The Constitution of the United States and Honest Money

By: Douglas V. Gnazzo | Mon, Aug 21, 2006
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"All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation." [1]


The above quote by John Adams in a letter to Thomas Jefferson was quite prescient, as it not only summed up the then current state of monetary affairs, but it is also applicable to the monetary problems in today's modern world over 200 years later.

Monetary theory, as practiced by today's monetary wizards of finance, has not progressed beyond pre-Colonial times; yeah - if anything, it has regressed by a devolution from a sound hard money system of gold and silver coin, to today's paper fiat debt-money that is drowning the world in its profligate over-issuance.

In an attempt to throw some light on the nature of coin, credit, and circulation; and more importantly - what the Constitution has to say about such issues, we will address each article in the Constitution that speaks to the money issue, and see if we can dust off 200 years of neglect and ignorance that has purposefully been occasioned.

There are seven clauses in the Constitution that speak to the monetary policy of our fledgling nation. We will submit one paper for each clause over the coming weeks. Once all of the clauses have been fully discussed, a summary conclusion will be offered.

Below are the seven clauses that are concerned with the money issue. The list is provided in the chronological order that they appear in the Constitution. The remainder of this paper will be a discussion of Article I, Section 8, Clause 2. First the entire list.

Seven Constitutional Monetary Clauses

There are seven clauses in the Constitution that deal with the subject of money:

Before proceeding with Article 1, Section 8, clause 2 we would like to point out a couple of facts that are not only interesting from an historical perspective, but which also provide a glimpse into the mindset of the framers of the Constitution regarding money.

The word money appears four times in the entire Constitution; the word coin appears but five; the word dollar appears twice; as does the word credit; and the word tender appears but once. Conspicuously absent is the word - paper, although bills of credit is a close surrogate.

Most striking is the fact that nowhere in the Constitution is a literal definition of the dollar provided. Was the lack of such an important definition as to the unit of account of our monetary system an oversight by such an august and learned group of men as the First Congress? Perhaps our investigations will shine some light on this question as well.

The First Clause

Article I, Section 8, Clause 2. The Congress shall have Power...To borrow Money on the credit of the United States.

There are not many words in the above clause, nonetheless they carry quite a wallop. The issues they deal with are intricate and complex, and to be able to use so few words to explain such detail speaks highly of the knowledge and capabilities of the framers.

To more easily understand what the clause says, and just as importantly what it doesn't say, we are going to break the clause down into four (4) sub-topics:

The Power To Borrow Money

The exact wording of the Constitution is that Congress has the power: "To borrow money on the credit of the United States." We will deal with the credit portion of the clause in the following sub-topic section. First the borrow money statement.

The power to borrow money is self-explanatory. It means that Congress can accept loans from other entities (lenders) based on its credit, and that it will be able to repay the loans. One example of borrowing money would be for the U.S. government to issue Treasury Bonds.

To borrow money does not mean to issue money, to create money, or to loan money, etc. - all that is meant is what was written: to borrow money on the credit of the United States. The clause is very specific and limiting to the one simple act of borrowing money.

If a specific power is not granted in the Constitution, it can not be said to exist by implication or consequence. Any law not in pursuance of the Constitution is null and void, as if it never occurred.

On The Credit of the United States

The word credit comes from the root credere, which means to believe in or to have faith. When one loans money to another, they do so only if they have faith that the other party receiving the loan, will pay it back in a timely fashion, as agreed upon, according to the terms of the loan contract.

The offer and acceptance of a loan on the credit of the United States appears simple enough and straightforward. However, there are subtle yet important issues involved.

When credit is extended and offered it means that both parties trust each other to uphold their end of the transaction. The transaction is a contract between the lender and the borrower, entered into voluntarily based on faith and credit, which leads into the next point of issue.

The Prohibition to Levy Forced Loans

As we have seen above, Congress was granted the power to borrow money on the credit of the United States. The loan that extends credit must be voluntary, the creditor cannot be forced into having to extend credit.

If the loan is not voluntary then it has not been borrowed on the credit of the U.S., it has been forced by coercion. This would mean that the U.S. does not have any credit or it would not have to resort to force.

Free men are not forced into any type of behavior by the government that We The People established and ordained. The government is to serve the people - not to force them into servitude and obedience. The people are sovereign, as the people came before the government and the Constitution that gave rise to the government.

Roger Sherman from Connecticut, who was to be a member of the Constitutional Convention of 1787, had the following to say regarding the paper money issuance from Rhode Island that had depreciated over 1300%, causing untold economic distress.

"That no Government has a Right to impose on its Subjects any foreign Currency to be received in Payments as Money which is not of intrinsick Value; unless such Government will assume and undertake to secure and make Good to the Possessor of such Currency the full Value which they oblige him to receive it for. Because in so doing they would oblige Men to part with their Estates for that which is worth nothing in it self and which they don't know will ever procure him any Thing. And since the Value of the Bills of Credit depend wholly on the Credit of the Government by whom they are emitted and that being the only Reason and Foundation upon which they obtained their first Currency, and therefore when the Publick Faith and Credit of such Government is violated, then there remains no Reason why they should be any longer current.

If What is us'd as a Medium of Exchange is fluctuating in its Value it is no better than unjust Weights and Measures, which are condemn'd by the Laws of God and Man, and therefore the longest and most universal Custom could never make the Use of such a Medium either lawful or reasonable." [3]

Form of Money Borrowed and Repaid

Congress was granted the power to borrow money. The question naturally arises: what money, as to its actual form and function? Obviously the form and function of the money should be what the Constitution mandates.

In two clauses that we will later examine in detail, it is clearly stated what constitutes money. In Article I, Section 8, Clause 5, and again in Article I, Section 10, Clause 1.

In the above two articles it is clearly stated that Congress has the power to coin money, while no state shall coin money; nor make any thing but gold and silver coin a tender in payment of debt. Thus the Constitution states that money is gold and silver coin.

It follows that if gold and silver coin are the only forms of money the Constitution grants recognition of, then Congress's power to borrow money means gold and silver coin. Likewise the form of money to be repaid is gold and silver coin.


Thus we have seen that Congress was granted the power to borrow money, i.e. gold and silver coin, on the credit of the United States. Such contractual obligations involving a creditor and a borrower must be voluntary on both parties accounts.

Powers not granted in the Constitution are as important as the powers that were granted. If a power is not specifically granted in the Constitution then that power does not exist, or if it does, it is retained by the states and by We The People. The Bill of Rights was very precise on this issue.

IX - Rule of construction of Constitution: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

X - Rights of the States under Constitution: 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. [5]

A point of issue, which will be covered in more detail in later articles on the remaining clauses pertaining to money, is the gnawing question that if Congress was granted the power to create and issue money, why would they need the power to borrow money, as stipulated in Article I, Section 8, Clause 2. Why borrow money when you can create all you want?

"The less there is of yours - the more there is of mine." [6]

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


[1] John Adams in a letter to Thomas Jefferson
[2] Constitution of the United States of America
[3] A Caveat Against Injustice, or an inquiry into the Evil Consequences of a Fluctuating Medium of Exchange.
[4] Constitution
[5] Bill of Rights
[6] Looking Through The Hour Glass



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.

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