The Constitution of the United States and Honest Money

By: Douglas V. Gnazzo | Mon, Sep 4, 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]

Introduction

Last week's article was the first in a series on the seven clauses in the Constitution that address the money issue. It was stated that each subsequent week a new paper would be offered discussing the next constitutional clause regarding money. Last week the first clause was covered. This week we will attempt to decipher the second clause.

Below are the seven monetary clauses within the US Constitution. We list them again in their entirety for both ease of understanding and in respect for their importance as supreme issues of We The People's freedom and liberty.

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

The Second Clause

Article I, Section 8, Clause 5. The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

To more easily facilitate the understanding of the discussion of the above clause we are going to break the clause down into five (5) separate sub-topics:

Delegation of Powers

Congress was granted the power to coin money by We The People, through and according to the Constitution, which delegates whatever powers Congress has, as clearly definded by the 9th and 10th amendments of the Constitution of the United States - Bill of Rights - The First Ten Amendments:

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. [3]

In other words, if the Constititution does not specifically delegate a power to Congress, one cannot be said to exist by association, or by a "living interpretation" that CHANGES the interpretation of the Constitution according to the times or the then current popular beliefs.

Powers expressly granted to Congress by the Constitution:

Can Not Change Without a Constitutional Amendment

Powers not expressly granted to Congress by the Constitution:

Are Reserved for the States Respectively or For We The People

Power To Coin Money

The first point is simply what the words express: the power to coin money. Once again recall that Congress only has powers expressly granted by the Constitution - all other powers are reserved for the States or for We The People.

The wording expresses the power to coin money - not to print money, not to issue money, not to create money, not to loan money - simply the power to coin money.

Which then raises the question: what is the meaning of to coin money, as used and understood in Colonial times?

Prior to the Constitution the colonies had created a confederation of States as articulated and governed by the written document known as the Articles of Confederation: Article 9 reads in part:

"The United States in Congress assembled shall also have the sole and exclusive right and power of regulating the alloy and value of coin struck by their own authority, or by that of the respective States -- fixing the standards of weights and measures throughout the United States..." [4]

Further to the above, the word coin at the time of the writing of the Constitution meant to form discs composed of specific weights and fineness of precious metals, and to then stamp them with marks denoting their weight, fineness, and the State/Nation of issue.

From the The Avalon Project : Blackstone's Commentaries on the Laws of England we read the following concerning the coining of money:

"THE coining of money is in all states the act of the sovereign power; for the reason just mentioned, that it's value may be known on inspection. And with respect to coinage in general, there are three things to be considered therein; the materials, the impression, and the denomination.

WITH regard to the materials, sir Edward Coke lays it down, that the money of England must either be of gold or silver; and none other was ever issued by the royal authority till 1672, when copper farthings and half-pence were coined by king Charles the second, and ordered by proclamation to be current in all payments, under the value of six-pence, and not otherwise. But this copper coin is not upon the same footing with the other in many respects, particularly with regard to the offence of counterfeiting it.

As to the impression, the stamping thereof is the unquestionable prerogative of the crown: for, though divers bishops and monasteries had formerly the privilege of coining money, yet, as sir Matthew Hale observes, this was usually done by special grant from the king, or by prescription which supposes one; and therefore was derived from, and not in derogation of, the royal prerogative. Besides that they had only the profit of the coinage, and not the power of instituting either the impression or denomination; but had usually the stamp sent them from the exchequer.

