Are you aware that a Federal Reserve dollar bill is not a constitutional dollar? Perhaps you are, but if so, do you know what a constitutional dollar literally is? FULL ARTICLE by Michael Rozeff
Source link: http://blog.mises.org/12134/a-constitutional-dollar/
A Constitutional Dollar
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“…in the U.S. In 1792, the U.S. Congress voted a bimetallist scheme into existence that decreed the exchange rate between gold and silver to be 1 to 15. The market rate was 1 to 15.5, however, and after a few years the artificially undervalued gold had all but disappeared from circulation. As in the United Kingdom, some people derived great profits from helping Americans exchanging gold for silver, and fractional-reserve banking flourished from the artificial deflation. This operation must have been so profitable that a few decades later it had to be repeated, only this time in the other direction. The U.S. Coin Act of 1834 fixed the legal
exchange ratio between gold and silver at 1 to 16, and now the entire silver currency of the country was replaced with a gold currency. Again, there were eager helpers, and fractional reserve banking received another shot in the arm.”
p.130 “the ethics of money production” j.g.hülsmann.
the daily article seems to take a overly benign view of the coinage act, an out-and-out grift.
Constitutional and scientific arguments against the failing fiat standard are pointless. The Constitution and the rest of the law is simply the opinion of a majority of 9 federal employees dressed in funny clothes.
One way is to regulate the value of the official gold dollar as time passes, which means to change the official rate of exchange between gold and silver in order to bring it into accord with the market rate of exchange. That is what the coinage acts did.
I think we need to be careful to understand the terminology. The meaning of the term “value” has changed so much over time, it’s important to understand the original meaning of the word in the late 1700s.
Today, we use the term “value” to describe the exchange ratio of something in the market. A car is worth $5,000, so it has a market “value” of $5,000. We’re so accustomed to this meaning of the word, that we reflexively think of “value” as referring only to what something may trade for, either the actual market price or in some hypothetical exchange.
That’s not what “value” means in the coinage clause of the Constitution. The “value” of coinage refers only to the power to establish standards for the objective measurement of weight and purity of coins. Obviously, coin-metal is often mixed with impurities, such as gold being alloyed to make it more durable. As a result, determining the actual quantity of the actual metal is a matter of chemistry — distilling out the impurities, and determining exactly how many molecules of the elemental metal is present. The number of gold or silver molecules there are in a coin (or other lump) is determined most easily by weight. This is what assaying is — measuring weight and purity. It’s a metallurgical science.
Many commodities are measured by weight alone, because the rate of purity or impurity is not a factor. But the “value” of coinage is a two-factor measurement scale — both the weight and the purity are needed to determine the exact quantity of the relevant metal in question.
Therefore, the “value” of a coin is a strictly objective measurement of the actual, material, molecular quantity of silver, or gold, or whatever. The “value” of a coin has nothing to do with its exchange price on the market, whether it is to be traded for bananas or tires or linens or man-hours or coins of another metal.
That’s why the clause granting Congress the power to “regulate the value” of coins is found alongside the power to establish weights and measures.
The idea behind the first Coinage Act was to set up a government-run mint – a place where metallurgists could be trusted to melt metal into coins, stamp them to certify the content thereof. The idea was that the government’s mint could be trusted, since it didn’t run the minting service as a for-profit business, thereby keeping all of the private mints honest.
When Congress decreed an official exchange rate of gold coins versus silver coins, it obviously went FAR beyond merely establishing standards of weight and measurement. No, that’s just PRICE-FIXING, pure and simple.
Price-fixing the money is a gross abuse of power, and pretty much the root cause of most of our economic problems. It’s as if the central state decreed that all debts are required to be paid in gallons of milk, and then decreeing one day to say that a gallon shall henceforth be defined as 7 pints instead of 8. When Congress is a debtor, it is awfully attractive to have the power to decree that it shall be required to pay less, and thus that creditors shall have to accept less as though it were payment in full.
