Gold and Silver Certificates: The Story Behind The Story

By: Douglas V. Gnazzo | Mon, Jul 10, 2006
Print Email

Part 2
The Moth Seeks Out The Flame
So Man Pursues Fortune [1]


The following paper is a continuation of last week's article on Gold & Silver: The Story Behind The Story. This series of papers is in response to several quotations made in The Precious Metal's Timing Investment Letter of June 24.

The information was cited as being taken from Wikipedia, the on-line encyclopedia. We are of the opinion that the information is incorrect, and very misleading, adding unneeded complication and confusion to a subject already unfathomably complex.

Last week we discussed the first paragraph of the cited quotations. We ended by saying that not only was the information presented incorrect, but there was a great deal of correct and critically important information left out. We will attempt to provide some of that information forthwith.

The following is a direct quote from the Precious Metals Timing Letter discussing the issuance of silver certificates:

"The silver coins that were to be minted would be legal tender for all debts, like gold. These coins, however, were quite heavy, so the government applied their gold certificate strategy to the silver." [2]

First, we offer some historical background regarding monetary policy in general, and the place silver certificates had within the monetary system at the time.


By 1860, our monetary system had already experienced many changes from the simple, yet powerfully effective, hard currency system of gold and silver coin of the Constitution.

From 1788 until 1815, Congress had fully adhered to the hard currency system of the Constitution. In 1815, however, changes started to appear that were not always in keeping with the Constitution.

United States Treasury Notes first appeared in 1812, to fund the War of 1812. Some of the notes were redeemable in gold and silver coin, and some were irredeemable.

In 1815 and 1844, the system crossed the constitutional line from a purely hard money system restricted to coin, to both a hard and soft system, i.e. paper U.S. Treasury Notes were allowed to circulate as currency.

The Supreme Court declared the 1844 note issue unconstitutional. For further detail see: Honest Money, Part IV: Treasury Notes.

The reason they were unconstitutional is that the Constitution forbid the issuance of bills of credit that could circulate as currency. The Court at this time understood the meaning of the term: constitutional disability.


The Federal Monetary System devolved as follows:

Recall the Constitution only granted Congress the power to coin gold and silver, along with the disability, or lack of power, to emit bills of credit.

The Constitution did not grant Congress the power to function as a deposit bank. Likewise, it never granted Congress the power to create money - only the power to coin or mint existing gold and silver bullion brought to the mint as private property - not state property.


In the Coinage Act of 1878, Congress provided for the issuance of silver certificates redeemable in silver dollars for amounts not less than ten dollars (10 one-ounce silver dollars).

Congress mandated the following within the Act of 1878:

...That any holder of the coin authorized in this act [i.e. silver dollars containing 371.25 rains of fine silver] may deposit the same with the Treasurer in sums not less than ten dollars each... the coin deposited for or representing the certificates shall be retained in the Treasury for the payment of the same on demand. Said certificates shall be receivable for customs, taxes, and public dues, and, when so received, may be reissued." [3]

The last sentence: "said certificates shall be receivable for customs, taxes, and public dues, and, when so received, may be reissued," raises an interesting point. If the certificates were receivable for all the various types of payments listed, they were obviously meant to circulate as currency.

In my opinion, which would be disputed by most in this field, the silver certificates were unconstitutional, as they were not gold and silver coin. Also, the manner in which the silver coin was being minted, held in account, and distributed into circulation, as well as the issue concerning the possession of the title to the silver - are all diametrically opposed to the Constitution and to the Mint Act of 1792.

Some will say that the certificates amounted to warehouse receipts for the silver on deposit. Perhaps they did, perhaps they did not. For the sake of discussion, I will grant the allowance that they did. The question remains: where does the Constitution grant Congress the power to act as a bank of deposit?

Furthermore, there is the extremely questionable policy of Treasury Notes being used to buy silver that was then minted and placed on deposit, and could then be used to redeem the same Treasury Notes that were used to purchase the silver with in the first place. To me it begs human comprehension and smacks of outright fraud and embezzlement.

Although not mentioned in the quotes from the Precious Metals Timing Investment Letter presently under review, we are going to discuss certain aspects of the Silver Purchase Act of 1890, as it is most germane to the topic in question.


The Silver Purchase Act of 1890 stated that the Secretary of the Treasury was authorized to purchase silver bullion to the aggregate amount of 4,500,000 ounces, or as much thereof as would be offered in each month at the market price, not exceeding $1 for each 371.25 grains of pure silver.

Treasury Notes of the United States were to be issued in payment for such purchases. The Treasury Notes so issued were redeemable on demand, in coin, at the Treasury of the United States, or at the office of any assistant treasurer of the United States, and, when so redeemed, could be reissued.

But the Act also stated: "but no greater or less amount of such notes shall be outstanding at any time than the cost of the silver bullion and the standard silver dollars coined therefrom, then held in the Treasury purchased by such notes." [4]

Further on the Acts says,

"That the Secretary of the Treasury shall each month coin 2,000,000 ounces of the silver bullion purchased under the provisions of this act into standard silver dollars until the first day of July, 1891, and after that time he shall coin of the silver bullion purchased under the provisions of this act as much as may be necessary to provide for the redemption of the Treasury notes herein provided for." [5]

What Did They Say

Once again, this is not the free coinage of the original Constitutional system. The government is buying the silver with the people's money by issuing Treasury bonded debt, and furthermore, the silver was being held on account for the redemption of the notes, which meant that most of the silver would never be put into circulation as currency.