THE denomination, or the value for which the coin is to pass current, is likewise in the breast of the king; and, if any unusual pieces are coined, that value must be ascertained by proclamation. In order to fix the value, the weight, and the fineness of the metal are to be taken into consideration together. When a given weight of gold or silver is of a given fineness, it is then of the true standard, and called sterling metal; a name for which there are various reasons given, but none of them entirely satisfactory. And of this sterling metal all the coin of the kingdom must be made by the statute 25 Edw. III. c. 13. So that the king's prerogative seems not to extend to the debasing or enhancing the value of the coin, below or above the sterling value: though fir Matthew Hale appears to be of another opinion. The king may also, by his proclamation, legitimate foreign coin, and make it current here: declaring at what value it shall be taken in payments. But this, I apprehend, ought to be by comparison with the standard of our own coin; otherwise the consent of parliament will be necessary. There is at present no such legitimated money; Portugal coin being only current by private consent, so that any one who pleases may refuse to take it in payment. The king may also at any time decry, or cry down, any coin of the kingdom, and make it no longer current." [5]

To Regulate The Value

The exact wording is "to regulate the value thereof . . ." The task before us then, is to determine what is meant by "to regulate the value thereof."

Before proceeding with the discussion as to the meaning of the phrase, recall the already quoted Articles of Confederation: Article 9 as further evidence as to the then common usage of the term:

"The United States in Congress assembled shall also have the sole and exclusive right and power of regulating the alloy and value of coin struck by their own authority, or by that of the respective States -- fixing the standards of weights and measures throughout the United States..." [6]

To regulate means to adjust to some type of measure, rule, or standard. That which is adjusted already exists, in other words, the power to adjust does not express the creation of something new that is not already in existence.

Therefore to regulate refers to the adjustment of the value of coinage already in existence according to arranging the value to a system of order denoted by a measure, rule, or standard.

Hence we see the natural affinity and genesis of the term "and fix the Standard of Weights and Measures" that follows after "to regulate the value thereof" in Article I, Section 8, Clause 5, presently under review.

To regulate the value thereof means to compare the weight and fineness of the coin to the STANDARD of weights and measures, and by such comparison of weight to weight to determine the ratio or value the coin had in terms of the standard.

The Value of Foreign Coin

The precise phrase from the Constitution reads: "to coin money, regulate the value thereof, and of foreign Coin." Foreign coin obviously refers to coin from other nations. We offer two references to documents that provide detailed discriptions of "to regulate foreign coin."

"All gold coins ought to be estimated according to the quantity of fine gold they contain and the proportion which the value of fine gold bears to that of fine silver in those FOREIGN markets at which these states will probably carry on commerce." [7]

Previous to the assessment by the Continental Congress of the current coins passing as currency in the colonies, we find the Dollar Proclamation 1704, Queen Anne's Pillar Dollar Royal ... 6 Anne c.30 s.1 ... Dollar Weight which referred to:

"A table of the value of the several foreign coins which usually pass in payments in our said plantations, according to their weight, and the assays made of them in our mint, thereby showing the just proportions which each coin should have to the other." [8]

Thus we find that to regulate the value of foreign coin was done by the same process as to regulate the value of coin minted by Congress: i.e. to adjust and order the value of said coins by comparing their weight and fineness to the STANDARD weights and measures.

Standard Weights and Measures

The wording used in standard weights and measures has a long history of both illustration and application in dozens of monetary systems thoughout the world and ages: back to England from whence the Colonists hailed, to France and Spain, and further back to Rome and Greece - throughout all times and in all places precious metals have set the standard for many a monetary system.

We have seen by the usage and meaning of coinage that all money was to be minted of coins - hard money - commodity money - silver and gold.

Prior to the Constitution were the Articles of Confederation. Article 9 we have already quoted above, and will only submit the pertinent section for the present issue under review:

"The United States in Congress assembled shall also have the sole and exclusive right and power of fixing the standards of weights and measures throughout the United States..." [9]

Now to find the concise definition of to fix the standard. We know that only coin is to be money. Furthermore we know that only gold and silver are to be coined as money.

Thus the standard, or that which all coins of precious metals are to be compared to, for compliance as to weights and measures, precludes that the standard itself must be some weight and fineness of gold or silver.