The first quote is correct. The second quote confuses “value” with weight. The coinage act decreed the weight of gold in a dollar and the weight of silver in a dollar. It did not establish a gold coin to be “worth”, i.e. to have a value, sixteen times more than a silver coin. Congress may have tried to regulate the “value” of the two metals in relation to each other and that would be “price fixing” but I don’t know if they did that.
If the value of gold increased that means it’s purchasing power increased but the weight remained the same obviously.
It is true that the wieghts were determined from the then current market value differences in the metals. I think people were aware of the fact that a dollar was a weight in gold or in silver.
If congress attempted to fix the “value” between the metals then that is “price fixing” the metals in relation to each other. Gold however did become more valuable on the market so it was better to save a dollar (in weight) of gold than a dollar (in weight) of silver and Gresham’s law would seem to come into play. Saving would be preferred in gold. If the “value” of the coins were allowed to float with the market and the weight of silver or gold remained the same then a bi-metal coinage would work just fine, in my view.
The article only mentions U.S. statutes, not the U.S. Constitution. Where does the U.S. Constitution require that the federal government only use a silver standard?
GTT,
You are correct. There is no such thing as a constitutional dollar. Rozeff has not evidence to support the title of his article.
Mises.org:
Please reprint Pieces of Eight by Vieiri, it sounds like a great addition to money theory from an Austrian type:
http://www.amazon.com/Pieces-Eight-Monetary-Disabilities-Constitution/product-reviews/0967175917/ref=dp_db_cm_cr_acr_txt?ie=UTF8&showViewpoints=1
would love to but the author has declined permission.
1. I agree with the comments that the Constitution does not require silver, gold, or any other metallic coinage. While I could claim the word “coin” implies metal, coins have been produced for millenia from wood, clays, seashells, stones, and various other materials. I can presume anything on which Congress is willing to place a value, including paper or plastic, satisfies the Constitution.
2. Although a minor point, there are 12 troy ounces in a pound, not 16.
The concept is silly from the get go. The official “value” of the kilometer and the second has changed over the years. Should these also require a legislative or constitutional change?
Didn’t one of our north central states once legislate the value of pi to be 3.00?
I can presume anything on which Congress is willing to place a value, including paper or plastic, satisfies the Constitution.
You can presume anything you want, but your assertion is incorrect.
The word “value” had a specific meaning in 1789, and it referred to the chemical assaying of the weight-and-purity of metal that was struck into coins.
This meaning can be derived from a wide variety of original sources, not just the text of the Constitution itself. Interpreting the original meaning of the Constitution is just like interpreting the original meaning of a contract — you start with the document itself, and then, if you need to resolve any issues that arise, widen the inquiry to include extrinsic, contemporaneous usages.
“Regulating the value” of coins is equivalent to the power define a mile as 5,280 feet, or a pound as 16 ounces, and nothing more.
Thus, even the first Coinage Act of 1792 was unconstitutional, to the extent that it set up a price-fixing scheme by decreeing the exchange ratio between gold and silver. Congress has the power to define the weights and measures of coinage, and to operate a mint (i.e., a coin manufacturing service) based on those official weights and measures, and nothing else. 100% paper money based on nothing but more paper is out of the question, and never should have been considered remotely legitimate.
Could you provide a little more backing for your case about the Constitution? Certainly we have had these statutory standards in the past, but the Constitution requires no such standard.
My understanding has been that the Constitution gives Congress the power to set the standard, and it denies states the right to declare anything other than gold and silver legal tender. I haven’t reviewed it in a while, but I thought that was it. Rozeff seems to be making a very dubious case here.
Remove government’s monopoly over money. Specifically, abolish legal tender laws and legally permit individuals to utilize whatever medium of exchange that they find mutually agreeable. In addition, all mediums of exchange should be subject to the same tax treatment. While more comprehensive proposals, especially those advanced by Murray Rothbard, would be even more beneficial, the above changes would significantly contribute to the establishment of a stable and ethical monetary system. In particular, individuals would be free to opt out of the existing state and central bank corrupted framework.
