mv1001

Gold and Silver: Backwardation and Manipulation

James W:

Article 1, section 10 requires the states to allow only gold and silver coin as legal tender.

Article 1, section 8 grants to Congress the power to define money:
"The Congress shall have the power - To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures"

Congress has the sole power to define money, and the states can only accept gold and silver coin as legal tender. And, it is specifically prohibited that the states "emit bills of credit" (paper money) to be used as legal tender.

Taken together, it is clear that only gold and silver coin may be used as money in the united States, and that Congress has the sole power to define the weight and measure of the gold and silver coins. In other words, no paper money, and the States may not individually create their own coinage.

It wouldn't make sense if Congress could create paper money, with the States not allowed its use it as legal tender.

Why the States? Because, the US was conceived as a union of sovereign states, and State law (not Federal law) was where contract law was to be defined. (Contracts being the essence of economic transactions.) Up till the adoption of the Constitution, the individual Colonies (and later, States) did indeed "emit bills of credit", which, like all paper money, suffered devaluation as more was printed. The authors of the Constitution wanted to avoid the problems of hyperinflation (google "not worth a Continental") and also wanted to have a uniform currency across the union.

There's nothing in the Constitution that lets Congress transfer its power to "coin money" to a private bank, and charge interest on the money so created. But, that's the situation we're in today. And, the Constitution is written so that powers not specifically granted to Congress are not retained by Congress, that is, the Constitution says what Congress may do, and if a power is not specifically allowed, it is by default prohibited. So, the fact that Congress was not granted the power to transfer its money-making power to another entity, means that it cannot, unless of course the Constitution is amended to allow such transfer of this power.

Yet, Congress went ahead and created the Federal Reserve anyway, and Wilson signed it into law.