Tuesday, January 17, 2012
U.S. Constitution: Federal Government's Role Regarding Coining Money, Weights and Measures
By Douglas V. Gibbs
Article I, Section 8, Clause 5 establishes that the duty of coining money belonged to Congress. Note that the Constitution called for coining money, rather than printing federal reserve notes (bills of credit). The coins produced by Congress were expected to be made of metals that reflected the worth of the coins. In other words, the gold in a coin, if taken to a goldsmith, would be worth the same as the value of the coin. Later, the banks realized they could loan on the gold in their vaults backing the currency, leaving less gold as a reserve. They did this by issuing receipts, or bills of credit. When this happened, if there was a bank run, where everyone brought their receipts in to cash it in for gold all at once, the bank would be left in a situation where they did not have enough gold to cover all of the notes.
If one goes back to the Articles of Confederation, it is important to note that under the confederation, there had been no power given to the central government to regulate the value of foreign coin, an omission, which in a great measure would destroy any uniformity in the value of the current coin, since the respective states might, by different regulations, create a different value in each. As a result, the States were prohibited in Article I, Section 10 from coining their own money, thus taking away their ability to manipulate the value of currency as a means of effecting the economies of the other states.
The authority to coin money was given specifically to Congress so that no outside interest could manipulate the value of American money. This included private banks. Nonetheless, we have seen three nationalized banks run by private bankers in the United States issuing the currency. The third is the currently existing Federal Reserve Bank.
Thomas Jefferson was against national banks. Alexander Hamilton created the “Bank of the United States” in 1791 for the purpose of acting as a depository of government funds, issuing paper currency backed by gold and silver, and creating a system of mercantilism in America. The bank’s charter lapsed in 1811. The Second Bank of the United States was formed in 1817, and lasted until President Andrew Jackson vetoed the renewal of its charter in 1836. The bank existed for 5 more years as an ordinary bank before going bankrupt in 1841. In a letter to John Taylor in 1816, Thomas Jefferson wrote, “I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
Article I, Section 8, Clause 5 also establishes that Congress shall have the power to fix the Standard of Weights and Measures. Fixing a standard of weights and measures was important for the reason of uniformity, and the ease of commerce. This clause suggests that before the Constitutional Convention the States were able to independently fix their own weights and measures, which not only added confusion to commerce, but enabled the States of use unsavory trading tactics against each other.
Article 1, Section 8, Clause 6 establishes that the U.S. Congress will provide for the punishment of counterfeiting the securities and current coin of the United States. This power would naturally flow, as an incident, from the antecedent powers to borrow money, and regulate the coinage. Indeed, without the ability to provide for the punishment of counterfeiting, the powers of coining money or creating securities would be without any adequate sanction. The word “securities,” in this clause, means: a contract that can be assigned a value so that it may be traded, like a “bond.”
-- Political Pistachio Conservative News and Commentary
Posted by Douglas V. Gibbs at 12:52 PM