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"Money": Legal History

“To regulate Value”

The Framers understood the constitutional “Value” of “Money” not as some plastic notion of “worth”, but rather as a concrete substance of an actual coin.

Constitutional Militia
By Constitutional Militia
To regulate Value
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Last Updated on January 15, 2023 by Constitutional Militia

“To * * * regulate * * * Value ” and the cognate power “To * * * fix the standard of Weights and Measures”

The phrase “fix the standard” empowers Congress itself to define the basic units of “Weights and Measures”; whereas the phrase “regulate the Value” empowers Congress only to apply the basic unit of “Value”, which the Constitution elsewhere explicitly identifies as the “dollar[ ]”, a known historically fixed weight of silver beyond Congress’s power to change.[1]

Congress’s Power “To * * * regulate  * * *  Value”

As with the power “To coin Money”, the allied power in Article I, Section 8, Clause 5 “To * * * regulate the value, and of foreign Coin” traces its ancestry to linguistically similar—and operatively identical language in the Articles of Confederation, later successfully modified in the Federal Convention of 1787.[2] Of no little significance is the Framers’ consistent association throughout its evolution, of the power “To * * * regulate * * * Value ” with the cognate power “To * * * fix the standard of Weights and Measures” which also appears in Clause 5.[3] Again, as with the power “To coin”, nowhere in the Constitution or anywhere antecedents does or did another explicit power exist to “regulate the Value” of “currency”, “bills of credit”, “securities”, “notes”, “paper money”, or anything other than United States and foreign coin. The verb “regulate” refers to a particular, specific activity relating only to coinage rather than “granting general powers of legislation” to declare what shall have “Value”, and to what  degree, as “Money”.[4]

This is not because the Founding Fathers were economic illiterates, unconversant with what some people may flatter themselves are modern ideas about managed paper currencies. To the contrary: From their own experiences and their knowledge of Colonial history, they were well aware that legislatures and courts had often attempted to manage paper money, by setting rates of exchange for “bills of credit”, and revaluing (“scaling”) contracts expressed in paper money, using tabular standards and like devices.[5] Because they also knew that the choice of which standards to use in these essays in monetary (mis)management easily degenerated into a political contest, they must have been concerned that, were any such power included in the Constitution, it should be specified clearly.[6] So, if they included no congressional power “To * * * regulate the Value” applicable to “bills of credit”, it must be because they deemed it unnecessary—which, of course it would be if Congress, both under Article I, Section 8, Clause 2,[7] and the States under Article I, Section 10, Clause 1,[8] lacked all power to emit “bills of credit” , and therefore needed no power “To * * * regulate the Value thereof”. That is, in the historical context of the Founders’ experiences with managed paper currencies, the absence of an explicit power “To * * * regulate the Value of Bills of Credit” is compelling evidence that the Constitution contains no implicit power for government at any level to emit “bills of credit” .

The specificity for coin of the power “To * * * regulate the Value thereof and of foreign Coin” unequivocally define’s that powers substance. “[R]egulate” meant then,[9] as it does today[10] to adjust according to some rule or standard. “‘The word ordinarily implies not so much the creating or establishment of a new thing, as the arranging in proper order and controlling that which already exists.’”[11] Such an “arranging in proper order” succinctly describes what “regulat[ing]” coinage meant, in governmental practice and public understanding, prior to the ratification of the Constitution.

For instance, in his Commentaries, Blackstone outlined the common law concerning “[t]he denomination, or the value for which the coin is to pass current”;

In order to fix the value, the weight and fineness of the metal are to be taken into consideration together. When a given weight of gold or silver is of given fineness, it is then the true standard, and called sterling metal  * * *. And of this sterling metal all of the coin of the kingdom must be made * * * . The king may also  * * * 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 * * * .[1]

Interestingly, Blackstone equated “the value for which the coin is to pass current” with its “denomination”, or mere name—indicating that the process of “fix[ing] the value” of both domestic and foreign coins at common law was essentially an objective comparison of the weight and fineness of precious metal in a particular “denomination” to “the true standard” of that metal, rather than an attempt to manipulate the coins’ purchasing power according to some arbitrary policy.

Blackstone wrote of “fix[ing] the value” of coins; but he could have easily have said “regulating the Value”, the verbs “fix” and “regulate” being effectively synonymous in this context.[2] An early example of such usage appears in Queen Anne’s Proclamation of 1704, and the Parliamentary Act of 1707, which referred to “a Table of the Value of the several foreign Coins which usually pass in payments in or said Plantations, according to their Weight, and the Assays made of them in our Mint, thereby shewing the just Proportion which each Coin ought to have to the other”, and then commanded that certain foreign coins “stand regulated, according to their Weight and Fineness, * * * in Proportion to the Rate before limited and set for the Pieces of eight of Sevil, Pillar, and Mexico”.[3]

Footnotes:

1.) 1 W. Blackstone, Commentaries on the Laws of England (Amer. ed., 4 vols. & App., 1771-1773) at 278 (footnotes omitted).