Remove government’s monopoly over money. Specifically, abolish legal tender laws and legally permit individuals to utilize whatever medium of exchange that they find mutually agreeable. In addition, all mediums of exchange should be subject to the same tax treatment.
While the more comprehensive proposals advanced by Murray Rothbard would be more beneficial, the above changes would significantly contribute to the establishment of a stable and ethical monetary system. In particular, individuals would be free to opt out of the existing state and central bank corrupted framework.
billwald
I think the pi=3 definition comes from the Bible (the description of the Temple of Solomon).
” It was round, ten cubits from brim to brim, and five cubits high, and a line of thirty cubits measured its circumference”. For Fundamental Christians, the Bible is the word of God, and if the Bible says that pi=3, then pi=3.
Awesome piece, awesome!
And what an idea to attach a FAQ — wow…
Mr. Rozeff, after all the material over the years over at LewRockwell, a big thank you, Sir!
Kurt
Finally, after quite some time, an article here at Mises. More please (!)
The comments are helpful. Allow me to clear up the more significant misunderstandings and/or misconceptions. The most important incorrect comments above are that there is not a constitutional dollar or that the federal government can make anything it wants to into a constitutional dollar. Vieira’s work shows in the most thorough, detailed, footnoted, and referenced way that the dollar referred to in the Constitution is a silver dollar with a certain weight. Jefferson even obtained 1000 Spanish milled dollars, melted them down, and got the average weight of silver in them.
The lengthy comment explaining that regulating the value means regulating the weight of the metal in the coin is correct. Vieira shows this in his book. It is indeed a shame that this book is not more widely available.
The facts that there is a constitutional dollar and that the Federal Reserve is unconstitutional as well as its “dollar” is not a political argument and does not impel any political position. It is a statement of legal facts. Those who believe the Constitution lacks authority may still accept these facts, even if they think they have no bearing on anything. Others may have a wide variety of views on what should be done or not done. Those who believe in a living Constitution will probably ridicule the idea of a constitutional dollar as much as anarchists and Spoonerites do.
Professor Rozeff,
Why opt for a “constitutional dollar”? It doesn’t make sense to objectively decide whether or not X weight in whatever metal is equal to 1 U.S. Dollar. Why not instead argue for a free-market in money?
By the way, the actual title of the article was “Gresham’s Law Briefly Revisited in a Constitutional Context.” Gresham’s law came into play in the constitutional context because, in fact, there was a silver standard and an official gold/silver exchange rate. And also, by the way, the article takes no position at all on the ethics of the Coinage Act of 1792 or 1834, on their relation to fractional-reserve banking, or on what motivations may have supported these coinage acts. Those are all interesting subjects, but they are not the subject of this article. Vieira provides a great deal of useful material on whether or not the First and Second Banks of the United States were constitutional. They were not; that is my understanding, as the Constitution doesn’t permit the U.S. to charter federal corporations. Vieira also shows and/or argues strongly and persuasively that the Constitution does not permit the states to issue any paper money whatsoever. The phrase “emit bills of credit” was specifically deleted, as compared with the Articles. This prohibition logically carries over to the U.S. government as well. The states chartered banks; they had the power to do that. But then, early on, in the early 1800s, they allowed them to suspend payment in specie when their paper money issues ran into problems. The U.S. had some power to control those paper issues as well via taxation, to stop fractional-reserve banking or at least bring it to heel and to punish these suspensions and put an end to them, but it did not.
There is this comment: “Why opt for a “constitutional dollar”? It doesn’t make sense to objectively decide whether or not X weight in whatever metal is equal to 1 U.S. Dollar. Why not instead argue for a free-market in money?”
I take no position in the article on what to opt for. Personally, I’d like to see a free market in money and I’d like to see the Union dissolved. We can’t get a free market in money while under the Constitution, that is, if anyone pays any attention to it or wants to change things with some semblance of constitutional legality. It would require amendment, because the only money it recognizes is metal money.
