The Constitution of the United States & Honest Money

By: Douglas V. Gnazzo | Sun, Sep 17, 2006
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Honest Money Gold & Silver Report

"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]


Last week's article was the second in the series on the seven monetary clauses within the Constitution. This week we will discuss the third clause. As we have occassioned to do before, we shall first list all seven of the monetary clauses, endeavoring to add to the clarity, and hence an easier assimilation, of the subject at hand.

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

The Third Clause

The third monetary clause within the Constitution reads:

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.

To simplify and thus facilitate the issues under consideration we will break the clause down into four (4) sub-sections:

Difference by Separation

The first important issue is the fact that the wording of the article refers to the punishment of counterfeiting of two separate objects:

1. Securities, and

2. Current coin of the United States.

In other words, by the use of the word and, and the discription of two separate entities, i.e. securities and current coin, the wording makes it clear that two DIFFERENT and DISTINCT objects are being listed as subject to counterfeiting: securities, and current coin.

Futhermore, this makes perfect sense according to the two previously mandated clauses: 2 and 5 of Section 8, Article I that state:

Article I, Section 8, Clause 2 grants Congress the power to borrow money on the credit of the United States. The recording, documentation, evidence, and proof of the power to borrow money, AND that it has been excercised and used, is done by the issue of Securities: that which secures the obligation to repay that which is borrowed.

The inclusion and reference of the counterfeiting of Securities in Article I, Section 8, Clause 6 makes perfect sense and fits in exceptionally well with the exegisis of the monetary system espoused by the Constitution.

Likewise, Article I, Section 8, Clause 5 refers to the power of Congress to coin money; hence the articulation in Article I, Section 8, Clause 6 for the punishment of counterfeiting current coin.

Promise to Pay

Also of interest is the question as to whether the mere PROMISE to pay, is the same as that which secures a promise to pay. The simplest explanation is usually the best, and this case is no different.

The possibilities are:

1) A promise to pay a debt is all that is given upon the extension of credit from the creditor to the debtor. The debtor simply promises to pay.

2) The second possibility is that the creditor that extends the loan to the debtor, secures the repayment of the loan against non-payment by exercising their legal right that allows them to transfer some type of resource from the debtor to the creditor in the event default on the payment of the loan occurs.

This point of contention goes to the heart of the issue of honest money. First, only gold and silver coin are money. Bills of credit are not money. Bills of credit are prohibited or disallowed by the Constitution.

Securities are listed separately from current coin, obviously they are different or they would not have been listed separately. The Constitution makes no mention of the punishment for counterfeiting paper bills of credit, or paper money, for the EXACT reason that anything but gold and silver coin is prohibited and disallowed to function as money to begin with.

Secondly, if Congress has the power to create or issue money, why would they need the power to borrow money? They would simply, and more cheaply, create all the money they needed, without paying any interest on loans.

The grant to borrow money shows that there was an existant NEED to borrow money. Such a need would not exist if Congress had the power to create or issue money. Furthermore, taken together the clauses show that:

The answer is that a promise to pay is not the same as the issuance of a security to pay, as the first only allows for payment or default; the second also allows for the transfer of some type of collateral or resource from the debtor to the creditor in case of default. It the resource or collateral than can be legally transferred that truly SECURES the loan obligations.

There are many who would disagree with this opinion - so be it. The reader can decide for themselves based on the evidence presented or lack thereof. They who disagree would also espouse the following, which we disagree with as well, and is the crutch that paper money limps along upon.

Faith & Credit

A Federal Reserve Note is a promise to pay. At one time it was a legal promissory note. At one time it was backed by silver and gold coin. Today's Federal Reserve Notes do not meet all of the essential prerequistes necessary to fulfill the legal definition of a promissory note.

There are those who say that a promissory note is not a mere promise to pay. Then there are those who say that a promise to pay, as exemplified by the government, which pledges its full faith and credit to back the obligations or promises to pay, it more than a mere promise.

Be that as it may, rather then to debate the theory of the issue, it is easier and more instructive to simply look at the credit history of the United States in meeting its obligations. We will site two examples, there are more, however these two will suffice.

1. In 1933 President Roosevelt confiscated all personal gold holdings, which at the time were used as both circulating currency of coin or money, as well as that which backed both Federal promissory notes as well as gold certificates.

This was completely unconstitutional on several fronts - the least of which is the confiscation of private property. Not only were the government's and Federal Reserve's obligations and promises not kept - their actions were essentially the same as declaring national bankruptcy.

2. In 1971 President Nixon closed the gold window, which was the term used for the last remaining vestige of the gold standard. At the time, although the US no longer accepted gold coin from the people in payment as circulating currency, the government did pay foreign nation's trade accounts or balances in gold, as stipulated in the Bretton Woods Agreement.

In 1971, Nixon said no more - we will no longer honor our obligations in gold. If you want payment we will give you these little green coupons or FRN's - no gold - nothing else. Take it or leave it.

