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The U.S. Constitution and Money 1789-1860

The U.S. Constitution and Money 1789-1860

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Published by michael s rozeff
I summarize pp. 179-259 of Edwin Vieira's Pieces of Eight. This covers evidence during the years 1789-1860 of the monetary powers and disabilities of the U.S. Constitution. The evidence comes mainly from the various coinage acts and Treasury note issues, accompanied by reports, debates, and Supreme Court cases. The original meanings of the Constitution respecting money largely were sustained until 1860. The article focuses on the regulation of coin value by Congress, showing it to be entirely correct and proper, as opposed to the erroneous Supreme Court pronouncements that occur in important cases like Knox v. Lee (1870).
I summarize pp. 179-259 of Edwin Vieira's Pieces of Eight. This covers evidence during the years 1789-1860 of the monetary powers and disabilities of the U.S. Constitution. The evidence comes mainly from the various coinage acts and Treasury note issues, accompanied by reports, debates, and Supreme Court cases. The original meanings of the Constitution respecting money largely were sustained until 1860. The article focuses on the regulation of coin value by Congress, showing it to be entirely correct and proper, as opposed to the erroneous Supreme Court pronouncements that occur in important cases like Knox v. Lee (1870).

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Published by: michael s rozeff on Mar 23, 2010
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07/27/2013

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It can be downloaded only by joining scribd, which is a painless and harmless procedure,
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and one which then allows access to millions of documents that can be downloaded. Membership produces no junk e-mails or other invasions that I know of.There are students of the Constitution alive and well in today’s law schools that are
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 proposing and publishing in major law journals doctrines of what the Constitution allows thatdiametrically oppose Vieira’s work. For example, see Natelson’s articleon paper money andcoinage. He advances the unbelievable claim that “ascribing a purely metallic meaning to ‘coin’creates serious textual difficulties.”
The U.S. Constitution and Money: 1789-1860
 by Michael S. Rozeff 
Introduction
This article continues to summarize Edwin Vieira, Jr.’s major work,
 Pieces of Eight The Monetary Powers and Disabilities of the U.S. Constitution.
Part 1 of the summary can be foundand read inmy scribd archive. A direct link is
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here. This article covers pp.179-259 of the book,which is part of the material he provides on the years 1789-1860. All page references shown in parentheses are to Vieira’s book.This article, somewhat more than Part 1, freely translates, summarizes, and augments Vieira’swork as opposed to outlining it rigidly. In order to clarify and support the exposition, Iincorporate a certain amount of integrative and explanatory material, while making every effortto be faithful to the substance of Vieira’s work. Certainly most of what appears is extracted inone way or another from the pages of 
 Pieces of Eight.
In pp. 1-177 of his 1,722 page book, Vieira makes a detailed case that the Constitution allowsonly a hard money (specie, silver, gold) system and disallows government issues of paper moneyat either the state or federal levels. The strength of his case is that it logically integrates andmakes understandable a wide variety of evidence by showing the consistency of each piece of evidence with other pieces and with the provisions in the Constitution, the latter necessarily being terse but powerful statements.Vieira doesn’t let the matter rest at the year 1789, because for such a critical issue as the nation’smonetary system, it is important (p. 181) “to eradicate any even colorable dispute or doubt as tothe meaning of these constitutional provisions.” The evidence that Vieira brings to bear for the
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years 1789-1860 is critical in bolstering and confirming the hard money case and rebutting themodern misinterpretations that aim to justify a system of state money, state paper money,irredeemable money, and state power that finds no support in the original meaning of the U.S.Constitution.The areas addressed in this article are the Coinage Acts of the 1790s and mid-1800s and thegovernment’s issues of Treasury Notes. I do not cover the incorporation of the First and Second
 
