Chapter VI:
The Legal Aspect

Most unquestionably there is no legal tender and there can be no legal tender in this country, under the authority of this government or any other, but gold and silver, either the coinage of our mints or foreign coin at rates regulated by Congress. This is a constitutional principle perfectly plain and of the very highest importance. The States are prohibited from making anything but gold and silver a tender in payment of debts, and although no such express prohibition is applied to Congress, yet as Congress has no power granted to it in this respect but to coin money and regulate the value of foreign coin, it clearly has no power to substitute paper or anything else for coin as a tender in payment of debts and in discharge of contracts.

Daniel Webster21

The political revolutions of the 17th and 18th centuries were anti-aristocratic in nature, most especially so the American Revolution. In this tradition the U.S. Constitution was written to prohibit paper money.

It is a comment on the slavish mentality of our age that it cannot grasp this achievement of the 18th century. Americans today do not understand their Constitution. Indeed our present aristocracy could not exist if the Constitution were understood and respected.

This is a crucial point. Operating, as it does, through the power of the government, the banker aristocracy seeks for its dictums the authority of law. What they count on is the respect for law which inheres in most people. This is one of the ways in which 5% of the population can rule the other 95%. The 95% submit to exploitation because they believe it is the law.

Acts establishing paper money certainly appear to be law. They have been enacted by the Congress in accordance with the conventional procedure. People obey them as law. What you must consider at this point are the questions: What is law? Where does legitimate authority come from? To what do we morally owe obedience? And, are the legal tender enactments really law?

When the first attempt to make paper a lecal tender was made during the Civil War, the Supreme Court struck it down by a vote of five to three. (The court was then composed of eight members.) All three of the votes for constitutionality were appointees of President Lincoln, who had instituted the paper money. But even Lincoln's former Secretary of the Treasury, who had issued the paper money and was then Chief Justice of the Supreme Court, could not support the constitutionality of the legal tender acts.

The paper money advocates, however, were not to be stopped even by a Supreme Court ruling. One of the five judges who had opposed paper money resigned due to old age, and Congress increased the size of the court from eight to nine, thus giving President Grant two appointees. One of his appointees was a judge who, on a lower court, had ruled paper money constitutional. The other was a corporation lawyer closely associated with the railroad interests. The railroads, carrying large debt loads, were strongly in favor of paper money, and it was widely assumed that this lawyer would represent the interests of his former employers.

Although the court had already declared paper money unconstitutional, thenew majority moved to reconsider the issue, and in two cases grouped together under the heading: Legal Tender Cases (Knox v. Lee and Parker v. Davis, 12 Wall 457) it reversed its former ruling five to four with the two new appointees joining the minority of the previous decision to form the new majority. The N.Y. World commented: The decision provokes the indignant contempt of thinking men. It is generally regarded not as the solemn adjudication of an upright and impartial tribunal, but as a base compliance with executive instructions by creatures of the President placed upon the Bench to carry out his instructions.22

These historical circumstances present us with some sobering facts. The Republican administrations of Lincoln and Grant had a vested interest in legitimizing the paper money Lincoln had issued during the Civil War. They simply appointed enough Supreme Court justices until they got a ruling, in their favor. Of the justices who had been on the bench prior to the enactment of the legal tender acts not one thought them constitutional. It took six appointments to get five votes because Samuel Chase — a man noted for his integrity — refused to subordinate his conscience to the interests of his political party. Clearly no impartial sources believed legal tender acts to be legitimate law. We must now consider the question, from where does legitimate authority come?

There are two doctrines which have been offered to establish the legitimacy of acts of government: The doctrine of divine right of kings and the doctrine of the rights of man. The doctrine of divine right of kings says that God gives all power to the head of the government and that therefore the head of the government has the right to do what he likes with his subjects' lives, liberties and property. In this concept the government is all powerful. Obedience to the government is obedience to God. The common person has no rights whatsoever. Government is unlimited.

The doctrine of the rights of man says that man is born with unalienable rights. Government has no power to violate these rights. The only powers government has are the powers given it by the people.

Most countries in ancient history derived the authority of their government from the doctrine of divine right of kings. In many cases the king was held to actually be a god. America was the first country to be explicitly founded on the doctrine of the rights of man. As the Declaration of Independence states: We hold these truths to be self-evident — that all men are created equal; that they are endowed by their creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness. If people have unalienable rights, then the question arises: How does government get the power to boss them around, to tax them, to regulate them, to establish laws over them? This is the question of legitimate authority. To this question the Founding Fathers of America had an unequivocal answer: In the words of the Revolutionary writer James Wilson: the only reason why a free and independent man was bound by human laws was this — that he bound himself.23 In the words of John Adams: The body politic is formed by a voluntary association of individuals; it is a social compact by which the whole people covenants with each citizen and each citizen with the whole people.24 As the Declaration of Independence itself concluded: … That, to secure these rights, governments are instituted among men deriving their just powers from the consent of the governed; The phrase consent of the governed has sometimes been interpreted to mean consent of the majority of the governed. This was not intended by the Founding Fathers and has no basis in logic. If man has unalienable rights, then the majority can give away their own rights, but they cannot give away the rights of those who disagree with them. The statements of Wilson and Adams make this clear. Freedom of speech, for example, is guaranteed to everyone; even if the majority does not want someone to speak, they have no right to prevent him.