It made sense to the framers to set up a standard weight of silver with the name “dollar”. Then any coins whatever, foreign or privately minted, can circulate and be used as a medium of exchange. They just need not have “dollar” stamped on them. They can exchange at a price determined relative to the weight of metal they have compared to the standard. It makes sense to have the standard dollar. That makes it a unit of account. It makes it so that all prices can be expressed in a standard unit. This provides immense convenience in exchanges involving money. Still, for an authority to set such a standard is not a free market.
If people wish to transact in media other than metals or in media other than e-credits based on metals or checks drawn on metal accounts, or if they wish to establish standards superior to a given metal, they cannot do so if one authority doesn’t allow it. People may wish to try out competing units of account for the simlpe reason that the most stable such unit will tend to be the most attractive one. And they certainly may wish to set up methods of exchange that bypass metals or relegate them to secondary roles. So, a free market is really what we should be after.
Read more: A Constitutional Dollar — Mises Economics Blog http://blog.mises.org/12134/a-constitutional-dollar/comment-page-1/#comment-678884#ixzz0hnqKfRnr
Catalan>Why opt for a “constitutional dollar”? It doesn’t make sense to objectively decide whether or not X weight in whatever metal is equal to 1 U.S. Dollar. Why not instead argue for a free-market in money?
It seems that some minimal govt power over money is needed to enforce contracts. Ie, Jones owes Smith $100 but they dispute the meaning of $100 to the extent of disputing what kind, fineness and amount of “money metal,” shells, tobacco, etc. is implied by $100. A private mediator in an anarchist society would also need a pre-existing standard that is previously known and accepted by contractees.
Stephen Grossman,
The standard could be decided in the contract being signed. There are a large number of the standard being chosen, but it could very well be a specific weight in a specific grade of gold/silver. Or, perhaps minting is being done by individual banks, and so those involved in the contract choose the coins being minted by the most reliable bank, as a way of guaranteeing value. While a government monopoly over money can get the same job done, the problem is the room allowed for manipulation of currency.
in light of the discussion on gold and the dollar, I thought these comments at the gold convention in Toronto about the dollar and gold were pretty interesting, especially coming from a gold mining CEO:
http://www.goldalert.com/gold-stocks.php#gold_between_$1,000_&_$1,200_in_2010?
I think what Prof. Rozeff means by a “constitutional dollar” refers to the fact that the constitution does in fact contain the term “dollar”: In Article 1, Section 9, a ten dollar duty can be placed by congress on the importation of persons (part of the slave issue), and in Amendment 7, the right to a trial by jury is preserved for controveries exceeding $20. So, a “constitutional dollar” is whatever the “public meaning” was as to the use of that term in the constitution (to use Randy Barnett’s view of constitutional construction). The answer is that it meant a specific weight and fineness of silver.
Often, Michael S. Rozeff seems right in what he writes. Yet, Michael S. Rozeff is oh so wrong about Gresham’s Law.
Rightly, as stated by perhaps the world’s greatest economist, Henry Dunning MacLeod, Gresham’s Law means “good and bad money cannot circulate together”.
In short, when coins of a known minting with a given name are circulating, say a silver dollar of one ounce of silver, and then the government issues new silver dollars containing 3/4ths an ounce of silver, then in short order, no longer are persons willing to spend the one ounce silver dollars. Instead, they shall hoard them and only accept the new issued 3/4ths of an ounce silver dollars, most likely after raising prices to offset the 1/4 ounce loss.
The blathering Michael S. Rozeff does about gold and silver has nothing to do with Gresham’s Law.
to smack:
in the absence of legal tender laws, there is no “bad” money, only money. gresham’s law only applies to price-fixing regimes.
newson, my friend to be,
Your claim is not true — “in the absence of legal tender laws, there is no “bad” money, only money.”
For any man or woman reading this can conceive of a land, say Freedomland, that has in circulation silver dollars from Spain and silver dollars from Netherlands, yet no coins of its own. Both dollars in name from Spain and Netherlands have weighed in at one ounce silver.
