The Constitution of the United States and Honest Money III

By: Douglas V. Gnazzo | Sun, Oct 8, 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."


This week's discussion will be on the sixth monetary clause in the Constitution. As previously occassioned we will first list the seven monetary clauses found within the Constitution.

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

Article I, Section 10, Clause 1. states: "No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt."

We shall split the above clause up into four (4) sub-topics to facilitate the ease of discussion of what can be fairly complex issues.

No State Shall Coin Money

The first observation to note is that a distinction is made between to coin money; emit bills of credit; and to make anything but gold and silver coin a tender in payment of debt.

The framers of the Constitution took the time and effort to expressly separate these three issues. In so doing they were explicitly stating that they were all different and unique ideas that had their own meaning, otherwise why take the time to list them separately.

The declaration that no state shall coin money, etc. etc. is distinct from the other two clauses in article 1 section 10, which use the words: no state shall, without the consent of Congress....

The distinction between the two wordings and their respective meanings is obvious: the first is an absolute prohibition of the State; and the second is a conditional prohibition: the condition being without the consent of Congress.

Clause 1 is thus stating an absolute prohibition from any state coining money. The use of the word "coining", as we have seen in earlier papers on the monetary clauses, refers to the minting of metal coins - of gold and silver. Thus the prohibition is against any state coining metal as money.

Pre-Constitutional History

Recall the pre-constitutional history we have seen, as exemplified in the Articles of Confederation, prior to the Constitution. The states only delegated certain aspects of the above powers to the Continental Congress, via the Articles of Confederation.

From the Articles of Confederation: Article IX we read:

"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."

From this we see that prior to the Constitution, the States could strike their own coin. They also could emit bills of credit.

Furthermore, the pre-constitutional Continental Congress had no authority to coin or borrow money, nor to appropriate or regulate the value of money - "unless nine states assent to the same." Article IX of the Articles of Confederation states in part:

"The United States in Congress assembled shall never engage in a war, nor grant letters of marque or reprisal in time of peace, nor enter into any treaties or alliances, nor coin money, nor regulate the value thereof, nor ascertain the sums and expenses necessary for the defense and welfare of the United States, or any of them, nor emit bills, nor borrow money on the credit of the United States, nor appropriate money, nor agree upon the number of vessels of war, to be built or purchased, or the number of land or sea forces to be raised, nor appoint a commander in chief of the army or navy, unless nine States assent to the same: nor shall a question on any other point, except for adjourning from day to day be determined, unless by the votes of the majority of the United States in Congress assembled."


Thus we see revealed the most critical issue concerning the Articles of Confederation, as compared to the Constitution: the delegation of power and sovereignty.

The Articles of Confederation stressed that all powers were vested in the individual States, and that Congress (the states assembled) had limited powers granted to it by the assent of the nine States assembled as Congress. The States retained their sovereignty.

The Constitution is a more centralized form of government, whereby Congress is delegated powers (certain specific powers) that had previously been reserved to the States. Now the question arose: were the States sovereign, or was the central government sovereign? For many, the debate continues to this day. Our response: We The People our Sovereign.

The Debates

Mr. Wilson and Mr. Sherman moved to insert after the words "coin money", the words "nor emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts" making these prohibitions absolute, instead of making the measures allowable with the consent of the legislature of the U.S. [i.e., Congress]

Mr. Gorham thought an absolute prohibition of paper money would rouse the most desperate opposition from its partisans.

Mr. Sherman thought this a favorable crisis for crushing paper money. If the consent of the Legislature could authorize emissions of it, the friends of paper money, would make every exertion to get into the Legislature in order to license it.

Thus we see the absolute prohibition against paper money. Nothing but gold and silver coin was to be used as circulating currency.

No State Shall Emit Bills of Credit

Once again we find the Constitution stating an absolute prohibition: that no State shall emit bills of credit. Prior to the Constitution the Articles of Confederation allowed bills of credit to be issued IF (above article IX) nine States approved of such measures. Article XII of the Articles of Confederation states:

"All bills of credit emitted, monies borrowed, and debts contracted by, or under the authority of Congress, before the assembling of the United States, in pursuance of the present confederation, shall be deemed and considered as a charge against the United States, for payment and satisfaction whereof the said United States, and the public faith are hereby solemnly pledged."

Further to the above we know that the framers of the Constitution debated the question of allowing or disallowing the power to emit bills of credit. The first draft of the Constitution actually allowed for bills of credit to be admitted. But reason prevailed and the power was absolutely denied.

