[discostu]

One slight correction, the mentioned section of the Constitution (1-10-1) doesn't prevent the states from issuing paper money, it prevents them from issuing any kind of money including precious metal coins. They're allowed to use gold or silver coin to pay debts and nothing else, but they're not allowed to issue anything.

One of my big arguements with the gold bugs is that cash itself is becoming a thing of the past. With the vast majority of transactions being forms not created by the US Mint (credit cards, checks, electronic transfers) the concept of what a printed dollar "represents" is frankly immaterial. And any "constraints" put on the physical money supply by tieing it to a commodity are meaningless.

[justshutupandtakeit]

Of course these prohibitions didn't stop States from chartering private banks which then issued their own money. It was allegedly convertible into gold but only in theory. Some banks had reserve ratios of more that 100-1. Any time a run would start the banks just folded.

Part of the genius of Hamilton's program was that it immediately gave the U.S. a supply of capital it did not have prior to the passage of the financial acts. U.S. debt then became as good as gold and created a money supply acceptable to the entire world.