print “legal tender” with no backing.

dollars of different nominal par

This, of course, caused problems because it essentially devalued and nullified contracts made prior to the law by empowering debtors to pay creditors back with unbacked “greenbacks” rather than the gold or silver backed coinage their contract had stipulated (this also brings up debates concerning the Fifth Amendment and that declaration that “no person shall be deprived of life, liberty, or property, without due process of law”. “The legal tender laws by directly impairing the value of contracts deprived persons of property without due process of law.”)

By default then, suits starting hitting the courts after the Civil War.

In short, Hepburn vs. Griswald (1869) was the first major “Legal Tender” case. The case became a familiar one following these Legal Tender laws. A creditor came to collect on his debts and was paid in the newly created “legal tender” of the day, rather than the backed coinage the creditor had stipulated in the contracts written prior to these Legal Tender Laws (This also calls into question the ex post facto Constitutional limitation).

In this case, the Court sided with the creditor, declaring all the Congressional Legal Tender Laws unconstitutional.

“The making of notes or bills of credit a legal tender in payment of preexisting debts is not a means appropriate, plainly adapted, or really calculated to carry into effect any express power vested in Congress, is inconsistent with the spirit of the Constitution, and is prohibited by the Constitution.”

In short, the Supreme Court said, “Hey Congress, this is not a power enumerated to you by the Constitution, thus, you don’t have the power to create legal tender.”

Conclusion

As you well know, we still have legal tender to this day and it’s not even printed, controlled or regulated by the Department of Treasury anymore–but rather, by something called The Federal Reserve.

So, how’d we get to where we are from this Supreme Court case?

Well, little preview, the Court overturned Hepburn vs. Griswald the very next year. The Constitutional justification?

The “necessary and proper” clause.

Ah yes, much more to unpack.

The Liberty Belle

3 thoughts on “The Enumerated Powers Series: The Evolution of the Coinage Power – Part 1”

  1. R. Bruce Hartnett

    Unfortunately, far too many, now in the majority, mistakenly believe that Congress took their sole Constitutional Power to “coin money” & “Regulate the value thereof” and unconstitutionally turned said Power over to a non-government, private/international organization, the Federal Reserve.
    Instead of “creating”, i.e. “coining money”, interest free, Congress now borrows said fictitious money from the Federal Reserve and expects us to pay interest on said FRNs!
    A lot of us out here learned a long time ago that we don’t owe & are NOT obligated to pay ANY interest on fictitious money created from nothing!
    All part of the long term scam to destroy our nation!

    1. R. Bruce Hartnett

      From a Poster in one of my email groups today:

      “We all need to think about and spread the idea of property rights in both money and credit. The money that was obviously property – gold and silver – was withdrawn from circulation and the credit was collectivized before we were born. We have been living under a communist system of money and credit our entire lives while being lied (taught in school) to about how we lived in a capitalist society.

      “It is time to restore money and credit as property rights!”

      There were also links to one of my favorite Daily Sites, newswithviews.com, with links to the last couple of days.

  2. Pingback: The Evolution of the Coinage Power – Part 1 – The Liberty Belle – PatriotNewsSite.com

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