The requirement that government have the voluntary consent of each citizen raises an immediate practical problem. No political association could function if it needed unanimous agreement on every issue. The solution is for the citizens to create a social compact which gives certaingeneral powers to the government and to which the citizen gives his consent.

For example, the citizen may give the government the general power to tax. A citizen may object to a particular tax, but he cannot complain that his rights have been violated; he has given the power to tax in general knowing that he will not agree with each use of the power. If he feels that powers are being abused or not, being used wisely, he can withdraw his consent, give up his citizenship, and return to a state of nature.

Thus the Founding Fathers felt the need for a document which would be a social compact giving specific powers to a government and winning the consent of the citizens. Such a document was the U.S. Constitution. This is why America, operating under the doctrine of the rights of man, was the first country to have a constitution. A constitution resolves the problem of legitimate authority.

This point was made by an unknown patriot writing at the time of the Revolutionary War:

It is easy to perceive that individuals by agreeing to erect forms of government, (for the better security of themselves) must give up some part of their liberty for that purpose; and it is the particular business of a Constitution to mark out how much they shall give up. In this sense it is easy to see that the English have no Constitution, because they have given up everything; their legislative power being unlimited without either condition or control, except in the single instance of trial by Juries. No country can be called free which is governed by an absolute power; and it matters not whether it be an absolute royal power or an absolute legislative power, as the consequences will be the same to the people. That England is governed by the latter, no man can deny, there being, as is said before no Constitution in that country which says to the legislative powers, Thus far shalt thou go, and no farther. There is nothing to prevent them passing a law which shall exempt themselves from the payment of taxes, or which give the house of commons power to sit for life, or fill up the vacancies by appointing others, like the Corporation of Philadelphia. In short an act of parliament, to use a court phrase, can do any thing but make a man a woman.

A Constitution, when completed, resolves the two following questions: First, What shall the form of government be? And secondly, what shall be its power? And the last of these two is far more material than the first.25

There is a particular result of this which bears directly on the question of the legitimacy of legal tender. This is that the powers of our government are strictly limited to those given in the Constitution. When the government tries to act outside of these powers, it has no legitimate authority. This is the point Daniel Webster was making when he said: The people, sir, erected this government. They gave it a Constitution, and in that Constitution they have enumerated the powers which they have bestowed on it. They have made it a limited government. They have defined its authority.26

This being, the case, it should be easy to determine if the legal tender acts are legitimate law. We simply search the Constitution for a grant of such a power. And what do we find? The powers granted to Congress by the Constitution in relation to money are as follows (Art. 1, Sect. 8): To coin Money, regulate the Value thereof, and of foreign Coin, and to fix the Standard of Weights and Measures; … To provide for the Punishment of counterfeiting the Securities and current Coin of the United States … No legal tender power was given to the government in the Constitution. This is the meaning of Webster's words above: as Congress has no power granted to it in this respect but to coin money and regulate the value of foreign coins, it clearly has no power to substitute paper or anything else for coin as a tender in payment of debts and in discharge of contracts.27 The absence of the legal tender power was not an accident of omission. It was the result of strong feelings on the part of the Founding Fathers aboutpaper money. They made an important distinction between coining money-coining being an operation which referred only to metal and making paper into money by giving it a legal tender authority. The Constitution was written at a time when the depreciation of the continental (the paper money issued by the Continental Congress to fight the Revolutionary War) was fresh in everyone's mind, and while the Constitutional Convention was making its deliberations, there was a paper depreciation in Rhode Island (See Federalist #51). Here are some of the thoughts of the Founding Fathers on the subject:

… a rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the union, than a particular member of it;28

Your surmises relative to a revival of paper currency alarms me. It is impossible that any evil can render such an alternative eligible. It will revive the hopes of the enemy, increase the internal debility of the State, and awaken the clamors of all ranks throughout the United States against her. Much more to Virginia's honor would it be to rescind the taxes, although the consequences of that can but be of a most serious nature.29

Here the Legislatures should cooperate with Congress in providing that no money be received or paid at their treasuries, or by any of their officers, or any bank, but on actual weight; in making it criminal, in a high degree, to diminish their own coins, and, in some small degree, to offer them in payment when diminished.30

The Constitutional Convention was replete with references to paper money. Here is the general drift of the sentiment:

The great evils complained of were that the State Legislatures run into schemes of paper money &c, whenever solicited by the people, & sometimes without even the sanction of the people (record of June 7, 1787, notes of James Madison on the sentiment of the convention).

Give all power to the many, they will oppress the few. Give all power to the few they will oppress the many. Both therefore ought to have power, that each may defend itself agst. the other. To the want of this check we owe our paper money (June 18, 1787).

The check provided in the 2d. branch was not meant as a check on Legislative usurpations of power, but on the abuse of lawful powers, on the propensity in the 1st branch to legislate too much to run into projects of paper money & similar expedients (July 19, 1787; notes of James Madison on a speech by Governor Morris).

He admitted that inconveniences might spring from the secession of a small number: But he had also known good produced by apprehension of it. He had known a paper emission prevented by that cause in Virginia (August 10, 1787, notes of Madison on a speech by Colonel Mason).