Once again, this was the Federal Government and the Federal Reserve reneging on their obligations and promises to pay - as stipulated in a written contract known as the Bretton Woods Agreement.

And once again, this was the same as declaring national bankruptcy, as the banking system and the government were no longer honoring their contractual obligations, no matter how much faith and credit supposedly backed them.

Credit History

The credit history of the government and the Federal Reserve, as laid out above, and in other historical events, is an F - they flunked out, and are neither creditworthy, or responisbile, or honorable - in the least degree.

If any private business was to do conduct their business accordingly they would most likely end up in jail; just as those who bring attention to such actions of the state often do. Ezra Pound comes to mind.

In truth, they act as thugs and strong arms that collect their vig by confiscating private property, by performing unconstitutional acts, by breaking written contracts, and by dereliction of duty, wherby they have sworn and given oaths of office to uphold and defend the Constitution of the United States of America. Think about it - and vote accordingly.

And all these dastardly deeds are done while hiding behind the War Powers Act, which itself is arguably unconstitutional - but quite clearly it does not uphold during a time when we are not at war, as when Roosevelt used it to confiscate private gold holdings of the people.

The only possible national emergency at the time was that the irresponsible bankers could not meet their obligations to redeem money in gold coin. It's called a run on the banks. They could not upholding their contractual obligations to perform because of fractional reserve banking. Some call it fraud and embezzlement. We leave it to the reader to decide.


Punishment for offenses that break the rules or laws of a state or nation refers to the disciplinary action that the state takes against those who break the rules or laws. Trial and judgement take place according to the prevailing legal system of courts according to due process, which administer the laws, and the penalities for breaking the laws.

Penalities can be monetary fines; jail and incarceration; and lastly the death penalty. The original Coinage and Mint Act of 1792, which followed the Constitution, and was the statutory expression of the monetary system mandated by the Constitution, has a most fascinating penalty for those who counterfeited the coinage of the nation.

Since it has never been changed by a Constitutional amendment it still is part of the Supreme Law of the Land, and one that more of today's politicians, elected representatives, and elite bankers should perhaps reread - if they have ever read it to begin with, as it does have dire consequences. It states:

Sec. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death. [2]


To counterfeit means to make the opposite of, or to go against, as to imitate the original that exists by lawful right, with the pretense to defraud by passing the imitation in place of the original: to replace the true with the false.

Counterfieting goes back to before the time of the ancients - of Sumeria, Bablyon, and Egypt. The code of Hammurabi contains penalities for the offense.

Cheating is as old as man himself. It does not know geography or chronology and hence it is widespread, all over the world. Our ancient texts have always reminded us of the co-existence of dharma and adharma. One form of cheating, namely counterfeiting of coins, has been an ancient practice prevalent all over the world, including our own country.

Vijnanesvara, a commentator on Yajnavalkya Smriti and hailing from Karnataka, was an illustrious writer and his book Mitakshara enjoys paramount authority in our law courts in matters relating to adoption, inheritance and partition. He flourished in the last part of the eleventh century. He noticed counterfeit practice is his days. Coating the base metal coins (copper) with gold or silver polish was very common and even the government officials colluded with criminals and amassed huge amount of what we today call blackmoney. In fact, both Manu and Yajnavalkya have suggested more severe punishment, namely cutting off the limbs bit by bit. No doubt this punishment looks inhuman, but they were interested in making the punishment a deterrent. Perhaps, people were prepared to loose their limbs but were bent upon amassing wealth by counterfeit methods. That is the power of greed. [3]

Ming Dynasty to England 1800's

In order to reduce counterfeiting, early societies exacted severe penalties for forgery. Chinese notes of the early Ming dynasty (1368-1644) carried this warning: Whoever forges notes or circulates counterfeit notes shall be beheaded. Whoever reports and apprehends a counterfeiter shall receive a reward of 250 silver tael and the counterfeiter' s entire property (Kranister, 1988). Forgery was a hanging offense in England from 1697 to 1832. During this period, approximately 600 counterfeiters were condemned to death, but even this threat of severe punishment did not eliminate counterfeiting. [4]

U.S. Legal Code states at 18 U.S.C. 485:

Whoever counterfeits any coin or bar in resemblance or similitude of any coin of a denomination higher than 5 cents or any gold or silver bar coined or stamped at any mint or assay office of the United States, or in resemblance or similitude of any foreign gold or silver coin current in the United States or in actual use and circulation as money within the United States. [5]

Thus ends our discourse on the third monetary clause within the Constitution. Next week we will attempt the fourth clause.

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] Coinage Act, 1792 (The Mint Act) By Congress
[3] PAGES FROM HISTORY: HOW OLD IS COUNTERFEITING OF COINS? November 5, 2005 By Prof. A.V. Narasimha Murthy, former Head, Dept. of Ancient History & Archaeology, University of Mysore.
[4] Counterfeit Deterrent Features for the Next-Generation Currency Design (1993) National Materials Advisory Board (NMAB)
[5] U.S. Legal Code states at 18 U.S.C. 485:



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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