Posted on 08/21/2007 11:34:38 AM PDT by BGHater
I am relieved to hear Ron Paul talk about COMMODITY based money instead of money based on gold alone. Still, we need real money backed by something with intrinsic value. I was disturbed to read at least one poster considered our present fiat currency as a “commodity”. It has no intrinsic value and therefore cannot be a commodity. It is crystal clear that our government is going to wind up hyper-inflating their way out of their obligations, and this is going to destroy the middle class.
I am glad Ron Paul is attempting to raise this issue, but disturbed to find that instead of debating the idea, the critics on FreeRepublic 1) resort to silly name calling or childish insults about flavored drinks, or 2) continue to point out such irrelevant facts as “there is not enough gold” when the idea on the table is COMMODITY based, not GOLD based alone. Presumably gold would just be one thing in a basket that would determine what a dollar was.
Except for you, skeptic. You made some points that were quite interesting.
L.Ron might be poor, but he’s not broke!
Perhaps you'd share the part of the Constitution where it requires gold and silver?
“He suggests that we should back our currency with a material that’s main source of value is that people think it is pretty.”
This is your idiotic statement. RP never said that.
A product which trades on a commodity exchange; this would also include foreign currencies and financial instruments and indexes.
Sounds like a commodity to me. And I hear you can even buy gold with it.
The Founders were well versed in the evils of paper money (recall the phrase "not worth a Continental").
Thanks for playing. LOL!
This is really very, very simple. Article I, Section 8 provides that Congress has the power:
To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;
Nowhere does the Constitution grant Congress the power to force people to take paper instead of money. The Founders knew what money was, and knew that “coining money” was not the same thing as issuing bank notes backed by nothing more than a promise to pay. The people who think that the Constitution granted the United States the inherent power to force people to take paper instead of money are close kin to those who believe the Second Amendment is a “collective right” only available to States.
Try and think a little bit here: why on earth would the Constitution expressly forbidstates from trying to force people to take their paper, yet somehow grant that power to the United States? How would you rule, if you were faithful to the Constitution, if the State of New Hampshire announced that state taxes could not be paid with Federal Reserve Notes, only gold and silver coin? How could you possibly invalidate that law?
If you want to understand the issue, start here:
http://www.lexrex.com/enlightened/bancroft/bancroftsplea.htm
The Free Republic started to go off track in 1873, when the Supreme Court held that Congress could require people to take paper backed by gold. People also used “gold clauses” in contracts, which were upheld by the Supreme Court against governments trying to pay debts with paper. But after 1933, the Supreme Court held that Congress could steal everyone’s gold, that gold clauses were void, and all Constitutional constraints on federal power were pretty much finished off. Thus the dollar today has lost 96% or more of its value, and we have lost the most fundamental check on the growth of government was lost (since governments can print paper, but not practice alchemy).
Thanks for playing.
Nowhere does the Constitution grant Congress the power to force people to take paper instead of money.
Congress has the power: To coin money, regulate the value thereof,
Try and think a little bit here: why on earth would the Constitution expressly forbidstates from trying to force people to take their paper, yet somehow grant that power to the United States?
Why would they forbid states from entering into treaties?
Article 2, Section 2. [The President]
He shall have power, by and with the advice and consent of the Senate, to make treaties, provided two thirds of the Senators present concur; . . .
There is thus an express grant of power in the Constitution to the United States, through the President, to make treaties. We cannot have the states making them at the same time.
Just as simply, we cannot have the gold and silver coin the only lawful money in the states, and irredeemable paper the lawful money in the United States.
This is really very, very simple. It is crystal clear from the “legislative history” of the Constitution that everyone involved intended to forbid the United States from falling into the well-known evils of paper money, and specifically removed that power from early drafts based upon the Articles of Confederation.
Since you evidently did not follow the link, I will post Professor Bancroft’s summary of that history here:
PART III. THE FEDERAL CONVENTION SHUTS AND BARS THE DOORS AGAINST PAPER MONEY. FROM 14TH MAY TO 17TH SEPTEMBER, 1787.
The convention of the states for the reform of the confederacy organized itself by electing as its president George Washington, who of all the public men in his day was the most decided in convictions and the most outspoken in his words on the inherent dishonesty of irredeemable paper bills.
Virginia took the lead, and Randolph, its governor, in his opening speech drew attention to paper money by reminding his hearers that the patriotic authors of the confederation did their work “in the infancy of the science of constitutions and of confederacies, when the havoc of paper money had not been foreseen.”