As Blackstone says in his commentaries:

"In order to fix the value, the weight and the fineness of the metals are to be taken into consideration together. When a given weight of gold or silver is of a given fineness, it is then of the true standard, and called sterling metal. And of this sterling metal all of the coin of the Kingdom must be made. The King may also legitimate foreign coin, and make it current here; declaring at what value it shall be taken in payments. But this ought to be by comparison with the standard of our own coin." [10]

The word fix, as used to fix the standard, is to make something the same without change - complete - unalterable. To fix the standard is to denote something by which all other things are to be compared to, in able to determine their value in comparison to the standard.

If the standard were to constantly change it would not be the standard. It would be as if the standard that 12 inches equals one foot was to daily change to 14 inches or 18 inches equals one foot.

Such change would turn the lumber and other markets that used the standard of a foot to measure and compare their goods to, upside down in confusion as to what measure was to be exchanged for/as one foot.

Powers Not Delegated

We have seen that the power to coin does not include the power to print, issue, emit, create, make, or decree what is to be money. Likewise, the Constitution prohibits the issuance of bills of credit, i.e. paper bank notes that circulate as currency and legal tender.

Article I, Section 10, Clause 1 states that:

"No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt." [11]

The above clause of the Constitution is stating a DISABILITY of Congress by clearly NOT GRANTING the power to emit bills of credit, and instead PROHIBITING such issuance.

Further to this point is the preceeding history of the colonies regarding the power to emmit bills of credit.

The Articles of Confederation, which pre-date the Constitution, as the written form of government for the Colonies: DID ALLOW for the issuance of bills of credit in Article IX:

"The United States in Congress assembled shall have authority ... to ascertain the necessary sums of money to be raised for the service of the United States, and to appropriate and apply the same for defraying the public expenses -- to borrow money, or emit bills on the credit of the United States..." [12]

By the prohibition in Article I, Section 10, Clause 1 of the Constitution, which denies any grant of power to emit bills of credit, and to make any thing but gold and silver coin a tender in payment; knowing full well, as Congress did, that the Articles of Confederation allowed bills of credit - is evidence that the framers DID NOT WANT BILLS OF CREDIT to be issued as currency and or legal tender.

Furthermore, the first draft of the Constitution INCLUDED the words emit bills of credit. After its reading to the members of the constitutional convention a fiery debate ensued. Feelings were strong and heated regarding paper money, as the Colonies had directly experienced inflation rates over 1000% caused by such issuance of paper money.

The words of Maryland Legislature, Luther Martin sums up the issue quite well:

"By the tenth section, every state is prohibited from emitting bills of credit. As it was reported to the committee of detail, the states were only prohibited from emitting them without the consent of Congress; but the Convention was so smitten with the paper-money dread, that they insisted the prohibition should be absolute..." [13]

And so it came to pass - the power to emit bills of credit was REMOVED from the Constitution, and not only removed, but a specific disability and prohibition was inserted disallowing such issuance.

Thus ends our discourse on the second monetary clause of the Constitution. Next week we will attempt to decipher the third monetary clause:

Article I, Section 8, Clause 6: "The Congress shall have Power...To provide for the Punishment of counterfeiting the Securities and current Coin of the United States."


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And read the Open Letter to Congress

COMING SOON: A REQUEST FOR AN AUDIT OF US GOLD RESERVES

 

[1] John Adams in a letter to Thomas Jefferson
[2] US Constitution
[3] Constitution of the United States - Bill of Rights - The First Ten Amendments:
[4] Articles of Confederation. Article 9
[5] The Avalon Project : Blackstone's Commentaries on the Laws of England
[6] Articles of Confederation.
[7] 4th Journal of the Continental Congress
[8] Dollar Proclamation 1704, Queen Anne's Pillar Dollar Royal ... 6 Anne c.30 s.1
[9] Articles of Confederation. Article 9
[10] The Avalon Project : Blackstone's Commentaries on the Laws of England
[11] US Constitution
[12] Articles of Confederation.
[13] Records of the Federal Convention

 


 

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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