"No State shall ... make any thing but gold and silver coin a tender in payment of debts; ..."
The original Articles of Confederation of the United States of America provided for a loose federation of thirteen sovereign states. This was seen by some to be inadequate for the destiny of the new nation as they envisioned it. The adoption of the Constitution was an attempt to strengthen the position of the federated states relative to foreign nations by delegating certain powers to the federal government, in particular, the power to declare war and the power to enter into treaties. The Constitution carefully spelled out the limits of federal authority, and sought to preserve the power of the states and of the people. Despite the care with which the powers of the federal government were enumerated, various interpretations by the courts over the years have allowed power to be increasingly concentrated at the federal level, and have given it permission to engage in activities which seem contrary to the intent of the Constitution.
Of special note are the agreements of the States with respect to money, which were written into the Constitution. Article I, Section 8, enumerates the various powers of the Congress. Among these is the power to "coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures."
In order to understand the meaning of this section, one must understand the prevailing situation and the parlance of that time. The form of money which we use now was not the form used back then. At the time of the writing of the Constitution, the substance of money was gold and silver coin, but now, almost all the money is in the form of bank credit, with the remainder in paper bills and base metal coins. Congress was given the power to stamp precious metals into coins of measured weight and fineness, and to decide how much metal was to be contained in the monetary unit, i.e. to "regulate the value of," the dollar. It was not given the power to print paper money or to create some other form of "legal tender."
The intent of the Founding Fathers is further clarified when we consider another part of the Constitution which listed certain limitations on the powers of the States. Article I, Section 10, provides that "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; ..."
The clear intention was to standardize coinage by placing that power in the hands of Congress. The required form of payment for debts was to be limited to gold and silver coins. Other forms of payment might be accepted by the payee but could not legally be required of the debtor, i.e. be made legal tender.
Bills of credit were promissory notes such as those which were issued by the Colonies (States), and which commonly circulated as money prior to the Constitution. The Colonies spent these notes into circulation, in quantities that were typically excessive in relation to the tax revenues available for their redemption. The eventual consequence of such abuse was that colonial currencies in the hands of the people lost much of their value, causing economic distress. During the Revolutionary period, the Continental Congress issued paper money, called "Continentals," which were similarly abused, thus derived the saying "Not worth a Continental."
By writing these provisions into the Constitution, the Founding Fathers sought to prevent a recurrence of these earlier monetary disasters. Although the federal government was not specifically prohibited from issuing bills of credit, this power was not specifically given to it either. In fact, an earlier draft of Article I, Section 8 included the power "to emit bills of credit" (paper notes), but it was deleted in the final version.
It is probably unconstitutional for Congress to do directly what is done through the Federal Reserve, i.e. issue money based on the government's promise to pay. The issuance of "Greenbacks" by the U.S. Treasury under Abraham Lincoln during the Civil War was just such a case in point. Lincoln, instead of borrowing from the banks at exorbitant rates of interest to finance the war, had the Treasury issue (spend) paper currency directly into circulation. These "greenbacks" were controversial throughout their entire life. While Lincoln managed to save the taxpayers the cost of interest by printing money instead of borrowing it, he usurped a power that the Founding Fathers had intended to withhold.
Subsequent to the end of the Civil War, the banking interests saw to it that such a costly (for them) move would not be repeated. They found a way for the Federal government to get what it wanted, namely the power to spend without limit, while enhancing their own wealth and power. Thus, the constitutional limitation upon the federal government with respect to monetization of its debt has been circumvented by its collusion with international banking interests to redefine and manipulate the exchange media (money) and its allocation within the economy.
This began with the National Bank Act of 1863 which required each bank to purchase a dollar amount of government bonds equal to one-third of its capital and surplus. [28] This collusion between bankers and politicians became more formalized with the establishment of the Federal Reserve System in 1913, and was legitimized by the subsequent entry of the United States into World War II. The Federal Reserve at that point announced a policy of providing the Treasury with the money needed to finance the war. It agreed to buy any amount of Treasury bills at the posted rate and to resell them at the same rate. [29] In the post-war era, the use of monetary mechanisms to handle fiscal (budgetary) indiscretions has come to be taken for granted. This, more than anything else, has undermined the democratic process in America, and allowed the emergence of the American Empire under elite control.
Over the years, the monetary authorities have managed to quietly redefine the dollar, from a specified weight of gold, to a unit of bank credit with no defined value. While the Federal government ostensibly controls the central bank (the Federal Reserve System) and regulates the banking industry, the reality is probably more the other way around. Those who "pay the piper, call the tune." It is naive to think that political campaign contributions made by wealthy individuals and corporations do not buy influence. Not only has the power migrated from the local and state levels to the federal level, it has been privatized and appropriated by a monetary and financial ruling class.
Western civilization has reached a crisis point. The imperial stage of civilization is approaching its zenith. To permit its continued development to its ultimate maturity would be to permit a global tyranny far beyond Orwell's imagining, and to sell the soul of humanity into a new feudalism of material excess for some, comfort for a few, and subsistence and drudgery for most.
The single most important element needed to assure a future of freedom, dignity, health, and realization of the human potential, is the creation of non-political, equitable exchange media and the dispersal of financial power. The only feasible way to achieve this, I believe, is through the establishment, by private initiative, of community-based complementary exchange mechanisms which are democratically and locally controlled.
Even though the dominant trend of civilization over the past several millennia has been toward increasing centralization of power in the hands of fewer and fewer people, there are signs that civilization may now be starting to move toward decentralization and local control. Even as the shadow of "Big Brother" looms ever larger and the prospect of global tyranny appears increasingly probable, we can see a major turn approaching.
Diverse networks of communication and mutual support are beginning to emerge. The village, neighborhood, household, farm and community are now becoming more significant as centers of education and economic activity. Manufacturing operations, while they are largely being shifted to lesser developed countries (LDC's), are at the same time, being decentralized. Many large companies are forming work teams which are given broad decision making power over their own work methods. Information handling is increasingly becoming the substance of work, both inside and outside of the formal economy. Work styles are changing. More and more people are moving toward diversification of skills and self-employment. As cities grow larger and transportation channels become clogged, people are finding ways of working which are less stressful and more efficient. "Telecommuting" and home-based employment are becoming ever more common, especially among highly skilled workers and professionals.
Centralized institutions of power, even while appearing to further consolidate their power, are disintegrating from within. The world has been startled with the suddenness of the collapse of the Eastern Bloc and the Soviet Union, which once seemed monolithic and indestructible. Old ethnic identities are reemerging as the seeds around which a new order is beginning to crystallize. But even this degree of centralization around ethnic identities, with all their historic rivalries and animosities, will probably be transitory. With the emerging global consciousness and person-to-person communications, it seems likely that the nation state as the dominant political institution is in its last days.
It is important to recognize that economic, political and social structures are interdependent and mutually determining. They comprise the fabric of "culture." In our highly mobile and atomistic society we have grown dependent upon structures which are inimical to humane and liberative values. Any attempt to address the "mega-crisis," or to transform socio-economic realities, must come from a holistic perspective. The interconnections among land tenure, money, banking, finance and taxation must be thoroughly understood. Transformation requires not only a deeper understanding of the mechanisms of land speculation, money creation, and coercive wealth redistribution, but also a change in our basic assumptions and attitudes.