Among the delegates of Connecticut were Oliver Ellsworth, who in the federal congress had repeatedly served on committees for the reform of the federal constitution, and Roger Sherman, who in 1752 had published his conviction that good laws and paper money are irreconcilable. They agreed to insist in the convention “that the legislatures of the individual states ought not to possess a right to emit bills of credit for a currency, or in any manner to obstruct the recovery of debts, whereby the interests of foreigners, or the citizens of any other state, may be affected.”
The refusal of the convention to confer on the legislature of the United States the power to emit bills of credit or irredeemable paper money in any form is so complete that, according to all rules by which public documents are interpreted, it should not be treated as questionable; but as the truth in this case is of infinite importance, and has been questioned by those in authority, the wrong done to the constitution may justify a simple narrative of the facts, which ample and indisputable records establish, and which no power can alter.
The journal of the convention for framing the constitution was kept under the supervision of its members, and its authority is vouched for by Washington, not only as the presiding officer of the convention, but as president of the United States in a special message to congress.
By a clause in the ninth article of confederation of the United States of America, and only by that clause, the confederated states had authority “to emit bills on the credit of the United States.”
Of the legislature of the United States under our present constitution, the court insists that “congress is clearly authorized to emit bills of credit.” But is it so?
The eighth clause of the seventh article, in the first draft of the constitution, was as follows: “The legislature of the United States shall have the power to borrow money and emit bills on the credit of the United States.” The journal of the convention for August 16th makes this record: “It was moved and seconded to strike out the words ‘and emit bills,’ “and the motion to strike out these words “passed in the affirmative. Yeas: New Hampshire, Massachusetts, Connecticut, Pennsylvania, Delaware, Virginia, North Carolina, South Carolina, Georgia—9. Nays: New Jersey, Maryland—2.” So the convention, by a vote of more than four to one, refused to grant to the legislature of the United States the power “to emit bills on the credit of the United States.”
For the interpretation of this record, Madison, the best possible witness, has left this note: “Striking out the words cut off the pretext for a paper currency, and particularly for making the bills a tender either for public or private debts.”
Madison was the chief author of the new constitution. Its opponent, Luther Martin, the attorney-general of Maryland, a delegate to the federal convention and present at the debate, read to the Maryland house of delegates a paper, in which he gave his account of the purpose of the convention; his evidence agrees exactly with that of Madison, and for nearly a hundred years his fidelity as a witness was as little questioned as that of Madison. Here are two witnesses—Madison, who approved the prohibition, and Martin, who condemned it; the court pushes the testimony of Madison aside as if he had “not explained himself” sufficiently, though on the point in question his words are as clear as sunlight. The address of Martin the court rejects as a “philippic,” though it contains not a word of invective against any individual, and does contain the clearly-expressed wish of its author “not to wound the feelings of any person.”
We have a record of what was spoken and of what was done in the federal convention kept by Madison, who took upon himself the most solemn engagement to preserve the truth for the instruction of coming generations, and whose opportunity, capacity, and integrity no one questions. His report of what was said and done on the 16th of August in the federal convention preserves the testimony of many witnesses, taken down as it were by the most capable notary.
The question before the convention was: Shall power be granted to the legislature of the United States “to emit bills of credit?” The first witness is Gouverneur Morris, a man free from illusions; a delegate from the state which contained Philadelphia, then the most opulent city in the thirteen states; and as by his interests he was nearly connected with the city and state of New York, he thoroughly represented the interests of commerce. He moved to strike out the grant of power to “emit bills on the credit of the United States,” saying: “If the United States have credit, such bills will be unnecessary; if they have not, will be unjust and useless.” The seconder of Gouverneur Morris was Pierce Butler, a delegate from South Carolina, then the richest commercial state in the South. He remarked in the course of debate that “paper is a legal tender in no country in Europe,” and he was urgent to withhold from the government of the United States the power to make it so.
Madison interposed: “Will it not be sufficient to prohibit the making” the bills “a tender?” Gorham, in reply to Madison, held that no accompanying prohibition was sufficient to make it safe to grant to the legislature of the United States the power to emit bills of credit. He spoke absolutely “for striking the words out,” saying: “If the words stand, they may suggest and lead to the measure.”
The words of Oliver Ellsworth, our third chief justice, were: “This is a favorable moment to shut and bar the door against paper money. The mischiefs of the various experiments which have been made are now fresh in the public mind, and have excited the disgust of all the respectable part of America.”
Randolph expressed “his antipathy to paper money;” but “could not agree to strike out the words, as he could not foresee all the occasions that might arise.”