2.) E.g., Black’s Law Dictionary (4th rev. ed. 1968), at 765 and 1451 (defining “fix” in terms of “regulate”, and “regulate” in terms of “fix”).

3.) An Act for ascertaining the Rates of foreign Coins in her Majesty’s Plantations in America, 1707, 6 Anne, ch. 30, § I (emphasis supplied). Pieces of eight were also known as “pillar” or “Spanish Milled” dollars.

The Continental Congress proceeded in the same manner. In 1776, a committee “appointed to * * * ascertain the value of the several species of gold and silver coins current in these colony, and the proportions they * * * ought respectively to bear to Spanish milled dollars”, prepared a table of “rates”, showing the name and weight of the various coins, and their “Value in Dollars”.[1] The similarity of this procedure to that in 1707 Act nearly three quarters of a century earlier—even to the use of the nouns “proportion”. “rate”, and “value”, and of the verb “ascertain”—is both striking and hardly accidental.

Later that year, another committee submitted a more detailed report on the same subject. The committee defined its task as, first, “declaring the precise weight and fineness of the * * * Spanish milled dollar * * * now becoming the Money-Unit or common measure of other coins in these states”; and, second, “explaining the principles and establishing rules by which * * * the said common measure shall be applied to other coins * * * in order to estimate their comparative value”[2] Having stated the weight of the Spanish Milled dollar, “as it comes from the Mint new and unworn, the committee then set out the rules for regulating the value of silver and gold coins: “[A]ll * * * silver coins * * * ought to be estimated * * * according to the quantity of fine silver they contain.”  And “all gold coins * * *  ought to be estimated * * *  according to the quantity of fine gold they contain and the proportion * * * which the value of fine gold bears to that of fine silver in those foreign markets at which these states will probably carry on commerce”, “the several proportions at the said markets * * *  [being] averaged”,[3]  Although it found this average to be “nearly as one to fourteen and * * * one half”, the committee  nevertheless recognized that, “as in long tracts of time the proportional values of gold and silver at market are liable to vary, whenever such variation shall have become sensible, this house [i.e., Congress] ought to make a corresponding charge in the rates at their treasury”,[4] It then presented a table of values, showing the various silver and gold coins, their “Proportion of fine metal”, “Weight”, amount of “Fine metal”, and “Value in Dollars” (to six decimal places).[5]

Footnotes:

1.) 1 Journals of the Continental Congress, 1774-1789 (Library of Congress  ed.1904 et esq.), at 381-382.

2.) 5 id. at 725.

3.) Id.

4.) Id. at 725-26.

5.) Id. at 726.

This conception of “regulating”, “fixing”, or “estimating” the value of coinage was widely understood among the public as well.[1] 

In sum, the power “To * * * regulate the Value [of United States coin] , and of foreign Coin” consists solely of a power of comparison and declaration: comparing the amount of fine metal in particular silver coins to that contained in the “Money-Unit or common measure of other coins”, the “dollar[ ]” (or “piece of eight”),[2] and declaring this proportion in “dollar” “Value[s]”; or ascertaining the amount of gold in particular gold coins, calculating the market equivalent of fine silver, comparing the later amount to the “Money-Unit”, and declaring this proportion in “dollar” “Value[s]”. Thus under the power “To coin Money” Congress has the discretion to set the weight, purity, form and impressions of all silver, gold, and copper coins it mints (excepting of course the intrinsic value of the “Money-Unit” itself). Whereas, under the power “To * * * regulate the Value thereof”, it has a duty accurately to determine the proportions between the fixed “Money-Unit” and the coinage it, and foreign nations, mint.

Insofar as the proportions between various gold coins and the (silver) “dollar[ ]” are concerned, it may have been reasonable in the late 1700s and immediately thereafter to declare by statute the exchange ratio between gold and silver customarily prevailing in the market—the transmission of financial information throughout the country, let alone the world, being both slow and uncertain. Even so, the Continental Congress recognized that. because “the proportional values of gold and silver at market are liable to vary”, the government had a duty “whenever such variation shall have become sensible,  * * * to ale a corresponding charge in the rates”,[3] Today, with almost instantaneous transmission of sound market data available, any rigid statutorily declared ratio of value declared between gold and silver is unreasonable, and therefore unconstitutional.[4] Rather, in exercising the power “To * * * regulate * * * the Value” under contemporary economic circumstances, the government should permit the value domestic and foreign gold coinage to “float” as against the “Money-Unit”, from one market level to another, as changing rates become “sensible” in commerce.

