Article. I
Section. 10.
No State shall enter into any Treaty, Alliance, or Confederation;
grant Letters of Marque and Reprisal;
coin Money; emit Bills of Credit;
make any Thing but gold and silver Coin
a Tender in Payment of Debts;
pass any Bill of Attainder, ex post facto Law,
or Law impairing the Obligation of Contracts,
or grant any Title of Nobility.
Art. I Section 10 boils down to...
a) no state can coin money
b) no state can recognize anything other than gold or silver coin as legal tender
Basic reality:
Something or someone has to have the responsiblity and
authority to create money.
Art. I Section 8 grants this to Congress..
“To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;”
Congress has enacted legislation to manage the creation of money.
More money needs to be created as population the total value of all assets increases, so people and businesses can keep enough of their assets liquid (in the form of money, as in a checking account balance) to be able to conduct the transactions they need to. The money supply needs to be appropriate to allow the economy to function. Even if it were all gold coin, it would still be possible to create too much money - simply set the value of a 1 oz gold coin at $1 million as of today, and then overproduce the coins.
The idea of the supposedly so “terrible” fiat currency or paper money is to make it have a relatively cheap inherent value, as in, a piece of paper. The paper currency has no other use than money. As long as the paper does not become more valuable than it’s face value, there is no incentive to use it as a commodity, like writing paper, or fuel. Any metal, on the other hand, HAS INHERENT VALUE as it CAN BE USED FOR PURPOSES OTHER THAN MONEY. The metal is a commodity: steel, silver, nickel, copper, gold are all commodities. Once the value of the commodity in the piece of money becomes higher than the face value of the piece of money, people will melt down the currency and use the metal as metal instead of money. Therefore, it is much more difficult to manage the money supply, because you have to deal with the value of the metal commodity that the currency is made of as well as the money supply in managing the value of the money.