James Wilson, in concurrence with Ellsworth, said: “It will have a most salutary influence on the credit of the United States to remove the possibility of paper money. This expedient can never succeed whilst its mischiefs are remembered; and, as long as it can be resorted to, it will be a bar to other resources.”
George Reed spoke for Delaware: “The words, if not struck out, would be as alarming as the mark of the beast in Revelation.”
John Langdon, of New Hampshire, conforming to the wise instructions of the towns of his state, said: “I had rather reject the whole plan than retain the three words ‘and emit bills.’”
Madison, agreeing with the journal of the convention, records that the grant of power to emit bills of credit was refused by a majority of more than four to one. Eleven men took part in the discussion; and every one of the eleven, whether he spoke for or against the grant of the power, Gouverneur Morris, Pierce Buffer, James Madison, Nathaniel Gorham, George Mason, John F. Mercer, Oliver Ellsworth, Edmund Randolph, James Wilson, George Reed, and John Langdon, each and all, understood the vote to be a denial to the legislature of the United States of the power to emit paper money. Take the men, one by one, and see how weighty is the witness of each individual; take them together and add the consideration that they, every one of them, unanimously support each other and are contradicted by no one, and who shall dare question their testimony? The evidence is perfect; no power to emit paper money was granted to the legislature of the United States.
By refusing to the United States the power of issuing bills of credit, the victory over paper money was but half complete. The same James Wilson, who twelve days before with Oliver Ellsworth had taken a chief part in refusing to the United States the power to emit paper money, and the same Roger Sherman, who in 1752 had put forth all his energy to break up paper money in Connecticut, jointly took the lead. The first draft of the constitution had forbidden the states to emit bills of credit without the consent of the legislature of the United States; on the 28th of August they jointly offered this notion:
“No state shall coin money, nor emit bills of credit, nor make anything but gold and silver coin a tender in payment of debts,” making the prohibition absolute. Roger Sherman, animated by zeal for the welfare of the coming republic of countless millions, exclaims in the debate: “This is the favorable crisis for crushing paper money.” His word was the will of the convention, and the states, by a majority of eight and a half against one and a half-that is, by more than five to one—forbade the states, under any circumstances, to emit bills of credit. This is the way in which our constitution “shut and barred the door against paper money” and “crushed” it.
Nothing is wanting to the perfect strength of the truth, that the constitution put an end to paper money in all the United States and in all the several states; and yet a lawyer, who, but for his own refusal, would twelve years ago have become chief justice of the United States, in the line of succession from Ellsworth, further “finds in the legislative history of the country affirmative authority of the highest kind”: “No suggestion of the existence of a power to make paper a legal tender,” such are his words, “can be found in the legislative history of the country. Had such a power lurked in the constitution, as construed by those who ordained and administered it, we should find it so recorded. The occasion for referring to it has repeatedly arisen; and had such a power existed, it would have been recognised and acted on. It is hardly too much to say, therefore, that the uniform and universal judgment of statesmen, jurists, and lawyers has denied the constitutional right of congress to make paper a legal tender for debts to any extent whatever.”
Excellent. I guess they didn't want states all printing paper money to pay their debts.
It is crystal clear from the “legislative history” of the Constitution that everyone involved intended to forbid the United States from falling into the well-known evils of paper money
Then why did the Constitution only forbid states from paying with paper money?
They agreed to insist in the convention “that the legislatures of the individual states ought not to possess a right to emit bills of credit for a currency,
Sounds very familiar.
Thanks for proving my point, again.
I’ll try this one last time. The government of the United States is a government of limited powers, not inherent powers.
Example:
Article I, Section I:
Section 1. All legislative powers herein granted shall be vested in a Congress of the United States
Note that the words “herein granted” are to make it clear that Congress does not have plenary power.
Just to avoid any mistake, the Constitution was even amended immediately to clarify this point, and overcome objections that someday, people like you would misinterpret it:
Amendment X
The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.
Everyone involved knew what no one today seems to remember, that a national government of inherent and plenary authority is utterly incompatible with a Free Republic.
So when you ask “why did the Constitution only forbid states from paying with paper money”, you are asking a question that misinterprets the whole design of the Constitution. From their perspective, only the States could possibly have some power that needed to be forbidden; the new national government only had those powers which were expressly granted. And they had just struck down a proposal to grant such power, leaving Congress with only the authority to borrow money, and coin money. You cannot “coin” paper.
The States did have the power to issue paper money until they relinqished it by contract, so to speak, in the Constitution. But they never granted it to Congress, by ratification of the Constitution or otherwise.