Footnotes:

1.) See, e.g., A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), Bk 1, ch. 5.

2.) 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, at 134-141, 191-99.

3.) 1 Journals of the Continental Congress, 1774-1789 (library of Congress ed. 1904 et seq.) at 726.

4.) That application of constitutional principles may change with changes in economic and social facts is a commonplace of constitutional law. E.g., Brown v. Board of Education, 347 U.S. 483, 492-95 (1954); Block v. Hirsch, 256 U.S. 135, 155 (1921).

The Framers’ association of the power “To * * * regulate * * * Value” with the power “To fix * * * the Standard of Weights and Measures”, then was no mere caprice.[1]  Although the purchasing power of money varies with economic conditions, and ultimately is beyond government’s power to control,[2] at any particular point in time the relationship of money to economic values parallels that of weights and measures to physical quantities. Just as the Constitution empowered Congress “To  * * * fix the Standard of Weights and Measures” in order to establish uniformity therein throughout the country,[3] so, too, did it confer the power “To  * * * regulate * * * the Value in order (as much as possible in economic life) to provide a circulating medium of exchange of uniform intrinsic value throughout the Union.[4]

The phrase “fix the standard” empowers Congress itself to define the basic units of “Weights and Measures”; whereas the phrase “regulate the Value” empowers Congress only to apply the basic unit of “Value”, which the Constitution elsewhere explicitly identifies as the “dollar[ ]”, a known historically fixed weight of silver beyond Congress’s power to change.[5] Moreover, whereas the verb “fix” as applied to “Weights and Measures” implies “stability and confirmation”,[6] the verb “regulate” as applies to coinage implies continuous adjustment. Here, then, is striking example of the Framers’ linguistic precision, in one phrase selecting the verb that connotes the establishment of permanent “Standard[s]”, without which a system of “Weights and Measures” could not serve its purpose; and in the other choosing the synonym that implies a process of continuous intercomparisons among different forms of coinage, according to a set “Money-Unit”, without which a monetary system consisting of both silver and gold coins could not achieve its end.

Footnotes:

1.) The association was common in English common-law monetary practice. E.g., An Act for regulating and ascertaining the Weights to be made use of in weighing the Gold and Silver Coin of this Kingdom, 1774, 14 Geo. III, ch.92.

2.) See L. Von Mises, Human Action: A Treatise on Economics (3d rev. ed. 1963), at 408-14.

3.) See The Federalist No. 42.

4.) See 2 J. Story, Commentaries on the Constitution of the United States (5th ed. 1891), § 1118, at 58.

5.) 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, at 134-41, 191-99. The Constitution refers to no specific “Standard of Weights and Measures”. At the time of the Constitution’s ratification, though, the English system had long been in use in America. Arguably, then, Congress’s power in Article I, Section 8, Clause 5 might extend to only determining, with scientific accuracy, what a “pound”, a “foot”, and a “quart” traditionally were, and “fixi[ng] th[os]e Standards]” thereafter on the basis of that determination. Arguably, too, Congress’s power might allow for the adoption of some non-English standard (such as the metric system), or the creation of an altogether new standard. However, once Congress had “fix[ed] the Standard”, it could not thereafter alter the units of that standard within the same system of measurement. For example, Congress could not define the “pound” as (say) X cubic inches of lead, and later on for political reasons redefine the same “pound” as X/2 cubic inches, with the intent to cause creditors to lose 50% of their debts denominated in “pounds”. The very terminology “fix[ing] the Standard”, after all, implies the opposite of fraudulently permuting it.

6.) Cochnower v. United States, 248 U.S. 405, 408 (1919). 1 S. Johnson, A Dictionary of the English Language (1755), defined the verb “fix” to mean “[t]o settle; to establish invariably”.

In sum, the Framers understood the constitutional “Value” of “Money” not as some plastic notion of “worth” subject to the vagaries of ever-changing political policies  and officeholders’ edicts, but rather as a concrete substance identical, in Blackstone’s phrase, with “the weight and standard (wherein consists the intrinsic value)” of an actual coin.[1] And Congress so interpreted the Constitution in every monetary statute enacted from that document’s ratification until the 1930s—never attempting arbitrarily to set the “Value[s]” of silver and gold coins, but instead trying in good faith to establish the relative “Value[s]” of the metals in its coinage at their exchange ratio in the free market.[2]

Importantly, Article I, Section 8, Clause 5 also empowers Congress “To * * * regulate the Value * * *  of foreign Coin”.[3] The purpose of this provision is not simply “regulat[ion], but actual monetization: that is, incorporation of properly “regulate[d]” foreign silver and gold coins within the monetary system of the United States.[4] The three words “of foreign Coin” thus empower Congress, at a stroke of a pen, to internationalize America’s “Money” with the silver and gold coin of the entire world.

