How private money, inflation entail chicanery, fraud, coming wreck

Justice Stephen J. Field

Justice Stephen J. Field, a dissenter of paper money disaster

By David Tulis

The disaster of national economy that awaits us here in the hinterlands has its makings in ideas that are ultimately religious in nature. More immediately the wreckage caused by ballooning and unpayable debt is based on a ideas that take the form of legal fiction.

And this storytelling comes from jurists on the federal supreme court and many others — presidents, members of the U.S. congress, bankers and lobbyists for the cause of eternal prosperity based on borrowing. The narrative, in essence, is that national government intervention is required between every borrower and every lender. That role is to impair and impede the obligation of contract in the favor of one of the parties. And that is the borrower.

As ideasphere money controls we can see this manifest favor all about us in national economy — even here in local economy, subject as it is to “the good people” and their storytelling ministry in the public library’s children’s department. We see it in excess speculation, widespread malinvestment such as in the retail sector, in overcapacity that disregards fierce competition, in the working man’s continually falling behind in his wages. Granma Yellin, head of the Federal Reserve System, is fighting desperately to reach an inflation target of 2 percent, meaning that the working Joe is supposed to enjoy a 20 percent loss of buying power per decade.

Here, then, is the effect of that great war of ideas fought as a losing battle in American culture and courts. That of inflation as a permanent feature of modern life, of ideasphere dollars whose writings on the face of each bill bear no meaning whatsoever,  refer to no asset whatsoever.

The U.S. constitution must be laid aside for this program to advance. It prohibits the states from making anything but gold and silver a tender in payment of debt. But officials have long pretended themselves to be exempt from this rule and to allow themselves authority to intervene on behalf of borrowers. With what Solzhenitzyn calls “vague legalisms,” they lay aside the economic safeguards built in the federal constitution and many state constitutions. The result is to empower the issuers of paper currency and digitized credit on one hand and to relieve the great horde of borrowers who are allowed to pay back their debt in depreciated dollars on the other.

An important dissent of all the causes leading to the pending disaster was penned in an 1884 case, Juilliard v. Greenman, 110 U.S. 421. Juilliard sold and delivered 100 bales of cotton to Greenman for $5,122.90. Greenman tendered $5,100 in United States legal tender notes and the rest in coin, but Juilliard would not accept the U.S. paper. The 8-1 opinion is understood to give the Yankees the power to borrow money and to provide a national currency, which it did via the private Federal Reserve System. Justice Stephen J. Field was born in 1816, just 27 years after the ratification of the constitution. In Juilliard, the high court says the congress can make paper notes legal tender in payment of debt. If this case and its dissent are not required reading at University of Tennessee at Chattanooga economics and policy classes, they should be.

The Juilliard local economy dissent

If there be anything in the history of the constitution which can be established with moral certainty, it is that the framers of that instrument intended to prohibit the issue of legal-tender notes both by the general government and by the states, and thus prevent interference with the contracts of private parties. During the revolution and the period of the old confederation, the continental congress issued bills of credit, and upon its recommendation the states made them a legal tender, and the refusal to receive them an extinguishment of the debts for which they were offered.

They also enacted severe penalties against those who refused to accept them at their nominal value, as equal to coin, in exchange for commodities. And previously, as early as January, 1776, congress had declared that if any person should be ‘so lost to all virtue and regard for his country’ as to refuse to receive in payment the bills then issued, he should, on conviction thereof, be ‘deemed, published, and treated as an enemy of his county, and precluded from all trade and intercourse with the inhabitants of the colonies.’

Miscreancy among states

Yet this legislation proved ineffectual; the universal law of currency prevailed, which makes promises of money valuable only as they are convertible into coin. The notes depreciated until they became valueless in the hands of their possessors. So it always will be; legislative declaration cannot make the promise of a thing the equivalent of the thing itself.

The legislation to which the states were thus induced to resort was not confined to the attempt to make paper money a legal tender for debts; but the principle that private contracts could be legally impaired, and their obligation disregarded, being once established, other measures equally dishonest and destructive of good faith between parties were adopted. What followed is thus stated by Mr. Justice STORY, in his Commentaries:

“The history, indeed,” he says, “of the various laws which were passed by the states, in their colonial and independent character, upon this subject, is startling at once to our morals, to our patriotism, and to our sense of justice.

