One Constitutional argument that doesn’t seem to jive

August 23, 2007 at 2:50 pm 2 comments

I’ve seen this before – the Mogambo Guru, for one, has been known to claim it as a valid and founding prohibition on the U.S. government’s use of fiat currency. And today, Mike “Mish” Shedlock is saying it as well:

Now consider [the U.S.] Constitution, Article I, Section 10, Clause 1. No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

Well, yes, that’s what the Constitution says. “No State” shall make anything but precious metals into real money.

Remember, the Constitution created a federal government made up of the various States and binding them into a Union. Remember also that in Revolutionary and Articles of Confederation days, the various States were acting as traditional states do, as sovereign nations with their own militias, navies, and currencies.

This last made travel and commerce challenging and often confusing. So the Constitution settled things by prohibiting the States from putting out their own money anymore. (There’s apparently rather a debate historically and economically over how pleased the various States were at this, and whether or not it was forced down their throats. But that’s not relevant to this post.)

Anyway, I wonder why the Mogambos and Mishes don’t read the words of Article I, Section 10 more literally. This is one instance in which the feds spelled it out clearly right from the first. The States aren’t allowed to make “any Thing but gold and silver” legal tender. But there’s nothing I know of saying that the Congress and the federal government can’t do so.

And they know it well, and they’ve been doing it in spades. For years.

The only good thing about this is that it leaves more gold and silver for the rest of us – who know enough history to appreciate this excellent reminder from Mish, also in the post linked above:

All fiat currencies eventually go to zero, the only difference is the speed at which purchasing power declines. Gold has never gone to zero and never will either.


Entry filed under: Big Picture, Free Your Mind, Money & Economy.

Prickly thorns and dried-up old ladies I got quoted on Wikipedia!!!

2 Comments Add your own

  • 1. Brian Nickerson  |  August 23, 2007 at 7:20 pm

    I agree. It was one argument that just didn’t cut it. I remember the specific passages to which these various writers did refer, and none of it worked very well as legal argument. Hell, what did the constitution even matter anyways? Neither the feds nor the anarchists consider it valid; for the former it is inconvenient and so ignored, for the latter it is not a valid contract and so avoided where possible.

  • 2. velojym  |  September 10, 2007 at 12:32 am

    It seems pretty simple, as value in a commodity… even a form of currency, has a lot to do with scarcity. Heck, the Spanish expeditions to Central America in the 16th century brought home a lot of gold… yes. It also jacked up the European economy at the same time, and even caused Spain a lot of trouble.
    When the English and French settled farther north, they accepted that value could be created, and that both parties in an exchange can, in fact, profit.
    Of course, many of the latter group did some nasty stuff, and the biological exchange killed off a huge number of natives… but the Spanish were just assholes.


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