From the Radio Free Michigan archives ftp://141.209.3.26/pub/patriot If you have any other files you'd like to contribute, e-mail them to bj496@Cleveland.Freenet.Edu. ------------------------------------------------ Money by Richard Forest In United States v. Rifen (577 F2d 1111, 1113 (8th Cir. 1978)) the court stated that the Constitution "prohibits the States from declaring legal tender anything other than gold or silver, but does not limit Congress' power to declare what shall be legal tender for all debts." An Alaskan appellate court states, "United States Congress has power to make anything it wishes legal tender; Congress is not limited to gold or silver coins." (Lowry v. State, 655 F2d 780). A Kansas appellate court states, "power to declare what shall be money and regulate it's value is vested in Congress, which has Constitutional power to make paper money legal tender in payment of debts." (Allen v. Craig, 1 Kan App 2d 301) These courts appear to pay great lip service to the Constitution. Are these courts really correct? Can Congress exercise the power to make paper -- or chickens -- a legal tender under the Constitution? In order to find the truth, we are going to have to define some terms. The terms "bill of credit" and "Legal tender" are defined in the 1877 Bouvier's Law Dictionary: "LEGAL TENDER. That currency which has been made suitable by law for the purposes of a tender in the payment of debts. "The following descriptions of currency are legal tender in the United States:-- "All the gold coins of the United States are a legal tender in all payments at their nomonal value when not below the standard weight and tolerance provided by law for the single piece, and, when reduced in weight below such standard tolerance, they are a legal tender at valuation in proportion to their actual weight. The silver dollar of 412 1/2 grains is a legal tender for all debts and dues, public and private, except where otherwise expressly stipulated in the contract. The silver coins of the United States of smaller denominations than one dollar are a legal tender in all sums not exceeding ten dollars in payment of all dues, public and private. The trade dollar of 420 grains is not a legal tender. The five-cent piece, the three-cent piece, and the one-cent piece are legal tender for any amount not exceeding twenty-five cents in any one payment. No foreign coins are now a legal tender. "By acts of Feb. 25, 1862, July 11, 1862, and March 3, 1863 [Civil War years], congress authorized the issue of notes of the United States, declaring them a legal tender for all debts, public and private, except duties on imports and interest on the public debt. 12 Stat. at L. 345,532,709. These notes are obligations of the United States, and are exempt from state taxation; 7 Wall. 26; but where a state requires its taxes to be paid in coin, they cannot be discharged by a tender of these notes. A debt created prior to the passage of the legal tender acts, and payable by the express terms of the contract in gold and silver coins, cannot be satisfied by a tender of treasury notes: 7 Wall. 229; id. 258; 12 id. 687. The legal tender acts are constitutional, as applied to pre-existing contracts, as well as to those made subsequent to their passage; 12 Wall. 457; per Strong, J., overruling their previous opinion of the court in 8 Wall. 604, per Chase, C.J. See 17 Am. L. Reg. 193; 19 id. 73; 21 id. 601." Also from Bouvier's: "BILL OF CREDIT. Paper issued by the authority of a state on the faith of the state, and designed to circulate as money; 11 Pet. 257. "Promissory notes or bills issued by a state government, exclusively, on the credit of the state, and intended to circulate throughout the community for its ordinary purposes as money, redeemable at a future day, and for the payment of which the faith of the state is pledged; 4 Kent. 408. "The constitution of the United States provides that no state shall emit bills if credit, or make any thing but gold and silver coin a tender in payment of debts. U.S. Const. art. 1. sec. 10. This prohibition, it seems, does not apply to bills issued by the state but having a specific capital set apart; 2 M'Cord. 12; 4 Ark. 44; 11 Pet. 257; 13 How. 12; but see 4 Pet. 410; 2 Ill. 87; nor does it apply to notes issued by corporations or individuals which are not made legal tender; 4 Kent, 408, and notes. See 2 Pet. 318; 4 Dall. xxiii.; 3 Wall.Jr. 381; Story, Const. Secs. 1362-1364. As to the power of ursurping governments to bind the public faith for the redemption of notes issued by a revolutionary power, see 35 Ga. 330; 1 Abb. U.S. 261." Article 1, Section 8 of the United States Constitution gives congress the power to "borrow money on the credit of the United States" and to "coin money." The first two drafts of the Federal Constitution included the power to "emit bills of credit" among the powers of congress. On August 16, 1787, that power was struck off the list of the enumerated powers of congress. The following record of the minutes of the Constitutional Convention for that day gives full understanding of the legal intent of the convention: 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 & useless. Mr. BUTLER seconds the motion. Mr. MADISON. Will it not be sufficient to prohibit the making them a tender? This will remove the temptation to emit them with unjust views; and promissory notes, in that shape, may in some emergencies be best. Mr. GOUVERNEUR MORRIS. Striking out the words will leave room still for notes of a responsible minister, which will do all the good without the mischef. The moneyed interest will oppose the plan of government, if paper emissions be not prohibited. Mr. GORMAN 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 forsee 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 any such prohibition existed. Mr. GORMAN. 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 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 of 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 anything 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 his antipathy to paper money, could not agree to strike out the words, as he could not forsee all the occasions that might arise. Mr. WILSON. It will have a most 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 for such a power. Mr. MASON was still adverse to tying the hands of the legislature altogether. 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 the 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 Ay -- 9 New Jersey Maryland No -- 2 The clause for borrowing money was agreed tom nem. con. Adjourned. * The vote in the affirmative by Virginia was occasioned by the acquiescence 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, and particularly for making the bills a tender, either for public or private debts. The following sources were used for the foregoing: "The Records of the Federal Convention," Max Ferrand, Vol 2, pp. 308-311; "Elliott's Debates on the Adoption of the Federal Convention," Jonathan Elliott, Vol. 5 pp. 434- 435; "The Debates in the Federal Convention of 1787 Which Framed the Constitution of the United States of America," as reported by James Madison, pp. 413, 414; :Journal of the Federal Convention," kept by James Madison, pp. 541-543. Since the adoption of the Federal Convention, three classes of paper have circulated as legal tender in America: 1. Notes payable on demand in gold or silver coin. 2. Notes payable in gold or silver coin at an unspecified future date (bills of credit). 3. Nonredeemable "notes" redeemable in nothing at any time, apparently having value through the force of law. The minutes of the convention demonstrate that the Constitution gives Congress authority to make gold coin, silver coin, and no less a class of paper than notes payable on demand in gold or silver coin a legal tender. While congress has the authority to issue bills of credit through its power to borrow money on the credit of the United States, the power to make them a legal tender was withdrawn on August 16, 1787. Clearly, nonredeemable federal reserve notes have no constitutional authorization as legal tender. They do not appear to have congressional authority either, since under 31 USC 411 a federal reserve note is defined by law to be redeemable on demand.  ------------------------------------------------ (This file was found elsewhere on the Internet and uploaded to the Radio Free Michigan archives by the archive maintainer. All files are ZIP archives for fast download. E-mail bj496@Cleveland.Freenet.Edu)