Yet, at some point, the profligate Spanish have become wily and begin sneaking in an alloy with their named dollars of silver thus producing coins of 9/10s of an ounce of silver.
Once the people of Freedomland catch on to this deception, they shall hoard their now true dollars of silver from the Netherlands and spend only their Spanish debased dollars.
Gresham’s Law has nothing to do with price-fixing regimes. Gresham’s Law deals with debasement of specie money.
In Freedomland, with no legal tender laws, the debased Spanish dollars will no longer be accepted at tale, but will have to be assayed as to weight and fineness. Thereafter, both Spanish and Netherland dollars will circulate, but not at par with one another, because no buyer (debtor) can force Spanish dollars on a seller (creditor). There will also be a tendency for Spanish dollars to remain in or migrate back to Spain (where they can probably be used to pay of existing debt).
at the risk of sounding pedantic, in your example the spanish coins no longer serve as the generally accepted means of exchange, ie. money. so in the sense that once the ruse is discovered they cease to be accepted as money. gresham’s law applies when bad (unreliable precious metal content) is enabled to remain as money through legal tender law.
Murray N. Rothbard agrees with me when he wrote,
“Copernicus declared that it is impossible for good full-weighted coin and base and degraded coin to circulate together; that all the good coin is hoarded, melted down or exported; and the degraded coin alone remains in circulation.”
@newson
You’re suffering cognitive dissonance as you fight to defend your false beliefs.
It’s not that you can be pedantic. You must know about money first before you can discuss it.
Gresham’s Law (which is Copernicus’ Law and hence Oresme’s law) has nothing to do with legal tender laws and price-fixing.
In short, you don’t know what you’re talking about when it comes to money, credit, banking or governance.
Even Murray N. Rothbard agrees with me:
“Copernicus declared that it is impossible for good full-weighted coin and base and degraded coin to circulate together; that all the good coin is hoarded, melted down or exported; and the degraded coin alone remains in circulation”
@newson. You can’t be pedantic until you learn about money, credit, banking and governance. I’ve schooled you once already on the subject. That I must school you again saddens.
Gresham’s (aka Copernicus’ Law, aka Oresme’s Law) has nothing to do with legal tender laws or price fixing. Although, it is quite easy to chase out good money with bad, debased money that persons get forced to use under legal tender laws.
to smack,
thanks, i’m quite familiar with oresme’s work and rothbard’s too. legal tenders laws are price fixing. they force people to accept currency at a value above that which would prevail on the free-market.
good and bad monies, absent legal tender laws, could only circulate for the briefest of periods. a small number of bad coins would suffice to ruin the reputation of the balance, and market retribution would be swift.
Here’s a passage from Rothbard on Gresham’s Law where he talks about what would happen in a free market conditions and what would happen when the government intervenes and essentially price fixes. Not sure who wins the argument but I’m rooting for Newson because Smack is coming off like a real douche.
“It made sense to the framers to set up a standard weight of silver with the name “dollar”.
i would dispute this; rather i would say the framers were muddled-headed, or alternatively quite cynical.general weights and measures alone should be standardized, but one ounce of something doesn’t need any special name. 1 oz of butter doesn’t attract a special name, and nor should one ounce of silver. market forces alone will balance up metal content, coin reliability, reminting services etc. to determine exchange value, and brandnames are what people will trade off (ducat, sovereigns, krugerrands etc). the coins wars will give the people the best, most reliable means of exchange.
Yet 144 or something is called a gross, a dozen is another name for 12. It’s common to bunch up a specific number, distance (3 feet is a yard for instance), weight, and other units of measurement for convenience of explanation.
I was amused to find that APMEX sells constitutional dollars:
$1 in Silver Shot (Nuggets) .7734 Silver Certificate Exchange
is it possible to get Pieces of Eight anywhere?
For an interesting, free, historical read on the dollar, check out Dictionary of political economy by Sir Robert Harry Inglis Palgrave at Google Books http://bit.ly/aBR6JU ages 626-628
” Constitutional and scientific arguments against the failing fiat standard are pointless. The Constitution and the rest of the law is simply the opinion of a majority of 9 federal employees dressed in funny clothes.