He considered the emissions of paper money (& other kindred measures) as also aggressions (June 19, 1787, Madison is speaking on a plan of Mr. Paterson).

The rights of individuals are infringed by many of the state laws — such as issuing paper money, and instituting a mode to discharge debts differing from the form of the contract (June 19, 1787, notes of Yates on a speech by Madison).31

The first draft of the Constitution, as submitted by the committee, permitted states to issue paper money with the consent of Congress only. However, this was not good enough for the majority of delegates. Or as reported by one of the delegates, Mr. Sherman thought this a favorablecrisis for crushing, paper money.32 The prohibition against state-issued paper money was made absolute by a unanimous agreement. This prompted Luther Martin, an advocate of paper money and the abrogation of debts, to declare: As it was reported by the committee of detail, the States were only prohibited from emitting them without the consent of Congress; but the convention was so smitten with the paper money dread, that they insisted that the prohibition be absolute.33

Some of the state governments did have the power to issue paper money. Thus to prevent paper money from this source it was necessary for the Federal Constitution to explicitly prohibit the legal tender power to the states; whereas the same end was achieved with regard to the Federal Government merely by not granting any such power. The Constitution states: No State shall … coin Money, emit Bills of Credit; make any thing but gold and silver Coin a Tender in payment of Debts; (Art. I, Sect. 10).

Since the Constitution gives no legal tender power to the Federal Government, we may ask: What did the advocates of paper money use to justify their actions? How could they defend their position? The answer was given by Justice Strong:

And here it is to be observed it is not indispensable to the existence of any power claimed for the Federal government that ii can be found specified in the words of the Constitution or clearly and directly traceable to some one of the specified powers. Its existence may be deduced fairly from more than one of the substantive powers expressly defined or from them all combined. It is allowable to group together any number of them and infer from them all that the power claimed has been conferred….

And that important powers were understood by the people who adopted the Constitution to have been created by it, powers not enumerated, and not included incidentally in any one of those enumerated, is shown by the amendments. The first ten of these were suggested in the conventions of the States, and proposed at the first session of the first Congress, before any complaint wasmade of a disposition to assume doubtful powers. The preamble to the resolution submitting them for adoption recited that the conventions of a number of the States had, at the time of their adopting the Constitution, expressed a desire in order to prevent misconstruction or abuse of its powers, that further declaratory and restrictive clauses should be added. This was the origin of the amendments, and they are significant. They tend plainly to show that, in the judgment of those who adopted the Constitution, there were powers created by it, neither expressly specified nor deducible from any one specified power, or ancillary to it alone, but which grew out of the aggregate of powers conferred upon the government, or out of the sovereignty instituted. Most of these amendments are denials of power which had not been expressly granted, and which cannot be said to have been necessary and proper for carrying into execution any other powers. Such, for example, is the prohibition of any laws respecting the establishment of religion, prohibiting the free exercise thereof, or abridging the freedom of speech or of the press.34

Justice Strong is arguing that the government has powers not listed in the Constitution. Where did he get such an idea? How can such powers exist without the consent of the governed? From where do they derive their legitimate authority?

Justice Strong was basing his argument on the doctrine of implied powers. This doctrine is thought to derive from Alexander Hamilton; but, as you shall see later, that is an error. The doctrine of implied powers, in the form in which Strong relied on it, was first stated by John Marshall. In a famous Supreme Court decision Marshall had said: Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adopted to that end, which are not prohibited, but consistent with the letter and spirit of the Constitution are constitutional.35

The trouble with this doctrine is that most of it is so vague as to be meaningless. What are the criteria for legitimacy, appropriateness, being plainly adopted, or being consistent with the spirit of the Constitution? All of these are qualities which will be affirmed by the supporters of every measure and denied by the opponents. The only firm criteria which this doctrine sets forth is that the means should not be prohibited by the Constitution.

This doctrine subtly reverses the entire point of the Constitution. It admits as constitutional anything not prohibited by the Constitution. The Founding Fathers intended that nothing would be constitutional except that which was affirmed by the Constitution.

Thus we have two entirely different concepts of government. In the one case government has only those powers given to it; in the other government has all powers except those prohibited.

If it be asked how does such a concept of government come into being, where does this government derive its legitimate authority, then we must go back to the doctrine of the divine right of kings. Alexander Hamilton had some interesting things to say on this subject during the debate over a bill of rights. Hamilton opposed writing a bill of rights into the Constitution — but not for the obvious reason:

It has been several times truly remarked, that bills of rights are, in their origin, stipulations between kings and their subjects, abridgments of prerogative in favor of privilege, reservations of rights not surrendered to the prince. Such was MAGNA CHARTA, obtained by the Barons, sword in hand, from King John. Such were the subsequent confirmations of that charter by succeeding princes. Such was the petition of right (author's emphasis) assented to by Charles the First, in the beginning of his reign. Such also, was the declaration of right presented by the lords and commons to the Prince of Orange in 1688, and afterward thrown into the form of an act of parliament, called the bill of rights. It is evident, therefore, that according to their primitive signification, they have no application to constitutions professedly founded upon the power of the people and executed by their immediate representatives and servants. Here, in strictness, the people surrender nothing; and as they retaineverything, they have no need of particular reservations. WE THE PEOPLE of the United States, to secure the blessings of liberty to ourselves and our posterity do ordain and establish (author's emphasis) constitution for the United States of America — This is a better recognition of popular rights, than volumes of those aphorisms, which make the principal figure in several of our state bills of rights, and which would sound much better in a treatise of ethics, than in a constitution of government.36

