The US Constitution and Modern Money

Everyone says love makes the world go around, but I'm here to tell you, it takes money to go around the world. At one time money was worth something, but those days are long gone, now on a given day the value of your money is manipulated on the world stage in ways that would have shocked and, confounded the Founding Fathers of this great country. Your money can be manipulated by traders in futures,
foreign countries manipulating the value of their own money, and by our own central bank, The Federal Reserve. This is not the way in which to build a stable financial future for individuals or for a nation.


On June 21, 1788, 39 of the 55 delegates at the Philadelphia Convention ratified the Constitution of the United States of America, and formed the former British Colonies in North America into a nation of their own. In my humble opinion, there has been no finer act in the history of man, or no finer document written in the history of the world.

The US Constitution covers everything about the Federal Government, and the way the country is supposed to run, from the punishment for the crime of treason, to the number of Representatives and Senators from each state, states powers, and even the way in which money is to be made, (I'll tell you a secret... It was to be coined, not printed as it is today), as well as the powers vested in each of the three branches of government. But for the sake of this article, I'd like to discuss the way in which our money was to be dealt with.

The Founding Fathers of the United States had all seen the horrors of what could happen to printed money based on gold, first hand, from the way counterfeiters had almost ruined the British Pound in the colonies, and were absolutely dead set against the obscene idea of founding a new country, and using paper money as the monetary system, going to great pains to write in the Constitution exactly how the treasury was to deal with currency.

Article 1, section 8, paragraphs 5 and 6 tell us: 5) To coin money, regulate the value thereof, and of foreign coin, and for the standard of weights and measures; 6) To provide for the punishment of counterfeiting the securities and current coin of the United States. Nowhere in these two paragraphs is the word printed mentioned even one time, though they certainly had paper, ink, and printing presses at the time. I did see however money was to be coined, the Treasury was to set it's value, here and against world currencies, and would regulate the system of weights and measures used to make this possible. The constitution even tells us what the coins were to be made of a little further in the document.

Article 1, section 10, paragraph 1 states: No state shall enter into any treaty or alliance or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payments of debts; pass any bill of attainder, ex-post facto law, a law impairing the obligation of contracts, or grant any title of nobility. The Constitution is pretty clear on money, it is to be coined from gold and silver, and nothing else.

So what happened from the day the Constitution was ratified in 1788 until now, that we are using a highly unconstitutional and even from the founders view, very abhorrent form of money in this country? Walk with me down the path of history, and the answers will be revealed along the way.

In 1861 the states in the south wrote a proclamation in which they seceded from the Union, and plunged the country into a violent civil, (ever wonder what was civil about it?), war. By 1862 families were torn apart over ideology, and family members were meeting up, and fighting to the death on the field of battle. As a result of the absolute horror that was happening in this country, people were hoarding their coins, and prices on goods was on a roller coaster ride from hell.

The Congress, noticing the absence of coins in the Treasury, took the unconstitutional measure of ordering the printing of demand notes printed as a form of currency, to help pay for the war, and to make up for the shortfall of currency in circulation. Of course this experiment turned out to be an utter failure, and when people tried to redeem the little scraps of paper they'd been assured were as good as coins, it was found the Treasury didn't have the coins to back up the amount of money they'd printed.

After the war, the Treasury again came up with idea of printing money and in 1877 began printing up Gold and Silver Notes, (and of course people had forgotten the earlier paper fiasco), that people could exchange for gold and silver with relative ease. The gold and silver was kept in a secure location, and of course these notes became legal tender for all debts, public and private, (money), trashing those sections in Article 1 of the Constitution that deal with coins, once and for all.

This new form of money was backed with actual gold and silver this time, and did exactly as promised, it remained relatively stable over the years, with the value inflating and deflating in normal cycles, but always returning to it's normal position in the economy, until the Federal Reserve was created in 1913, and one way inflation was inserted into the system.

April 5, 1933 a date which will live in infamy. The United States of America was suddenly and deliberately attacked by the executive order of President Franklin Roosevelt. Roosevelt initiated executive order 6102 on that day, which in the wake of the order, and subsequent events, was a direct assault on the American people.