Reply
Magnus March 10, 2010 at 10:41 am”
i dont think that the constitutional arguments are pointless. funny dressed people can be wrong.
unless i am not seeing some aspect of the constitution it seems to me that any justice would call the current currency of the us something com0pletely different than what teh constitution specifies.
” I think we need to be careful to understand the terminology. The meaning of the term “value” has changed so much over time,…”
i dont know if this is true or not. value may have had a few different meanings over the years
” That’s not what “value” means in the coinage clause of the Constitution. The “value” of coinage refers only to the power to establish standards for the objective measurement of weight and purity of coins. ”
i am not sure about this either. i had read that g britian had been giving face ‘values’ to coins below their metal market value. i am not sure if the fledgling us was trying to not do what great britian had done by regulating value???
Read more: A Constitutional Dollar — Mises Economics Blog http://blog.mises.org/12134/a-constitutional-dollar/#comments#ixzz0hrJOkn5A
“Q: What is meant by a metal standard?
A: It means a monetary unit that contains a specific weight of metal.
Q: Can the United States or any country be on two metal standards at the same time?
A: No, this will be impracticable because of the continual changes in relative prices of any two metals.”
i dont know if this is correct or not.
if you had the silvergram: 1 gram of silver (sg) and the goldgram: 1 gram of gold (gg), wouldnt and couldnt the two metalgram standards fluctuate in value along side each other.
this doesnt seem impracticle at all considering the dollar-currency fluctuates against other currencies and goods. as the speed of market information increases so would the knowledge of metal to metal price fluctuations. metal extraction may very well be more stable than national printers.
ie one month silver to gold may be at a 200sg:1gg and the next month at 189sg:1gg…the great degree of scarcity differential between the two metals would probably keep gold for larger purchases and silver for smaller ones. i wouldnt think this would be a complication at tax time…if low wages were paid in sg and high wages in gg…income takings would adjust via form…1040sg and 1040gg. or whatever tax structure there was.
I agree that bi-metallism could work and the daily article today (Friday March 12) written by Ludwig Von Mises illustrates how the gold standard and monometallism was the result of government intervention.
I believe during the colonial times in early USA history they did have a bi-metal standard with silver and gold. They tried to fix the prices relative to one another and it ended up devaluing the gold somewhat relative to the silver.
So what ended up happening is that foreign investors would come in and exchange their silver for gold, and then sell off the gold back in Europe for a profit. I assume to get more silver to come back the America and get more gold.
Or maybe that is backwards. But what ended up happening, obviously, was a dramatic drop in the money supply in the colonies.
I think that in the past you’d easily run into troubles like this trying to handle multiple different types of monies based on different commodities. But nowadays with real time electronic communications and commodity markets then it would be much easier. Certainly people would be making good livings playing games with exchanging different types of currencies and working out profit schemes by leveraging them against one another, but it all probability that sort of behavior would only serve to stabilize prices and help illustrate what money bases are going to be more desirable.
“general weights and measures alone should be standardized”
i guess by standardized you mean ‘agreed upon’?
this makes sense. a gram should be a gram. not a political gram and a peasant gram.
Weights and measures are standardized. We need to keep honest weights and measures. The coin clippers have over time degraded our money and have turned our wealth into worthless paper tokens.
Many people know this crisis is coming and it will be man made. They do it in every administration. They did it in argentina not so long ago right before they collapsed their economy. They are doing the same replica of a collapse here in the U.S. Don’t believe it? Look up the argentine economic crash. Look how they are destroying Californias ability to farm and they contribute to much of the worlds food supply. When it happens, just like when they also crashed germany, then your paper fiat monopoly money will be absolutely worthless.
You will have to purchase with precious medals bread to eat.
Our founding fathers gave us a Constitution that was designed to guarantee the inalienable rights and freedoms of the individual included in the Bill of Rights. They recognized the importance of a stable medium of exchange. Knowing the failings of the human psyche, they created a blueprint of checks and balances and established a ‘money’ with backing (gold/silver) to thwart those failings.