Hamilton is saying that bills of rights originated in a period when government held unlimited power (via the divine right of kings). They represented a small, first attempt to carve out an area of liberty. The assumption made with a bill of rights is that the government has all power except those reservations of rights enumerated in the bill. While such bills were real advancements in the early struggle for liberty, by 1788 Americans had outgrown them. By 1788 liberty was not limited to the particular rights in a given list; liberty had swelled to encompass the entire political universe. It was the powers of government which were limited to a particular enumeration. Here, in strictness, the people surrender nothing; and as they retain everything, they have no need of particular reservations.37

To add a bill of rights to the U.S. Constitution might cause a terrible confusion. It might cause people to think that we were back in that early era when government held all powers except those enumerated in the bill and thus be used to infer a giant, unwarranted expansion of the powers of government. Hamilton continues:

I go further, and affirm, that bills of rights, in the sense and to the extent they are contended for, are not only unnecessary in the proposed constitution, but would even be dangerous. They would contain various exceptions to powers not granted, and on this very account would afford a colorable pretext to claim more than were granted For why declare that things shall not be done which there is no power to do? Why, for instance, should it be said that theliberty of the press shall not be restrained, when no power is given by which restrictions may be imposed? I will not contend that such a provision would confer a regulating power; but it is evident that it would furnish, to men disposed to usurp, a plausible pretense for claiming that power. They might urge with a semblance of reason that the constitution ought not to be charged with the absurdity of providing against the abuse of an authority, which was not given, and that the provision against restraining the liberty of the press afforded a clear implication, that a right to prescribe proper regulations concerning it, was intended to be vested in the national government. This may serve as a specimen of the numerous handles which would be given to the doctrine of constructive powers, by the indulgence of an injudicious zeal for bills of rights.38

Hamilton's fears came true. Over 80 years after his warning, the very argument he warned against — the doctrine of constructive powers — was made by Justice Strong.

Paradoxically, Marshall adopted his doctrine of implied powers from an argument by Hamilton. Hamilton's plan for a national bank (on the model of William Paterson's Bank of England) was challenged as to constitutionality. In arguing, for his bank Hamilton held that means to a constitutional end were themselves constitutional. That every power vested in a government is in its nature sovereign and includes, by force of the term a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power …39 Thus Hamilton claimed a new set of powers for the Federal Government, which he called implied powers; and which constituted means to a constitutionally valid end. It is conceded that implied powers are to be considered as delegated equally with express ones.40

Thomas Jefferson was alarmed at this new doctrine (as in the fight of history he might well have been). He felt that Hamilton was opening a Pandora's box of powers. He responded: I consider the foundation of the Constitution as laid on this ground — that all powers not delegated to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states, or to the people. To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.41

To put a boundary around this concept of powers which were a means to some other end Jefferson invented the doctrine of strict constructionism. He seized upon the last of the powers given to Congress, the power, stated in Art. I, Sect. 8 of the Constitution: To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers … Jefferson argued that this restricted the government to only necessary and proper means and construed the word necessary in a strict sense to mean yet the Constitution allows only the absolutely necessary … yet the constitution allows only the means which are ‘necessary,’ not those which are merely ‘convenient,’ for effecting the enumerated powers. If such a latitude of construction be allowed to this phrase as to give any non-enumerated power, it will go to every one; for there is no one which ingenuity may not torture into a convenience, in some way or other, to some one of so long a list of enumerated powers. It would swallow up all the delegated powers. It would reduce the whole to one phrase, as before observed. Therefore it was that the Constitution restrained them to the necessary means; that is to say, to those means without which the grant of the power would be nugatory.42 Hamilton differed with Jefferson as to the meaning of the word necessary. He said: It is certain, that neither the grammatical nor popular sense of the term requires that construction. According to both, necessary often means no more than needful, requisite, incidental, useful, or conducive to …43 He thus favored a loose construction of the word necessary.

But what of Jefferson's fears? Does the Constitution really allow a boundless field of power, no longer susceptible of any definition? Almost anything can be regarded as a means to some constitutionally listed end. Three decades ago the U.S. Government gathered up all Japanese-Americans and threw them into concentration camps. This was defended as a means to win the war. The power of Congress to declare war is clearly constitutional, and the imprisonment of the Japanese-Americans was a means to that end. Was it constitutional? Can any American citizen be thrown into a concentration camp because of his racial origin irrespective of proof that he is guilty of a crime? If so, what is the point of having a Constitution?

If any means to the enumerated powers are to be regarded as constitutional, then the government can do anything, and there is no point in writing a Constitution to mark out how much it can do. It could put to death all capitalists and seize their wealth to pay the national debt under the power to pay the debts … of the United States. It could jail all members of labor unions under the interstate commerce clause. It could execute all Negroes or Jews or Italians or WASPs or members of any other racial or religious minority, seize all their property, and use it for a road building program under the power to establish … post roads. In short, if this had been the intent of the Founding Fathers, they would not have bothered to write a constitution enumerating the powers of the government; they would simply have said: The government can do anything it thinks is desirable.