I agree. Here's one of their limited powers, Congress has the power: To coin money, regulate the value thereof
I’ll try this one last time. The dollar (money) was originally set at 27 grains of gold. If the Congress has the power to regulate the value of money, they can change the dollar to 13.5 grains or 5 grains or even zero grains of gold per dollar.
Now unless you have another passage in the Constitution where it says they can't value the dollar at zero grains of gold, I suspect we're done here.
Sophistry. If the value is regulated down to zero grains of gold or silver, the coin is no longer the gold or silver money that was the only lawful tender. And how is the power to issue coins, even with zero grains of gold or silver, the same as the power to issue paper money? This is the sort of approach to interpreting the Constitution that liberals advocate.
On the chance that you actually wish to learn something about the “regulate the value thereof” Constitutional text, I reproduce an excerpt from Edwin Viera (http://www.fame.org/HTM/Vieira_Edwin_To_Regulate_the_Value_of_Money_EV-006.HTM; footnotes omitted):
What, then, does the power “To coin Money, regulate the Value thereof, and of foreign Coin” actually mean? First, it is important to pay attention to what the Constitution says in haec verba. The verb “regulate” refers explicitly to two things, and two things only: (i) the “Money” Congress “coin[s]” and (ii) “foreign Coin.” Thus, on its face, Article 1, Section 8, Clause 5 grants Congress a power that that body can constitutionally exercise on coinage, and on coinage only. Second, it is also important to pay attention to what the Constitution does not say. Nowhere in the Constitution does any power exist to “regulate the Value” of “currency,” “securities,” “bills,” “notes,” or anything other than coin.71 Thus, on its face, the entire Constitution makes clear that the power “To * * * regulate the Value” does not include some general, undefined power to declare what shall have “Value” as “Money,” or shall be “Money.”
In the late 1700s, “regulate” meant (as it does today) “[t]o adjust by rule or method” or “[t]o adjust, in respect of some standard.”72 “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.”73 For the most important example, in his Commentaries Blackstone outlined the English 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 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 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 * * * .74
Interestingly, Blackstone equated “the value for which the coin is to pass current” (i.e., at its full lawful face value) simply with its “denomination,” or mere name—thereby indicating that the process of “fix[ing] the value” of both domestic and foreign coins under English common law was a mechanical and objective comparison of the weight and fineness of precious metal in a particular “denomination” to the “the true standard” of that metal, rather than an attempt to give the coins some arbitrary value, or to manipulate the coins’ purchasing-powers according to some arbitrary policy.
Blackstone wrote of “fix[ing] the value” of coins; but he could just as easily have written “regulat[ing] the Value thereof,” the verbs “fix” and “regulate” being reasonably synonymous in this context.75 An early example of such usage appears in Queen Anne’s Proclamation of 1704, and the Parliamentary Act of 1707, wherein the Queen referred to “a Table of the Value of the several foreign Coins which usually pass in Payments in our said Plantations, according to their Weights, and the Assays made of them in our Mint, thereby showing the just Proportion which each Coin ought to bear to the other,” and then commanded that various foreign coins “stand regulated, according to their Weight and Fineness, according and in Proportion to the Rate before limited and set.”76
About seventy years later, the Continental Congress proceeded in the same manner. As noted above, the Articles of Confederation, under which the Continental Congress operated, contained a power similar to that in Article 1, Section 8, Clause 5 of the Constitution.77 In 1776, a committee of the Continental Congress “appointed to * * * ascertain the value of the several species of gold and silver coins current in these colonies, 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.”78 The similarity of this procedure to that in the English act of 1707—even to the use of the nouns “proportion,” “rate,” and “value,” and of the verb “ascertain”—is both striking and hardly accidental.
Later in 1776 (as noted above), another committee of the Continental Congress 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 the rules by which * * * the said common measure shall be applied to other coins * * * in order to estimate their comparative value.”79
Having stated the weight of the Spanish milled dollar, “as it comes from the mint, new and unworn” (that is, “current”), the committee then set out the rules for regulating the value of silver and gold coins: (i) “[A]ll * * * silver coins * * * ought to be estimated * * * according to the quantity of fine silver they contain.” And (ii) “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.”