Executive Order 6102, ordered the seizure of all gold in America, (old gold coins excepted), the seized gold being "bought" at the then current rate of $20.67 an ounce. This move enraged the public, but failure to exchange gold was a felony, punishable by a $10,000 fine, and ten years in prison. Of course this abuse of power was protected under the 5th Amendment of the US Constitution, (don't you love how politicians can use the ultimate document of freedom in the world, as an instrument of tyranny?), which states: No person shall be held to answer for a capitol, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in time of actual service in a time of war or public danger; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty or property without due process of law; nor shall private property be taken for public use, without just compensation.

Not long after the "Great Gold Snatch of '33" as i call it, the government announced it was trading its ill gotten gold  with foreign countries in a closed system for $35.00 an ounce, further enraging the depression ravaged people of this country, and showing them they were only pawns in FDR's economic games, which did nothing to get the United States out of the Great Depression. It is my opinion that all  FDR's policies were simply wars on the American public.

The government printed $200 billion dollars it didn't have gold for in 1971, and threw us, and the rest of the world off the Breton Woods monetary system, and into a Fiat type system. Under the Fiat system, money is printed without any form of backing, and is thrown into the international market, where it moves up and down against other currencies in the market, based on it's perceived value within that market.

A major problem with this type of system is one we are seeing with China right now, a foreign country can manipulate the value of our money by either printing more of their own, hoarding our currency, or both. These maneuvers make their currency weaker than ours, which entices our consumers to buy their products, making the other country a net exporter, and our country a net importer, which of course accounts for the huge losses we are seeing in the manufacturing sector, in both the case of jobs and revenues.

China has effectively kept the Yuan undervalued against the Dollar since joining the WTO in 2001, and have enjoyed ever expanding trade surpluses with the US, which means ever expanding trade deficits for us. This would not have been possible under the Breton Woods system, as all currency in Breton Woods was pegged to the US Dollar, and the US dollar was pegged at 1/35th of an ounce of gold, making for stable currencies within the system. Breton Woods was by far the better of the two systems we have seen in the last 78 years.

The Mises Institute at mises.org suggests the world get back on the Breton Woods system for stable currencies world wide, and their cause is championed by my favorite politician, Dr. Ron Paul of the US House of Representatives. To get back on the Gold Standard Dr. Paul is proposing two forms of US currency, a gold backed Dollar, and a Fiat Dollar, and giving people the option to opt out of the Fiat system, until eventually the United States as a nation is back on a commodity backed currency, not quite what the Constitution demands, but a step in the right direction. I personally love the idea of a commodity backed currency, but I have a few reservations as to the logistics of getting back on this type of system, and how to keep politicians from pulling maneuvers like the Nixon Shock in 1971.

The first reservation I have, is there is simply not enough gold and silver in the world, for the US, and all of our trading partners to be able to buy into the system, with all the money that is in circulation around the world, so gold along with new commodities would have to be used as backing for the various commodities. This new commodity or commodities would have to be both valuable enough, and abundant enough to fill the needs of countries world wide.

Another concern I have, is if the United States is the only country to go on a commodity backed system, what is to keep other countries from simply buying up that commodity to raise the value of it, and our Dollar, effectively doing to our money, what China is doing right now? Or worse, what is to stop another country from dumping huge amounts of the commodity used as backing for our Dollar into the world markets, and forcing our dollar to become worthless? Our country being the only country with a backed currency would create a Dollar that is quite a bit more volatile and unstable than it is right now.

My final concern would be how the government would go about obtaining the commodity for the new currency, Would it be through measures like executive order 6102, or would the government print up more Fiat money to pay for the commodity to be used, causing hyperinflation in the current system? I just don't see how this can be done without first completely crashing the system we already have in place, but then I am neither an economist like the good people at the Mises institute, nor am I a brilliant politician like Dr. Paul, I am simple a carpenter who has only spent a few days considering the issue, while they have spent years on it, if it can be done I am sure there is a solution.

The Founding Fathers set up a great monetary system in the Constitution but thanks to Lincoln during the Civil War, Gold and Silver Notes in 1877, and the Nixon Shock in 1971, I am afraid there is no way for us as a country to get back to the protections the Constitution gave our money. What we as a country must do is speak out whenever politicians propose a move that strikes at the very heart of the US Constitution, instead of standing idling by and doing nothing while our country is being abused from within. We need to let our politicians know that they work for the government, and are only temporary employees by voting them out of office when they propose an unconstitutional measure, which will let them know their actions are not to be tolerated. Only then can we be free as a people.
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