Footnotes:

1.) 1 W. Blackstone, Commentaries on the Laws of England (Amer. ed., 4 vols. & App., 1771-1773) at 276.

2.) Compare 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, at 199-205, with L. Von Mises, The Theory of Money and Credit (1971 reprint, H Baston transl., new ed., 1952), at 197-98. In the late 1800s, Congress attempted to maintain proper exchange ratios between its silver and gold coinage by holding the intrinsic “Value[s]” of the coins fixed, but buying silver at $1.2929+ per ounce, in order to drive up its exchange value in the free market relative to the statutory “gold dollar” of 1873 and then 1900. See idem, Pieces of Eight, at 472-505, 507-25.

3.) Emphasis supplied.

4.) For statutory examples of this, see idem, Pieces of Eight, at 199-205.

1.) 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, at 134-41, 191-99. The Constitution refers to no specific “Standard of Weights and Measures”. At the time of the Constitution’s ratification, though, the English system had long been in use in America. Arguably, then, Congress’s power in Article I, Section 8, Clause 5 might extend to only determining, with scientific accuracy, what a “pound”, a “foot”, and a “quart” traditionally were, and “fixi[ng] th[os]e Standards]” thereafter on the basis of that determination. Arguably, too, Congress’s power might allow for the adoption of some non-English standard (such as the metric system), or the creation of an altogether new standard. However, once Congress had “fix[ed] the Standard”, it could not thereafter alter the units of that standard within the same system of measurement. For example, Congress could not define the “pound” as (say) X cubic inches of lead, and later on for political reasons redefine the same “pound” as X/2 cubic inches, with the intent to cause creditors to lose 50% of their debts denominated in “pounds”. The very terminology “fix[ing] the Standard”, after all, implies the opposite of fraudulently permuting it.

2.) Arts. Of Confed’n art. IX: “The United States in congress assembled shall * * * 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 standard of weights and measures throughout the United States * * * .”

     The records of the Committee of Detail contain two versions of the power: viz., “S. & H.D. in C. ass. Shall have the exclusive Right of coining Money—regulating its Alloy & Value—fixing the Standard of Weights & Measures throughout the U.S.”; and “to coin Money”; too regulate the [Alloy and] Value of foreign Coin; too fix the standard of Weights and Measured”. 2 Records of the Federal Convention of 1787 (M. Farrand ed. 1966), at 136, 167 (words in brackets crossed out in original version). The Reports of the Committee of Detail and the Committee of Style and Arrangement both contain the language: “To coin money; To regulate the value of foreign coin; To fix the standard of weights and measures”. Id. at 182, 569. The final Report on the Committee of Style adopted the constitutional text. Id. at 595.

3.) This, of course, reflected the conjunction in English common law, which located both powers within the King’s prerogative. See 1 W. Blackstone, Commentaries on the Laws of England (Amer. ed., vols. & App., 1771-1773) at 274-78.

4.) See Scott v. Sanford, 60 U.S. (19 How.) 393, 440 (1857).

5.) See, e.g., Fisher, “The Tabular Standard in Massachusetts History” 27 Quart J. Econ 417 (1913). Massachusetts was not the only Colony or State with such experience. See Id. at 422 n. 1, 438-39 & n. 2. See also E. Hargreaves, Restoring Currency Standards (1926), at 1-25.

6.) Compare Fisher, “The Tabular Standard” ante note 535 at 423-24, with L. von Mises, The Theory of Money and Credit (1971 reprint, H Baston transl., new ed., 1952), at 187-94; and with Human Action: A Treatise on Economics (3d rev. Ed. 1963), at 219-23.

7.) Id., at 1, 141-155.

8.) Id., at 1, 94-96, 104-12.

9. ) See 2 S. Johnson, A Dictionary of the English Language (1755).

10.) See 2 Oxford English Dictionary (compact ed. 1971), at 2473; Black’s Law Dictionary (4th rev. ed. 1968), at 1451.

11.) State ex rel. Hollywood Jockey Club v. Stein, 133 Fla. 530, 543, 182 So. 863, 868 (1938). Accord, e.g., Jeschor v. Town of Guilford, 143 Conn. 152, 159, 120 A. 2d 419, 422 (1956); Cole v. Village of Highland Park, 173 Mich. 201, 216, 139 N.W. 69, 74 (1912).

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