Last Updated on January 15, 2023 by Constitutional Militia
As a Rule of Constitutional Construction:
The first step towards elucidating the true meaning of the Constitution’s monetary provisions is not to consult decisions of the Supreme Court, but to study American history preceding the Court’s formation: “to review the background and environment of the period in which that institutional language was fashioned and adopted”.[1] “to place ourselves as nearly as possible in the condition of the [Framers]”,[2] and “to recall the contemporary or then recent history of the controversies on the subject” that “still were fresh in the memories of those who achieved independence and established our form of government”.[3]
The Monetary Powers and Disabilities Under the English Common Law
Pre-constitutional common law is one of the most important legal historical sources of the meaning of many constitutional provisions.[4] During the late 1700s Blackstone’s Commentaries was the standard legal treatise among Americans.[5] Blackstone’s discussion of the English monetary powers was detailed:
[A]s money is the medium of commerce, it is the king’s prerogative, as the arbiter of domestic commerce, to give it authority or make it current. Money is an universal medium, or common standard, by comparison with which the value of all merchandize may be ascertained: or it is a sign, which represents the respective values of all commodities. Metals are well calculated for this sign, because they are durable and are capable of many subdivisions: and a precious metal is still better calculated for this purpose, because it is the most portable. A metal is also the most proper for a common measure, because it can easily be reduced to the same standard in all nations: and every particular nation fixes on it it’s own impression, that the weight and standard (wherein consists the intrinsic value) may both be known by inspection only.
* * * * *
The coining of money is in all states the act of the sovereign power; for the reason just mentioned, that it’s value may be known on inspection. And with respect to coinage in general, there are three things to be considered therein; the materials, the impression, and the denomination.
With regard to the materials, sir Edward Coke lays it down, that the money of England must either be of gold or silver; and none other was ever issued by the royal authority till 1672, when copper farthings and half-pence were coined * * *. But this copper coin is not upon the same footing with the other in many respects * * *.
As to the impression, the stamping thereof is the unquestionable prerogative of the crown * * *.
The denomination, or the value for which the coin is to pass current, is likewise in the breast of the king * * *. In order to fix the value, the weight, and the fineness of the metal are to be taken into consideration together. When a given weight of gold or silver is of a given fineness, it is then of the true standard, and called sterling metal * * *. And of this sterling metal all the coin of the kingdom must be made by the statute 25 Edw. III. c. 13. So that the king’s prerogative seemeth not to extend to the debasing or inhancing the value of the coin, below or above the sterling value * * *. The king may also, by his proclamation, legitimate foreign coin, and make it current here; declaring at what value it shall be taken in payments. But this * * * ought to be by comparison with the standard of our own coin; otherwise the consent of parliament will be necessary.[6]
Besides implying historical misuses of the King’s prerogative as to “debasing or enhancing the value of coin” (and the existence of constitutional disabilities on that particular), Blackstone also recounted royal abuses of the borrowing power that hd lead to a constitutional crisis in England:
For no subject * * * can be constrained to pay any aids or taxes, even for the defence of the realm or the support of government, but such as are imposed by his own consent, or that of his representatives in parliament. By the statute 25 Edw. I. c. 5 and 6 it is provided that the king shall not take any aids or tasks, but by the common assent of the realm.
* * * * *
And as this fundamental law had been shamefully evaded under many succeeding princes, by compulsive loans, and benevolences extorted without a real and voluntary consent, it was made an article in the petition of right 3 Car. I, that no man shall be compelled to yield any gift, loan, or benevolence, tax, or such like charge, without common consent by act of parliament.[1]
Footnotes:
1.) William Blackstone, Commentaries on the Laws of England (Amer. ed., 4 vols. & App., 140). “Indeed when Charles the first succeeded to the crown of his father, and attempted to revive some enormities, which had been dormant in the reign of king James, the loans and benevolences extorted from the subject, * * * and other domestic grievances clouded the morning of that misguided princes reign; which * * * at last went down in blood, and left the whole kingdom in darkness. It must be acknowledged that, by the petition of right, enacted to abolish these encroachments, the English Constitution received great alterations and improvement.” 4 Id. at 429-30. Also see, Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution, (Chicago, Illinois R R Donnelly & Sons, Inc., GoldMoney Foundation Special Edition [2011] of the Second Revised Edition, 2002) by Dr. Edwin Vieira, Jr., Volume I, page 68-69.
Thus, Blackstone elaborated five monetary principles of the common law—
First, the precious metals are “most proper” for “money”, the “universal medium, or common standard”.
Second, the “coin of the kingdom” must consist of gold or silver “of the true standard”, in terms of weight and fineness. Or, under English common law prior to 1776, the only true “money” was undebased “gold or silver coin”.
Third, the common law power to coin money by “impression” or “stamping”, and to “fix the value (or “denomination”) thereof, was an Executive (Crown) not Parliamentary, power.