"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..."

Even the least well read and studied members of our representative body politic should be able to understand the meaning of: insisted the prohibition should be absolute. It they cannot, then they should not represent We The People. Take note and vote accordingly.

There are numerous quotes that could be sited, however, the above are more than ample evidence. The first quote of this paper illustrates the discussion of the issue amongst the framers of the Constitution. No more need be said.

But Gold and Silver Coin

Once again we find an ABSOLUTE PROHIBITION: this time in regards to making any THING but gold and silver coin a payment in tender of debt. At first blush this part of the clause appears to be self-explanatory, however, there is more here than meets the eye.

In must be remembered that the framers of the Constitution were very learned men in regards to these matters, and the surgically precise use of few words, contain a wealth of knowledge and information.

Any Thing

The first idea to ferret out is what lies behind the wording: to make any thing but gold and silver coin a payment of debt. This statement shows the keen insight the framers had regarding monetary issues.

Not only is an absolute prohibition being stated, but a delegation of power or action is also called upon - to wit: to make anything but gold and silver is cleary prohibited, however, the disallowance also means that gold and silver coin ARE TO BE used in payment of debt.

Thus the words "thing but" means ANY THING but silver and gold coin. The framers were once again bringing attention to bear on the anathema with paper money or bills of credit. They wanted no part of paper money - they would only accept silver and gold coin.

Why Not

This brings to the forefront a very interesting issue. The States have just been absolutely denied the power to coin money, and yet at the same time they have been compelled to accept only silver and gold in payment of debt. Why?

First, the States should not be in discord with the granted authority and powers of Congress. If Congress coined a one ounce silver coin and declared that weight to be its intrinsic value, the States could not increase or decrease the legal tender value of that coin; as to do such would throw the entire monetary system into disarray.


But what if Congress does not uphold and follow its constitutional duties? If Congress were to not supply a reasonable amount of coinage sufficient for the needs of commerce - what then - is commerce supposed to come to a halt?

No - the States would then be able to accept foreign coin properly regulated to the U.S. standard, as legal tender, according to the mandates of the Constitution.

And what if Congress does not properly regulate the value of silver and gold coins compared to the silver standard, thereby favoring one metal over the other, as well as debtors over creditors or vice versa?

The States could then step in and properly regulate the value of silver and gold coin, as that power and right has not been denied or prohibited to the States, especially in light of Congress's failure to uphold its constitutional mandates. As the tenth amendment states:

Amendment X

"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."

This issue will be further explored in the following sub-topic section: to tender in payment of debt.

Tender in Payment of Debt

There are two parts to the above statement: to tender and in payment of debt. As we shall see, however, both parts go together as a hand fits into a glove: another example of the understanding of money by the framers of the Constitution. We will start with to tender.

The word tender comes from the Latin tendere, which means to stretch out, as to move in a direction; as the way tends to the North; or to have an inclination or disposition to do something, as she tends to tell the truth.

The French also have the word tender, to reach or stretch out, as to offer to another, or to present to another for acceptance, that which is offered, as one tenders their resignation from thier job.

Above are the common every day usages of the word to tender. As can be clearly seen, if tender refers to making an offer for acceptance - the offer for payment of debt clearly falls under its scope of meaning.

Next we will look at the wording payment in debt, and then proceed to put the two sets of words together: to make a tender, and in payment of debt. When joined together they provide a synergistic definition of a specific monetary issue, especially when the word legal is introduced, as in legal tender.

Payment of Debt

To make a payment of debt requires two parties: a creditor who is owed the debt, and a debtor who owes the debt. The debtor makes payment of the debt to the creditor.

The fact that a debt exists implies that credit has been extended or offered by one party (creditor) to the second party (borrower). Upon acceptance of the offer of credit, the borrower now owes a debt that he is obliged to repay to the creditor.

The payment of that which was loaned is the payment of debt. Payment of debt can be done in many ways or in many mediums, essentially by whatever means the creditor and debtor has agreed to. This would be known as the terms of payment, as in a contract (which it is).

Most often payment of debt is done by use of the common medium of exchange, especially when it is also LEGAL TENDER. The Constitution states that only gold and silver shall be accepted as tender in payment of debts.

Although we have before us the: LEGAL TENDER.

Legal tender denotes the difference between money as an economic medium to exchange for goods and services in the marketplace, and the legal or juristic use of money to tender in payment of debt.

Next week we will go into more detail on the issue of legal tender.

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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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