Banks of the United States and certain Supreme Court decision that focused on the emission of  bills of credit by states. 
Hamilton’s Report in 1791
Alexander Hamilton, Secretary of the Treasury, provided Congress, at its request, on January 28,1791 with a
It is also known as
 Report on the Establishment of a Mint.
Congress used this as a basis for theCoinage Act of 1792, accepting some and rejectingother recommendations.The first important aspect of the report from the perspective of understanding the constitutionalmeaning of money is that it presumes and thus sustains, affirms, and exemplifies five of the main principles of money that are embodied in the Constitution:(i) that money is silver and gold,(ii) that the dollar is the money-unit of the U.S.,(iii) that the dollar is to be defined by metal content by weight,(iv) that the government will coin silver and gold money, and(v) that the Congress will regulate coin value.The second important aspect is that Hamilton’s presumptions continue those not only in theConstitution but those preceding the Constitution in the Continental Congress and inBlackstone’s treatment of the common law. And third, Hamilton’s position as a Framer,Founding Father, and first Secretary of the Treasury adds considerable weight to his treatment of money and its constitutional meaning.Hamilton nowhere questions any of these five underlying ideas, nowhere denies them, andnowhere proposes or even hints at paper money. The entire discussion revolves around the fine points of implementing the hard money system. Hamilton had his own ideas and preferences onthat score. Hamilton settled upon a dual coinage of both a silver and gold dollar in a ratio near 15-1, and if one were to be chosen, he preferred gold. Congress later chose only a single dollar standard and made it silver; yet by mandating a 15-1 ratio to gold, it effectively attempted to place a dual standard into operation.Hamilton refers to the Spanish milled silver dollar as the standard indirectly when he writes of “the dollar originally contemplated in the money transactions of this country, by successivediminutions of its weight and fineness,” and when he concludes that “the actual dollar incommon circulation has evidently a much better claim [than the ancient dollar] to be regarded asthe money unit,” since those actual dollars were the Spanish milled dollars. Also the latter appears obliquely when he writes of a dollar with 368 to 374 grains of fine silver “...that the sum in the money of account of each State, corresponding with the nominalvalue of the dollar in such State, corresponds also with 24 grains and 6/8 of a grain of finegold, and with something between 368 and 374 grains of fine silver,”
 
and again clearly when he reviews a prior Congressional resolution:“The suggestions and proceedings, hitherto, have had for object, the annexing of itemphatically to the silver dollar. A resolution of Congress, of the 6th of July, 1785,declares that the money unit of the United States shall be a dollar; and another resolutionof the 8th of August, 1786, fixes that dollar at 375 grains and 64 hundredths of a grain of fine silver.”And again in several other places:“The denominations of the silver coins contained in the resolution of the 8th of August,1786, are conceived to be significant and proper. The dollar is recommended by itscorrespondency with the present coin of that name [the Spanish dollar] for which it isdesigned to be a substitute, which will facilitate its ready adoption as such, in the mindsof the citizens.”“As it is of consequence to fortify the idea of the identity of the dollar, it may be best tolet the form and size of the new one, as far as the quantity of matter (the alloy being less) permits, agree with the form and size of the present. The diameter may be the same.”The “present coin of that name” is the Spanish milled dollar. Hence, Hamilton continues theidentification of the constitutional dollar as a coin whose value in silver grains will match theextant circulating Spanish milled dollar. His report explicitly rejects the pound as a standard.One of the misfortunes of history is that although Hamilton in a limited way recognized the bestcourse of regulating the value of coins of different metals, which was a floating price of onemetal against the other’s fixed standard weight, he didn’t promote this idea and Congress didn’tlegislate it:“There can hardly be a better rule, in any country, for the legal, than the market proportion, if this can be supposed to have been produced by the free and steady course of commercial principles. The presumption, in such case, is, that each metal finds its truelevel, according to its intrinsic utility in the general system of money operations.”The market exchange ratio could have been attained by fixing one metal as standard and lettingthe other float. The legal ratio would then be defined in a contract as the ratio of the standard tothe price of the other metal on a specified date or dates.At the time, this kind of thinking was simply not on the table. Furthermore, Hamilton’s thinkingwas conditioned by his belief, which he cites, that the ratio of silver to gold had remained stableat near 15-1 for the prior 75 years.Hamilton’s report is notable in stating that it is “inadmissible” to defray mint expenses by a“reduction of the quantity of fine gold and silver in the coins.” This degradation (or debasement)is “disapproved” and “condemned” strongly. He goes into the negative effects of the resulting

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