Fourth, “to fix the value” of domestic or foreign money meant to establish its “intrinsic value” by comparing “the weight and fineness of the [precious] metal” in a coin with the true standard, * * * sterling metal”.[1] This procedure precluded “debasing or inhancing the value of the coin, below or above the sterling value”.[2] Specifically, from 1603 through 1816, England followed a bimetallic monetary policy, whereby the law made no change in the silver coinage, but altered the weight and denomination of the gold to secure concurrent circulation.[3]
Fifth, common law denied the Executive any power to levy “compulsive loans * * * extorted without a real and voluntary consent ” by the people.
Footnotes:
1.) Blackstone could easily have substituted for his language “fix the value” the equivalent phrase “regulate the value” as later appeared in Article I, Section 8, Clause 5 of the Constitution. For, on this context, the two verbs are synonymous. See e.g., Black’s Law Dictionary (4th rev. ed. 1968), at 4561.
2.) The common law did not assert the economic error that silver and gold necessarily have “intrinsic value” in the sense of an inherent exchange. value, or purchasing power, recognized at all times in all places. Rather, legal “intrinsic” value meant simply the amount of pure silver or gold in a coin, measured against the physical amount of precious metal in the standard. Legal intrinsic value is thus an objective physical characteristic or quality of a coin; whereas a coin’s purchasing power is a matter of subjective valuation by buyers and sellers in the marketplace. See L. Von Mises, The Theory of Money and Credit (1971 reprint, H. Batson transl., new ed., 1952), at 97-123.
3.) S. Breckinridge, Legal Tender: A Study in English and American Monetary History (1903), at 43-46. This was the policy the Founding Fathers adopted.
Although Blackstone did not discuss “bills of credit” as part of the money of England, in its continuing oversight of the American Colonies Parliament dealt with the subject on several occasions. The Colonies’ powers to coin money and regulate the value of foreign coin varied from nonexistent to atrophied. Virginia’s charter of 1606 granted a power to coin money.[1] But it was little used. Massachusetts established a mint in 1652, which (among other things) led to revocation of her charter in 1684 and closure of the mint in 1688. Massachusetts and Connecticut fixed the values of foreign coins during the late 1600s. But in 1707 Parliament proscribed this practice and decreed the rates of exchange itself.[2]
From an early date, though, under the economic pressure of a scarcity of coin the Colonies claimed the authority to declare as “commodities of exchange” such homely items as wampum, corn, bullets, tobacco, pitch and tar, livestock, and country produce.[3] These, however, never themselves functioned as true media of exchange in which prices of all other commodities were expressed, but served simply as substitutes for money that the Colonies and private creditors accepted at their market values in real money, as an accommodation to debtors strapped for specie.[4] Sometimes, these commodity stand-ins for silver or gold coin circulated in the form of warehouse receipts that exchanged title to varying amounts of the underlying goods, especially tobacco.[5]
During the 1700s, the Colonies media of exchange consisted of specie, crude commodity money-substitutes such as tobacco (described above), “book credit” and various types of paper currency. The unit of account for Colonial money was the British pound, although in 1766 Maryland became the first Colony to issue currency denominated in Spanish silver dollars.[6] Book credit was credit merchants extended to other merchants, artisans, and farmers. In some areas, book credit may have formed the largest part of the practical medium of exchange.[7] Specie consisted of silver and gold coins derived by trade mostly from the Spanish and Portuguese colonies of the new world, and was denominated in the units of these colonies (for instance, Spanish “dollars” or “pieces of eight”). The amount in circulation at any one time was determined by the free market. Americans often complained that specie was scarce, especially the coins of small denominations most useful for common trade and business. This complaint may have been unwarranted, as species seems always to have been a major component of the Colonial money supply.[8] But, rightly or wrongly, the ostensible shortage served to rationalize the Colonies’ issuance of paper currency in petty denominations.[9] This fourth component of the system, paper currency, was not insignificant either in amount or in its effect on politics and law. Of specie and paper currency, perhaps three times as much as paper as specie circulated.[10] Yet paper currency never amounted to more than forty-eight percent of the media of exchange in the Colonies that used it.[11] Colonial paper was generally known as “bills of credit”, as distinguished from “money” proper, because the paper was only an instrument of debt (“credit”) which promised to pay, or to be redeemed in, specie (real money).
Footnotes:
1.) 7 F Thorpe, The Federal and State Constitutions, Colonial Charters, and Other Organic Laws of the States, Territories and Colonies Now or Heretofore Forming the United States of America, H. R. Doc.No. 357, 59th Cong., 2nd Sess. (1909), at 3783, 3786.
2.) An Act for ascertaining the Rates of foreign Coins in her Majesty’s Plantations in America, 6 Anne, ch. 30. See Bronson, “An Historical Account of Connecticut Currency, Continental Money, and the Finances of the Revolution”, 1 New Haven Historical Society Papers (1865), at 14-15, 25-26; A Davis Currency and Banking in the Province of the Massachusetts-Bay. Part I—Currency (1901), at 38-39; J. Felt Historical Account of Massachusetts Currency (1839) at 26.