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., the Continental Congress] ought to make a corresponding change in the rates at their treasury.” 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!).80
The Continental Congress’ conception of “fix[ing]” or “regulat[ing]” the value of coinage was widely understood among the public as well. For instance, Adam Smith noted how,
as people become gradually more familiar with the use of different metals in coin, and consequently better acquainted with the proportion between their respective values, it has in most countries * * * been found convenient to ascertain this proportion, and to declare by a public law, that a guinea (of gold), for example, of such a weight and fineness, should exchange for one and twenty shillings (of silver) or be a legal tender for a debt of that amount. In this state of things, and during the continuation of any one regulated proportion of this kind, the distinction between the metal which is the standard, and that which is not the standard, becomes little more than a nominal distinction.81
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: (i) comparing the amount of fine silver in particular silver coins to that contained in the “Money-Unit or common measure of other coins in these states” (the “dollar”), and declaring this proportion in “dollar”-values; or (ii) ascertaining the amount of fine gold in particular gold coins, calculating the market-equivalent of fine silver, comparing the latter amount to the “Money-Unit,” and declaring this proportion in “dollar”-values.
Thus, under the power “To coin Money,” Congress has discretion to set the weight, purity, form, and impression of all silver, gold, and copper coins it mints (excepting, of course, the intrinsic value of the “dollar” itself). Whereas, under the power “To * * * regulate the Value,” it has a duty accurately to determine the proportions of market value between the fixed “Money-Unit” and the coinage it, and foreign nations, mint.
Insofar as the proportions of market value 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 customarily prevailing in the market between gold and silver—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 make a corresponding change in the rates.”82
Today, with almost instantaneous transmission of sound market-data available, any rigid statutorily declared ratio of value between gold and silver is unreasonable, and therefore unconstitutional.83 Rather, in exercising the power “To * * * regulate * * * Value” under contemporary economic circumstances, the government should simply permit the value of domestic and foreign gold coinage to “float,” as against the silver “Money-Unit” (the dollar), from one market level to another, as changing exchange-rates become “sensible” in commerce.
The Framers’ consistent association of the power “To * regulate Value” with the power “To * * * fix the Standard of Weights and Measures,” then, was no mere caprice.84 Although the purchasing-power of money varies with economic conditions, and ultimately is beyond the government’s power to control,85 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 gave Congress the power “To * * * fix the Standard of Weights and Measures” in order to establish uniformity therein throughout the country,86 so, too, did it confer the power “To * * * regulate Value” in order (as much as possible in economic life) “to produce uniformity of value throughout the Union, and thus to preclude us from the embarrassments of a perpetually fluctuating and variable currency.”87 “[F]luctuating and variable,” that is, in terms of political phenomena impinging on the market.
Now, a “Standard of Weigh[t]” must itself be a weight and a “Standard of * * * Measur[e]” a measure. So, too to regulate * * * Value” implies the existence of a unit of “Value.” Here, the two phrases “fix the Standard” and regulate * * * Value” subtly diverge in shades of meaning, if not in ultimate intent: The phrase “fix the Standard” empowers Congress 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.88
Moreover, whereas the verb “fix” as applied to “Weights and Measures” implies “stability and confirmation,”89 the verb “regulate” as applied to coinage implies adjustment. Here, then, is another 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 connotes a process of inter-comparisons among changing forms of coinage, according to a set “Money-Unit,” without which a monetary system involving both gold and silver could not achieve its end.
In short, the Framers interpreted the constitutional “Value” of “Money” as something not subject to the vagaries of governmental edict—but rather, as Blackstone taught, as something identical with “the weight and standard (wherein consists the intrinsic value).”90
bump
You never showed anything that said the Feds had to pay in gold or silver.
Thus, on its face, Article 1, Section 8, Clause 5 grants Congress a power that that body can constitutionally exercise on coinage, and on coinage only.
So a dollar coin with zero gold is okay, but a dollar bill with zero gold is a no no? That's funny.
You never showed me anything that empowered the Feds to pay in paper promises. No grant of power, no power. You are missing the whole point, but do not seem stupid. Why do you have such a chip on your shoulder about the gold standard?
Of course it is not perfect; that is why Bryan preached crucifixion on a “cross of gold”. But even he did not advocate paper money; he wanted to release more silver coin (just like Father Coughlin, by the way). But we would be a lot closer to a Free Republic operating under gold and silver than operating under the Federal Reserve, and moving toward the Amero . . .
Congress has the power: To coin money, regulate the value thereof
You may not like the way they've regulated the value, but your feelings do not make their regulation unconstitutional.
Why do you have such a chip on your shoulder about the gold standard?
I enjoy taunting goldbugs.
Of course it is not perfect; that is why Bryan preached crucifixion on a “cross of gold”.
The gold standard didn't prevent inflation or deflation and didn't prevent booms or busts. Aside from that, it worked great.
and moving toward the Amero . . .
Stop it, you're killing me. LOL!
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