On the other hand some means, not specified in the Constitution, must be allowed if the government is to function. Marshall had argued: It is not denied that the powers given to the government imply the ordinary means of execution. That for example, of raising revenue, and applying it to national purposes, is admitted to imply the power of conveying money from place to place, as the exigencies of the nation may require, and of employing the usual means of conveyance … Take, for example, the power to establish post offices and post roads. This power is executed by the single act of making the establishment. But from this has been inferred the power and duty of carrying the mail along the post road, from one postoffice to another.44 These certainly seem to be reasonable powers, but they are not enumerated in the Constitution.

The solution to this problem is to keep in mind what a constitution is all about. The point at issue when discussing a constitution is the rights of the citizens versus the powers of the government. If an action of government does not interfere with the rights of a citizen, then there is no problem involved. The government can perform that action legitimately. But if an action of government does interfere with the rights of a citizen, then the citizen must have given up that right to the government; he must have given the government the power to interfere with his rights in this area. Since the Constitution is the document by which the people give up some of their liberties to the government, the power must be listed in the Constitution to be legitimate.

This is the answer to the doctrine of implied powers and the resolution of the conflict between strict constructionists and loose constructionists. With regard to actions of government which do not interfere with the rights of the citizen, the government has a free hand. (Just as you and I and any private organization have a free hand to act as we see fit provided we do not interfere with the rights of others.) In these cases the loose constructionists are right; the government can do as it pleases. But when the government interferes with the rights of its citizens, it must first have obtained their grant of power to do so, and such a grant was made by the Constitution. In this case, if the power is not in the Constitution, it has not been granted.

The powers which Marshall uses as examples, to convey money and mail, are clearly not in violation of anyone's rights. Therefore, there was no need for the Constitutional Convention to grant them. Anyone has these powers; therefore the government — has them. But the power to throw a racial minority into concentration camps and the power to force people to accept worthless paper in lieu of a true value do violate people's rights. Therefore, in order for these powers to be valid, they must be enumerated in the Constitution.

And, of course, they are not.

That this is true follows from the nature of constitutional government. But it is interesting to note that Hamilton understood it to be true and never intended the doctrine of implied powers to be used as Marshall and Strong used it. If we go back and look at his full statement: That every power vested in a government is in its nature sovereign, and includes by force of the term a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power, and which are not precluded by restrictions and exceptions specified in the Constitution, or not immoral, or not contrary to the essential ends of political society …45 Hamilton had included two additional requirements before a means could be considered as an implied power, that it be: 1. not immoral and 2. not contrary to the essential ends of political society. The essential end of political society is the protection of rights; acts of government which violate rights are both immoral and contrary to this essential end.

This was only to be expected. It was hardly likely that Hamilton in 1791 would contradict Hamilton in 1788.

The argument between those opposing a bill of rights (on the grounds that it would tend to disparage all rights not listed) and those favoring a bill of rights was resolved in an interesting way. When James Madison offered the Bill of Rights to the first Congress, he was sensitive to the argument that enumerating certain rights would form a pretext for denying those not enumerated, and, as he said, I conceive, that it may be guarded against … Madison’s solution was to include the following words in the Bin of Rights: The exceptions here or elsewhere in the Constitution, made in favor of particular rights, shall not be so construed as to diminish the just importance of other rights retained by the people, or as to enlarge the powers delegated by the Constitution; but either as actual limitations of such powers, or as inserted merely for greater caution.46 This would meet Hamilton’s fears by specifically eliminating any implication of a doctrine of constructive powers. It was simplified by committee to: The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people … 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. These passed into law as the ninth and tenth amendments to the Constitution.

So the Founding Fathers not only disagreed with Justice Strong's theory of powers … which grew out of the aggregate, they wrote their opinion into the Constitution where it remains the supreme law of the land to this day. And any judgment rendered which does not take cognizance of this can make no claim to be either legal or constitutional. It has no legitimate authority.

It is interesting to note the following debate. The Constitutional Convention never discussed the issue of paper money directly. The pro-paper money faction was such a small minority that it did not dare to bring up the issue for a vote. However, a back door attempt to smuggle in paper money was made via the power to issue bills of credit. Technically bills of credit are a short term means of borrowing (like Treasury bills today). But in practice at the time they were often made legal tender. The paper money forces hoped to persuade the Convention to adopt the bills of credit power by pretending that nothing more was involved than the power to borrow for short periods of time. Then, when the power was safely enacted, they would turn around and say: Of course, bills of credit are always made legal tender; that was what was intended. Everyone realized that when they voted for the power. The failure of this subterfuge sheds some light on the intention of the Founding, Fathers. Here is the actual debate at the Constitutional Convention in 1787:

Mr. Gouverneur Morris moved to strike out, and emit bills on the credit of the United States. If the United States had credit, such bills would be unnecessary; if they had not, unjust and useless.

Mr. Butler seconds the motion.

Mr. Madison. Will it not be sufficient to prohibit the making them a tender (author's emphasis)? This will remove the temptation to emit them with unjust views. And promissory notes, in that shape, may in some emergencies be best.

At this point in the debate the pretext of bills of credit was dropped, and the Convention began to debate the real issue-paper money.