They knew the evils of the central banking cartels and even fought a war of independence to rid us of this ‘evil’.
But, alas, the temptation of the special interests, finally influenced (bought off) sufficient elected representatives to establish the unconstitutional Federal Reserve that is owned by the same central banking cartels we were warned about. The rest is history as our elected minions of the special interests have systematically allowed our money and inalienable rights to place us into debt slavery.
Now can you see the importance of the gold/silver paradigm that our founding fathers entrusted us?
Gold is possibly one of the best hedges against inflation. During times of depression, war, natural disasters, economic crisis and uncertainty, gold, which is both liquid and global in nature, is the natural safe haven that most people flock to, boosting gold price in such times. As an investor in gold with long term goals, I always look for the cheapest
gold investment.
The problem is not so much whether the Constitution requires gold or silver or anything else to back the dollar. The real problem is nothing backs the dollar anymore … except the “full faith and credit” of the U.S. Treasury. Throughout history, when the “money” becomes a “currency” (i.e., nothing real backing it), the currency eventually becomes worthless. To protect (and ensure) your financial future, you need some level of ownership & possession of “real” money such as gold coins or bullion or silver coins or bullion in case the dollar collapses. With gold currently way beyond the typical ratio of gold prices to silver prices (currently over 50:1 versus the historical 20:1 or 15:1 as stated in your referenced article), I personally believe silver is the way to go.
Though the Constitution does not say that money must be gold and silver coin, the Constitution does have the word “dollar” in it. Two places. A dollar, in the Constitution of the United States, is a Spanish Milled Dollar coin, or its equivalent, in coin form, containing 371.25 grains of fine silver.
In his work, “What is the Dollar in the United States” (online), its author, Dan Goodman, shows that the Continental Congress established the dollar, as a coin, containing containing 375.64 grains of fine silver, equivalent to the then current Spanish Milled Dollar coin. The United States Congress completed the work of the Continental Congress by establishing a mint to coin the dollar (and parts thereof). However, the dollar was defined to be a coin, containing 371.25 grains of fine silver, equivalent to the then current Spanish Milled Dollar coin. The reason for the change in the number of grains of fine silver, was, according to Alexander Hamilton, in his report of the establishment of a Mint (Jaunuary 28, 1791), that “[t]he dollar originally contemplated in the money transactions of this country, by successive diminutions of its weight and fineness (by the country of Spain), has sustained a depreciation of five per cent. . . . This, nevertheless, is the condition of one which, having no coins of its own, adopts with implicit confidence those of other countries.”
So, though money under the Constitution may not include gold or silver coin, a dollar, however, is under the Constitution a silver coin containing 371.25 grains of fine silver. And since debts are generally denominated in terms of dollars, then only silver coin (and maybe gold coin) can be tender in payment of the debt.
On the issue of legal tender:
The United States cannot make its obligations a legal tender in payment of private debts. In the case of Julliard v. Greenman, the United States Supreme Court held that: 1) Congress had the power to make its obligations a legal tender in the payment of private debts, and 2) that this power was an implied power under the Constitution based on the case of McCulloch v. State of Maryland. The Court determined that this implied power of making the obligations of the United States a legal tender in payment of private debts was a means (incident) to the power (expressly) given to Congress to borrow money on the credit of the United States.
However, the case of McCulloch v. State of Maryland was wrongly decided. The concept of implied powers does not exist in the Constitution. In fact, such a concept, if a doctrine would be in conflict with the doctrine that the Congress is a government of enumerated powers. As such, Congress does not have the power to make its obligations a legal tender in payment of debts, since the concept of implied powers does not exist in the Constitution. Since the power is not granted (expressly) to Congress, the power to make its obligations a legal tender in payment of private debts is not given to Congress under the Constitution of the United States. This is shown in the work, “The United States government does not have the power to make its obligations a legal tender” (online) by Dan Goodman.
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