Also, note in the first section where it says, "purchase silver bullion... not exceeding one dollar for each 371-1/4 fine grains".

This means that an upper price limit has been set, but not a lower price limit. Maybe that's why the next section reads, "any seigniorage arising from such coinage is to be paid into the Treasury." [6]

Finally, there is the section that reads, "Redeem such notes in gold or silver coin, at his (Treasury Secretary's) discretion". Note the use of the word "or", as opposed to "and."

I will leave it up to the reader to decide if this sounds like it was free silver coinage for We The People, or something else of a more sinister nature, as what affect would, and did such have, on our monetary policy?


Was silver being purposefully, albeit clandestinely, tarnished in gold's favor: if so - why? Perhaps Senator Bates was on to something when he spoke during the Congressional debates concerning the Coinage Act of 1900:

"It was essentially provided in the National Bank law that they should take these bonds of the United States - not State bonds or corporation bonds, but bonds of the United States - upon which they are to base their operations. That is now essential.

They had, exclusive of the (1894-95) bonds, $685,000.000. How many banks are there in the United States? More than 3,500, with a paid in capital of more than $605,000.000. So when the bonds due in 1907 are taken up, there will be but little left to bank on. Therefore, the banks must have more bonds.

They seek in this bill to renew the life of the bonds. They make it a bond for thirty years longer. It is the renewal and extension of the life of the bonds they are after, so that the national banks may flourish under existing laws. That is one of the main secrets of this bill. The banks are at the back and bottom of it." [7]


Further to the above, we offer the policy of gold certificates, which provided the strategic model for the silver certificates. The gold certificates were more of a degradation then the silver certificates. Here is why, as discussed in debates in the House of Representatives on the bill in question.

Mr. Pendleton: The bill proposes not only that the certificates shall be issued for the payment of interest on the public debt to an amount of twenty per cent. more than there is bullion or gold in the Treasury, but it also provides for the issue of certificates to an amount of twenty per cent. more than the coin deposited in the Treasury by private individuals.

Mr. Hooper: I think the gentleman understands the bill correctly. It is really furnishing a sort of paper currency based upon specie. It is never to exceed the amount of specie deposited beyond twenty per cent. That excess would be in payment for the public interest. [8]

This is nothing more than a scheme for fractional reserve banking, albeit with gold on deposit. However, where does the Constitution grant the power to Congress to resort to fractional reserve lending, where paper certificates (bills of credit) are circulating as the currency, when nothing but gold and silver coin is to be the constitutionally authorized currency?

Once again - where does the Constitution authorize Congress to store gold as a bank of deposit for the public?

The government also retained the privilege of using the gold on deposit for other purposes then the express redemption of the gold certificates: a case of having your cake and eating too.

If the certificates were true warehouse receipts, as some maintain, for the gold on deposit, then the government was prohibited from using the gold for any other purpose then to redeem the certificates; as warehouse receipts are legal evidence of private property that the government is holding in bailment, expressly for redemption of the certificates, and for no other purpose.

Any way you cut it, it comes up short. It is just another example of the elite money powers usurping the wealth of the nation - which they did, and still are: until We The People stand up and say - enough, we will no longer accept the unacceptable.

The Joint Resolution of 1816 provides further evidence, if such is required:


The provisions of the resolution of 1816 provides clear evidence that Congress was fully aware of the difference between bills of credit and legal currency; and that they did not consider that Treasury Notes were legal currency - let alone a constitutional form of money. As stated in the Resolution:

"...That the Secretary of the Treasury be required and directed to adopt measures to cause all duties, taxes, debts, or sums of money, accruing or becoming payable to the United States, to be collected and paid in the legal currency of the United States, or treasury notes, or notes of the bank of the United States, or in notes of the bank of the United States, or in notes of banks which are payable and paid on demand in the said legal currency of the United States." [9]

Evident from the above wording, legal currency was distinctly set off from treasury notes by the use of the word "or". Also included as distinct from legal currency, by the self-same use of the word "or", were notes of the bank of the United States, and "in" notes of the bank of the United States.

So, what was the legal currency of the United States referenced to in the resolution?

According to the detailed listing of the several non-legal forms of currency, by process of elimination, one is left with silver and gold coin as the only candidates left standing: a most powerful declaration and testimony to Honest Money.

When viewed fully in the light, the monetary policy of the United States, including silver and gold certificates, is seen for what it is - a slowly devolving travesty of monetary destruction that allows the wealth of the nation to be siphoned off by the elite few who control the monetary and financial systems of the New World Order.

There will be more forthcoming on the subject in future papers.

Come visit our new website: Honest Money Gold & Silver Report
And read the Open Letter to Congress


[1] Gnazzo
[2] Precious Metals Timing by Ron Rosen June 24, 2006
[3] Coinage Act of 1878
[4] Silver Purchase Act of 1890
[5] Same as above
[6] Same as above
[7] Congressional Debates On the Coinage Act of 1900
[8] Congressional Debates On the Coinage Act of 1863
[9] Joint Resolution of 1816



Douglas V. Gnazzo

Author: Douglas V. Gnazzo

Douglas V. Gnazzo
Honest Money Gold & Silver Report

Douglas V. Gnazzo is the retired CEO of New England Renovation LLC, a historical restoration contractor that specialized in the restoration of older buildings and vintage historic landmarks. Mr. Gnazzo writes for numerous websites, and his work appears both here and abroad. Just recently, he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly, Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

Douglas V. Gnazzo © 2005-2013
All Rights Reserved Without Prejudice

All Images, XHTML Renderings, and Source Code Copyright ©