Mr. Gouverneur Morris. Striking out the words will leave room still for notes of a responsible (author's emphasis) minister, which will do all the good without the mischief. The moneyed interest will oppose the plan of government, if paper emissions be not prohibited.

Mr. Gorham was for striking out without inserting any prohibition. If the words stand, they may suggest and lead to the measure.

Mr. Mason had doubts on the subject. Congress, he thought, would not have the power, unless it were expressed. Though he had a mortal hatred to paper-money, yet as he could not foresee all emergencies, he was unwilling to tie the hands of the Legislature.'He observed that the late war could not have been carried on, had such a prohibition existed.

Mr. Gorham. The power, as far as it will be necessary, or safe, is involved in that of borrowing.

Mr. Mercer was a friend to paper-money, though in the present state and temper of America, he should neither propose nor approve of such a measure. He was consequently opposed to a prohibition of it altogether. It will stamp suspicion on the Government, to deny it a discretion on this point. It was impolitic, also, to excite the opposition of all those who were friends to paper-money. The people of property would be sure to be on the side of the plan, and it was impolitic to purchase their further attachment with the loss of the opposite class of citizens.

Mr. Ellsworth thought this a favorable moment, to shut and bar the door against paper-money. The mischiefs of the various experiments which had been made were now fresh in the public mind, and had excited the disgust of all the respectable part of America. By withholding the power from the new Government, more friends of influence would be gained to it than by almost any thing else. Paper-money can in no case be necessary. Give the Government credit, and other resources will offer. The power may do harm, never good.

Mr. Randolph, notwithstanding Ms antipathy to paper-money, could not agree to strike out the words, as he could not foresee all the occasions that might arise.

Mr. Wilson. It will have almost 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.

Mr. Butler remarked, that paper was a legal tender in no country in Europe. He was urgent for disarming the government of such a power.

Mr. Mason was still averse to tying the hands of the Legislature altogether (author's emphasis). If there was no example in Europe, as just remarked, it might be observed on the other side, that there was none in which the Government was restrained on this head.

Mr. Read thought the words, if not struck out, would be as alarming as the mark of the Beast in Revelation.

Mr. Langdon had rather reject the whole plan, than retain the three words, and emit bills.

On the motion for striking out, New Hampshire, Massachusetts, Connecticut, Pennsylvania, Delaware, Virginia*, North Carolina, South Carolina, Georgia, aye - 9; New Jersey, Maryland, no 2.

*This vote in the affirmative by Virginia was occasioned by the acquiescence of Mr. Madison, who became satisfied that striking out the words would not disable the Government from the use of public notes, as far as they could be safe and proper; and would only cut off the pretext for a paper-currency (author's emphasis) and particularly for making the bills a tender (author's emphasis) either for public or private debts.47

In other words, the authors of the Constitution refused to give the Federal Government power to issue bills of credit because they were afraid these bills would be used as a pretext for paper money. They did this, not by inserting a prohibition against bills of credit but by omitting, to grant the government the power to issue them. Even those of the delegates who favored paper money understood that, if the power were not granted, it would not exist.

The good citizen, whose concern is to do right and obey the law, must be very concerned with this question of legitimate authority. The government of the United States has legitimate authority because it is based on a constitution in which powers are given to it by the voluntary consent of the people. But this fact means that it has no legitimate authority with regard to powers that it usurps.

When the government usurps powers, then it is acting illegitimately, like a murderer or thief. The good citizen owes no obedience to usurpations. Usurpations are not law. No act of Congress made outside of the powers given to it by the Constitution is valid.

Supporters of authority today argue that the Supreme Court interprets the Constitution. They claim that the Supreme Court was set up as the highest authority to decide what the Constitution means.

Such an institution would have been totally allen to the concepts of the Founding Fathers. They intended the judiciary as the weakest of the three branches of government. They meant the Constitution to be the supreme law, binding on everyone and regarded it as the moral obligation of every good citizen to obey the Constitution.

In their eyes this meant that the good citizen had an obligation to study the Constitution, come to his own understanding of what it meant, and act on that understanding. This is what George Washington did when faced with Hamilton’s plan for a central bank. He did not say, I’ll leave the constitutionality up to the Supreme Court. Instead he solicited opinionsfrom opposing sides and made up his mind on the merits.

The proper function of the Supreme Court (and the lower courts) is to resolve disputes in accordance with the law, the Constitution being, supreme law. In this function it has a moral responsibility to interpret words and phrases in the Constitution to the best of its ability and to rule in accordance. But this function is not unique. The President has a moral responsibility to act in accordance with the law and (as in the case of Washington) must try to interpret words and phrases in the Constitution to the best of his ability. Every Congressman in voting has an obligation not to enact unconstitutional laws; thus he also must interpret words and phrases in the Constitution. The point here is that no one persons interpretation of the Constitution was made absolute.

Some people of the time opposed the Constitution on precisely the grounds that the Supreme Court was being, made into an absolute authority. Hamilton paraphrased their arguments as follows:

The authority of the proposed Supreme Court of the United States, which is to be a separate and independent body, will be superior to that of the legislature. The power of construing the laws according to the spirit of the Constitution will enable that court to mould them into whatever shape it may think proper; especially as its decisions will not be in any manner subject to the revision or correction of the legislative body. This is as unprecedented as it is dangerous.48 Hamilton rebuts this point of view, saying: >This, upon examination, will be found to be made up altogether of false reasoning upon misconceived fact.49 And he goes on to discuss the power of impeachment as a remedy for, Supreme Court justices who abuse the Constitution.

