The Frauderal Reserve as it is now has to and will be and is on
it's way out. ( The US dollar is on it's way out) Whom do you
think prints Frauderal Reserve Notes, and circulates and
collects interest on Frauderal Reserve Notes?
Evidently most do not know about the
Treasury , Congress and money and the formation of this UNITEDSTATES
experiment?
George Mason University School
of Law
The Congress shall have Power To...coin Money, regulate the
Value thereof, and of foreign Coin....
ARTICLE
I, SECTION 8, CLAUSE 5
Congress's power to coin money is exclusive: under Article I,
Section 10, the states are not permitted to "coin Money; emit Bills of
Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of
Debts...." Whereas the prohibitions on the states are clear and detailed,
Congress's grant of power under the Coinage Clause is open-ended.
Nonetheless, certain elements are clear. First, Congress is
granted the authority to "coin money," which authorizes Congress to
coin money from precious metals such as gold and silver. Under the Articles of
Confederation, the power to coin money was a concurrent power of Congress and
the states. To create a more standardized monetary system and reduce the costs
of running mints, the Constitution granted this power to Congress exclusively.
The elimination of the states' power to coin money and the exclusive grant to
Congress provoked controversy because the power to coin money was traditionally
understood as a symbol of political sovereignty. Second, Congress is empowered
to regulate the value of the coins struck domestically and to set the value of
foreign coins. Under the Articles, Congress held the former power but not the
latter. The Constitution gave both powers to Congress to encourage domestic and
foreign commerce by preventing the states from attaching disparate valuations
to circulating coins.
Beyond these simple issues, however,
the scope of the federal government's powers under the Coinage Clause is
unclear. In particular, although the Coinage Clause empowers Congress to coin money from
precious metals, it is not clear whether the federal government could also
issue paper money. Linguistic
and conceptual usage during the Founding era distinguished between several
different concepts: the power to "coin" specie money (i.e., money
backed by gold or silver), the power to borrow money
through the issuance of interest-bearing "notes," and the issuance of
"Bills of Credit." Unlike coined money, whose value was inherent in
the metal that composed the coin, and unlike "notes" that accrued
interest, a bill of credit was non–interest-bearing paper money issued on the
good credit of the United States with no tangible backing in precious metal.
Under the Articles of
Confederation, both the federal and state governments were guilty of rampant
inflationary issuance of bills of credit to finance the Revolutionary War. In
response to the revolutionary history, Article I, Section 10, of the
Constitution expressly prohibits the states from issuing bills of credit. With
respect to Congress's power, however, the issue is not as clear. At the
Constitutional Convention, it was proposed to give the federal government the
power to "emit bills on the credit of the United States," but the
language was defeated as being too prone to abuse. As a result, the
Constitution's monetary clauses expressly grant Congress the
power to coin money and to borrow money by issuing "notes" (i.e.,
interest-bearing government bonds), but not to issue bills of
credit. Given the Framers' general hostility to paper money (James Madison, for
instance, bemoaned its "pestilent effects" under the Articles), it is
likely that the Framers' intended to prohibit the federal government from
issuing bills of credit, just as they expressly barred the states from doing
so. Moreover, the Constitution itself created a government of enumerated
powers; thus, absent an express grant, Congress lacked the power to act. In
fact, both those who spoke for and those who spoke against the proposed
language to grant this power to the federal government understood that striking
the language amounted to a prohibition on Congress's power to issue paper money.
The monetary system that prevailed throughout most of the
eighteenth and nineteenth centuries up until the Civil War comprised a
hodgepodge of different types of money. Circulating money consisted of specie,
coins minted by the government; privately minted coins; certain foreign coins;
and paper banknotes issued by state-chartered private banks and backed by those
institutions. Congress regulated the weight of gold and silver required to be
contained in coins, but these ratios were often manipulated for political
purposes. There were also several private mints, which stamped coins whose
value reflected their intrinsic weight in specie. The dominant form of
circulating money for most of this period was currency issued by
state-chartered private banks and redeemable in gold or silver from the banks.
Privately stamped "token" money, often made of copper, also
circulated as an instrument for low-value exchange.
In general, the federal government
did not issue fiat money (paper money not backed by specie) prior to the Civil
War. Issuances were usually short-lived and were intended to be temporary
solutions for government finance needs during a war or to shore up the bank
system during a crisis. They were receivable for payment of government
obligations and taxes, but none of these issuances were declared legal tender
for private debts, although they did circulate for private transactions to some
degree. Issuances usually were interest-bearing and of relatively large
denominations that discouraged the circulation of the notes as money. The
federal government issued large denomination interest-bearing notes at the
outset of the War of 1812, but subsequent issuances declined in denomination
and did not pay interest. Interest-bearing notes also were issued in response
to the Panic of 1837. Notwithstanding the Framers' opposition to paper money
and principles of constitutional interpretation that suggest that Congress
is barred from issuing paper money, in Veazie Bank v. Fenno (1869), the Supreme
Court held that the federal government's issuance of bills of credit to fund
government operations was a valid exercise of the Necessary and Proper Clause.
To fund the Civil War, Congress
also passed the Legal Tender Act of 1862. Unlike earlier issuances that were
used to pay government obligations (as well as the paper money issued by the
Confederate government), Civil War "greenbacks" (for which redemption
in gold was "postponed") were for the first time declared legal
tender for all debts, public or private. Even if the federal government had the
authority to issue bills for payment of government obligations, it was a
distinct question whether the federal government could also force private
individuals to accept them for private contracts, an issue specifically
withheld in Veazie Bank.
The Framers believed that in prohibiting the authority of the
federal government from issuing bills of credit, they also were prohibiting
their recognition as legal tender by definition. Moreover, they also separately
and expressly barred the states from recognizing anything as legal tender other
than gold or silver, which was generally understood as further evidence of the
Framer's hostility to legal tender laws. Even those at the Constitutional
Convention who supported Congress's power to issue bills of credit opposed
granting the power to declare them legal tender.
In a series of nineteenth-century
cases dubbed The Legal Tender Cases,
the Supreme Court addressed the federal government's power to order its bills
of credit to be accepted as legal tender for all debts, public and private. In Hepburn v. Griswold (1870),
the Court held it a violation of the Obligation of Contract Clause to
retroactively alter contract terms by permitting payment in "greenbacks"
of an obligation incurred in gold dollars. Greenbacks were not immediately
redeemable in gold. Following a dramatic change in membership, however, just
one year later in the Knox v. Lee (1871), the Court expressly overruled Hepburnand upheld
the Legal Tender Act as applied to both prospective and retrospective debts.
Pointing to the crisis occasioned by the Civil War, Knox upheld the power to
declare paper money to be legal tender. In Julliard v. Greenman (1884), the Supreme Court
extended Knox, upholding the
validity of legal tender laws during peacetime. The Court held that the federal
government's monetary power was inherent in its sovereignty; thus it need not
be enumerated in the Constitution. Justice Stephen Field's blunt dissent
declared, "If there be anything in the history of the Constitution which
can be established with moral certainty, it is that the framers of that
instrument intended to prohibit the issue of legal tender notes both by the
general government and by the States; and thus prevent interference with the
contracts of private parties." The recognition of Congress's expansive
discretion on monetary issues in The Legal-Tender Cases was later used to support
the federal government's invalidation of gold clauses in private contracts in
the 1930s.
Note: Money Trust Investigations
prior to the 1913 Frauderal Reserve