3.) E. Groseclose, Money and Man: A Survey of Monetary Experience (2d ed 1967), at 121-22; 1 Documentary History of Banking and Currency in the United States (H Krooss ed. 1977), at 9-13; 1 T Hutchinson, The History of Massachusetts, from the First Settlement Thereof, in 1628, Until the Year 1750 (3d ed. 1975), at 31; C. Bullock, Essays on the Monetary History of the United States (1900), at 125-126 (North Carolina); J. Felt, Massachusetts Currency, ante note 298, at 28; Potter & Rider, “Some Account of the Bills of Credit or Paper Money of Rhode Island from the First Issue in 1710, to the Final Issue, 1786”, Rhode Island Historical Tracts, 1st Series No. 8 (1880), at 3; J. Hickox, A History of the Bills of Credit or Paper Money Issued by New York , from 1709-1789 (1866), at 4 (Maryland); H. Phillips, Historical Sketches of Paper Currency of the American Colonies, Prior to the Adoption of the Federal Constitution (First Series, 1865), at 12-13 (Pennsylvania).
4.) See Innes, “What is Money”, 30 Banking L.J. 377 (1913), at 378-79.
5.) See McCusker, “Colonial Paper Money”, in Studies on Money in Early America (E. Newman & R Doty eds 1976), at 94 95-97.
6.) See Thayer, “The Land-Bank System in the American Colonies”, 13 J Econ. Hist. 145 (1953), at 154.
7.) See West, “Money in the Colonial Economy”, 16 Econ. Inquiry 1 (1978), at 7-8. Private bills of exchange also had a limited circulation. See McCusker, “Colonial Paper Money”, ante note 5, at 100-03.
8.) See Weiss, “The Issue of Paper Money in the American Colonies, 1720-1774”, 30 J. Econ. Hist. 770 (1970), at 783.
9.) See Hansen, “Small Notes in the American Colonies”, 17 Explorations in Amer. Hist. 411 (1980); idem, “Money in the Colonial American Economy: An Extension”, 17 Econ. Inquiry 281 (1979).
10.) See J. McCusker, Money and Exchange in Europe and America, 1600-1775: A Handbook (1978), at 7 n.9.
11.) See Weiss, “The Issue of Paper Money”, ante note 8, at 782.
On 10 December 1690, Massachusetts emitted £7,000 in “indented” bills of credit supposedly “in value equal to money” and “accordingly [to be] accepted * * *in all Publick paymts, but without general legal-tender character.[1] Apparently, this was the origin of paper money in the Colonies and the British Empire.[2] The Indian on the Colonial seal implored: “COME OVER & HELP US” which proved prophetic: as within two years the bills’ depreciation caused the Province to declare them a legal tender, to “pass current * * * in all payments equivalent to money”.[3] This exemplified for the first time what would become the unbroken historic linkage between the unsoundness of an official medium of exchange and the political élites determination to force its circulation. Further issues followed. A typical Massachusetts bill emitted on 4 February 1736 declared:
This Bill of Six Schillings and Eight Pence Due from the Province of the Massachusetts Bay in New England to the possessor thereof Shall be in Value Equal to One ounce of coin’d silver. Troy Weight of Sterling Alloy, or Gold Coin at the Rate of Four Pounds Eighteen eighteen Schillings p’Ounce; and shall be accordingly accepted by the Treasurer or Receivers Subordinate to him in all Payments * * *.[4]
Various statutes empowered the Treasurer to apply such bills to pay (for instance) “wages”, “grants”, “stipends, bount[ie][y]s and praemiums”, and “all other matters and things which th[e legislature] have or shall , either by law or orders, provide for the payment of out of the publick treasury”.[5]
The other Colonies also emitted their own hodge-podge of bills of credit, some with and some without general legal-tender character.[6]
Footnotes:
1.) See photo above. See generally e.g., E. Groseclose, Money and Man: A Survey of Monetary Experience (2d ed 1967), at 122; 2 J. Story, Commentaries on the Constitution of the United States (5th ed. 1891), § 1362, at 231. Story’s Commentaries are recognized as a standard work in constitutional law. E.g., Field v. Clark, 143 U.S. 649, 670-71 (1892); J. Felt, Historical Account of Massachusetts Currency (1839), at 49-50.
2.) 2 E. Channing, History of the United States (1908), at 500.
3.) J. Felt, Historical Account of Massachusetts Currency (1839), at 51.
4.) See E. Newman, The Early Paper Money of America (1976), at 155.
5.) Act of 29 June 1738, § 9, PROVINCE OF THE MASSACHUSETTS-BAY ACTS PASSED AT THE SESSION BEGUN AND HELD AT BOSTON ON THE THIRTY FIRST DAY OF MAY, A.D. 1738, in Colonial State Session Laws (W Helm ed. 1987), at 927, 928-29.
6.) For overviews, see 2 J. Story, Commentaries on the Constitution of the United States (5th ed. 1891), §§ 1362, at 231-32 and 1367, at 236-38 & n.(a); G Bancroft, A Plea for the Constitution of the United States, Wounded in the House of its Guardians (S. Judd ed. 1987), at 5-20. For analysis of one Colony’s experience, see Kemmerer, “A History of Paper Money in Colonial New Jersey, 1668-1785”, 74 Proceedings of the N.J. Hist. Soc. 107 (1956). For illustrations see E. Newmaan, The Early Paper Money of America (1976).