There are people today who have such a love of authority and fear of using their own judgment that they must search for, authority figures where none exist. These people wish to make the Supreme Court into the Pope of the American Constitution. In their view the Supreme Court is the highest authority ON the Constitution just as the Pope is the highest authority ON the Bible.

The Founding Fathers did not count on a supreme authority to maintain liberty. They knew that liberty cannot survive under supreme authority. They placed their hopes on a balance of power. If all elements of society had the responsibility to interpret and uphold the Constitution, then the resulting system, while it might result in specific injustices, could never get too badly out of gear. Their intention was that each person should make his own judgment on the Constitution and then act on that judgment in terms of whatever actions were appropriate.

I am not here arguing that people should disobey whatever decision of the Supreme Court they do not like. There is a certain value to order and stability, and sometimes it is wiser to submit to an isolated injustice than to create a turmoil to correct it. But, as the Declaration of Independence points out: … mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. When there occurs such a travesty of justice as the legal tender decision of 1871 where the Court was packed for partisan purposes, where it is clear that the Court never seriously intended to be bound by the Constitution, where the judges ignored the explicit words of the Constitutional Convention on the subject, then it is time to return to first principles and say: The Constitution is the supreme law; the decision of 1871 was a miscarriage of justice, and whatever practical effect it had on the people of the time, it is not law, and it is not binding on us today. We are bound by law under the Constitution, not by decisions made in opposition to the Constitution. The legal tender acts are usurpations; they are not law; and they have no legitimate authority.

The Civil War attempt at fiat money did not succeed. It was left for a later day and age to accomplish that. The railroads did get to pay off much of their debt in depreciated paper, but when the war hysteria abated, the pro-gold forces regained control. The money supply was gradually brought into line with the quantity of gold, and redemption of the greenback into gold was established in 1879. Meanwhile people wrote into their private contracts explicit provisions that, whatever the legal tender, payment was to be made in gold coin. The gold standard was resumed.

It is interesting to note that this period, which was largely one ofdeclining prices (partly caused by the contraction in the money supply necessary to resume the gold standard and partly caused by the switch from a bimetallic standard — where both gold and silver were used as money — to a pure gold standard) was the greatest period of economic expansion of any country in the history of civilization. From the end of the Civil War to the turn of the century the country underwent an economic revolution the like of which had never been seen before and has not been seen since. A host of technological improvements, whose benefits were speedily made available to the average man, flowed from the minds of the creative members of society. A continent was conquered, tamed and settled. And the real wages (in terms of constant dollars) of the average worker more than doubled. (The contrast with our recent past can hardly be more vivid.)

It was not until another period of hysteria in the country — that of the great depression and the run on the banks — that the gold standard was finally abrogated permanently. Again it was by a Supreme Court decision of five to four made under extreme conditions. In this case (Nortz v. United States, decided in the term of October 1934) the right to own gold was denied and even contracts made with an explicit gold coin clause were abrogated. When Senator Carter Glass, who had been instrumental in writing the Democratic platform of 1932, first heard of this bill, he said: It’s dishonor, Sir. This great Government, strong in gold, is breaking its promises to pay gold to widows and orphans to whom it has sold Government bonds with a pledge to pay gold coin of the present standard of value. It is breaking its promise to redeem its paper money in gold coin of the present standard of value. It’s dishonor, Sir.50

The argument was, of course, the doctrine of implied powers (a la Marshall). There is no hint of any power in the Constitution to prohibit the ownership of gold or to enact the blanket abrogation of contracts. Alexander Hamilton would not have agreed with this decision. He had written: When a government enters into a contract with an individual, it deposes, as to the matter of the contract, its constitutional authority, and exchanges the character of the legislator for that of a moral agent, with the same rights and obligations as an individual. Its promises may be justly considered as excepted out of its power to legislate, unless in aid of them. It is in theory impossible to reconcile the idea of a promise which obliges, with a power to make a law which can vary the effect of it.51 In this case the paper money forces were a little more explicit as to their beliefs. The Government argued the medieval doctrine of unlimited sovereignty:

If the court please, other nations, impelled by the requirements of necessity and acting for the public welfare, have devalued their currencies, abandoned the gold standard, and abrogated gold contracts by specific laws enacted for that purpose. Without challenge and without question they have done precisely what the Congress of the United States has done. Belgium, France, Germany, Rumania, Mexico, Norway, and Sweden have enacted such laws. It is an essential attribute of sovereignty.

I ask this court to lay down in unequivocal language the proposition that, in matters of currency, the courses of action open to other governments are not denied to this country, and that, in employing these sovereign powers, we act upon an equality with all the other nations of the earth.52

Sovereign means: Above or superior to all others; chief; greatest; supreme.53 In America the people are sovereign. The Government is the servant, not the master, of the people. It is not for nothing that the preamble to the Constitution states: We the people of the United States … do ordain and establish this Constitution. Hamilton cited this statement in his argument against a bill of rights because he wanted to emphasize that it was the people, who are originally sovereign, who delegated a portion of their liberties to the government. But in 1935 this principle was thrown out in order to imitate, as the government attorney put it, Germany, Rumania, Mexico.

The government attorney would not admit it, but he had turned back the clock and was invoking the doctrine of the divine right of kings, which goes: (1) God gives special powers to the king; (2) Who thereby has authority (sovereignty) over the people. This directly contradicts the Founding Fathers who believed that liberty inheres in people and that the people delegate authority to the government. The government attorney did not dare to invoke the first premise of the divine right of kings argument, but he is quite explicit about the second. He wants us to admit that the government has sovereign powers not delegated to it by the people, not because it got them from God, but just because, well … everybody else has them, so why the heck not.

The attorney for the government could not have known it, but his enumeration of countries for the U.S. to imitate was most revealing in its inclusion of Germany, then under its new leader, Adolf Hitler. That Hitler immediately debauched the currency and instituted strict price and wage controls (see Chapter VIII) was not an accident. It was the natural concomitant of a social theory which exalted the destroyer of values (the warrior) and denigrated the producer. That Nazi Germany should have been held up as an example for the United States to follow in this regard is an eloquent comment on the nature of paper money.


  1. Daniel Webster as quoted by Chief Justice Salmon P. Chase, Supreme Court Reports, Legal Tender Cases, 12 Wall 586, Opinion of the Minority, Chase's emphasis.
  2. As quoted by Sidney Ratner, Was the Supreme Court Packed by President Grant? Political Science Quarterly, Sept. 1935, pp. 343-58.
  3. Andrew C. McLaughlin, Wilson on Blackstone, The Foundations of American Constitutionalism (New York, 1932), pp. 83-84.
  4. Constitution of Mass., 1780, chiefly the work of John Adams, from Documents of American History, 8th Edition, ed. Henry Steele Commager (New York, 1968), p. 107.
  5. Author unknown, Four Letters on Interesting Subjects, letter IV (Philadelphia, 1776), p. 19, Author's emphasis.
  6. Daniel Webster, as quoted by Clarkson Nott Potter, Supreme Court Reports, Legal Tender Cases (Knox v. Lee & Parker v. Davis), 12 Wall 495.
  7. Daniel Webster, as quoted by Chief Justice Salmon P. Chase, Op. Cit.
  8. James Madison, The Federalist Papers (New York, 1961), No. 10, pg. 84
  9. James Madison, in a letter to Edmund Randolph, Philadelphia, May 14, 1782, from Madison Papers (Washington, 1840), 1, p. 129, on the prospect of Virginia issuing paper money.
  10. Thomas Jefferson, Notes on the Establishment of a Money Unit, and of a Coinage for the United States, Memoir, Correspondence and Misc.. (Boston, 1830), ed. T. Randolph, Vol., 2nd Ed., pp. 138-9.
  11. The Records of the Federal Convention of 1787, ed. Max Farrand (New Haven, 1937), 1, p. 154.
  12. Ibid., Yates on Madison.
  13. Ibid., Vol. III, p. 214. Martin's emphasis.
  14. Justice Strong, Supreme Court Reports, Legal Tender Cases, 12 Wall 534-35, Opinion of the Court.
  15. John Marshall, Supreme Court Reports, McCullough v. The State of Maryland, Opinion of the Court, 4 Wheaton 421.
  16. Alexander Hamilton, The Federalist Papers (New York, 1961), No. 84, pp 512-13. [My emphasis except where noted.]
  17. Ibid.
  18. Ibid., pp. 513-14.
  19. Alexander Hamilton, Opinion of the Constitutionality of the Bank, Feb. 23, 1791, Documents of American History, Op. Cit., pp. 156-57. Author's emphasis.
  20. ibid.
  21. Thomas Jefferson, Opinion on the Constitutionality of the Bank, Feb. 15, 1791, Documents of American History, Ibid., pp.159-60. Author's emphasis.
  22. Ibid.
  23. Alexander Hamilton, Opinion … Op. Cit., p. 157. Author’s emphasis.
  24. John Marshall, Op. Cit.
  25. Hamilton, Opinion … Op. Cit., p. 156. Author’s emphasis.
  26. James Madison, speech in the House of Representatives on June 8, 1789, Debates and Proceedings in the Congress of the United States, (Washington, Gales & Seaton,1834), Vol., p. 439.
  27. The Madison Papers, III (Washington, 1840), record of Aug. 16, 1787, pp. l343-46 [My emphasis except where noted.]
  28. Alexander Hamilton, The Federalist Papers (New York, 1961), #81, p. 482.
  29. ibid.
  30. Sen. Carter Glass, as quoted in Economics and the Public Welfare, Benjamin M. Anderson (New York, 1949), p. 317.
  31. Alexander Hamilton, as quoted in Supreme Court Reports, Opinion of the minority, Gold Clause Cases (Norman v. Baltimore & Ohio Railroad Co., United States v. Bankers Trust Co., Nortz v. United States, and Perry v. United States), 294 U.S. 379-80.
  32. Supreme Court Reports, Argument for the Government, Norman v. B & O. R. Co., 294 U.S. 240.
  33. Webster’s New World Dictionary, College Edition (New York, World, 1960), p. 1395.