Not only was paper money issued and declared to be a tender in payment of debts, but laws of another character, well known under the appellation of tender laws, appraisement laws, installment laws, and suspension laws, were from time to time enacted, which prostrated all private credit and all private morals. By some of these laws the due payment of debts was suspended; debts were, in violation of the very terms of the contract, authorized to be paid by installments at different periods; property of any sort, however worthless, either real or personal, might be tendered by the debtor in payment of his debts; and the creditor was compelled to take the property of the debtor, which he might seize on execution, at an appraisement wholly disproportionate to its known value. Such grievances and oppressions, and others of a like nature, were the ordinary results of legislation during the revolutionary war and the intermediate period down to the formation of the constitution. They entailed the most enormous evils on the country, and introduced a system of fraud, chicanery, and profligacy which destroyed all private confidence and all industry and enterprise. Vol. 2, 1371. [110 U.S. 421, 453]

Constitutional remedy proposed

To put an end to this vicious system of legislation which only encouraged fraud, thus graphically described by STORY, the clauses which forbid the states from emitting bills of credit or making anything but gold and silver a tender in payment of debts, or passing any law imparing the obligation of contracts, were inserted in the constitution.

Money is not only a medium of exchange, but it is a standard of value. Nothing can be such standard which has not intrinsic value, or which is subject to frequent changes in value. From the earliest period in the history of civilized nations we find pieces of gold and silver used as money. These metals are scattered over the world in small quantities; they are susceptible of division, capable of easy impression, have more value in proportion to weight and size, and are less subject to loss by wear and abrasion than any other material possessing these qualities. It requires labor to obtain them; they are not dependent upon legislation or the caprices of the multitude; they cannot be manufactured or decreed into existence; and they do not perish by lapse of time. They have, therefore, naturally, if not necessarily, become throughout the world a standard of value. In exchange for pieces of them, products requiring an equal amount of labor are readily given. When the product and the piece of metal represent the same labor, or an approximation to it, they are freely exchanged. There can be no adequate substitute for these metals.

Says Mr. Webster, in a speech made in the house of representatives in 1815: “The circulating medium of a commercial community must be that which is also the circulating medium of other commercial communities, or must be capable of being converted into that medium without loss. It must also be able not only to pass in payments and receipts among individuals of the same society and nation, but to adjust and discharge the balance of exchanges between different nations. It must be something which has a value abroad as well as at home, by which foreign as well as domestic debts can be satisfied. The precious metals alone answer these purposes. They alone, therefore, are money, and whatever else is to perform the functions of money must be their representative, and capable of being turned into them at will. So long as bank paper retains this quality it is a substitute for money; divested of this, nothing can give it that character.” 3 Webster’s Works, 41.

The clause to coin money must be read in connection with the prohibition upon the states to make anything but gold and silver coin a tender in payment of debts. The two taken together clearly show that the coins to be fabricated under the authority of the general government, and as such to be a legal tender for debts, are to be composed principally, if not entirely, of the metals of gold and silver. Coins of such metals are necessarily a legal tender to the amount of their respective values, without any legislative enactment, and the statute of the United States providing that they shall be such tender is only declaratory of their effect when offered in payment.

Power of congress to coin money

When the constitution says, therefore, that congress shall have the power to coin money, interpreting that clause with the prohibition upon the states, it says it shall have the power to make coins of the precious metals a legal tender, for that alone which is money can be a legal tender. If this be the true import of the language, nothing else can be made a legal tender. We all know that the value of the notes of the government in the market, and in the commercial world generally, depends upon their convertibility on demand into coin; and as confidence in such convertibility increases or diminishes, so does the exchangeable value of the notes vary. So far from becoming themselves standards of value by reason of the legislative declaration to that effect, their own value is measured by the facility with which they can be exchanged into that which alone is regarded as money by the commercial world.

They are promises of money, but they are not money in the sense of the constitution. The term “money” is used in that instrument in several clauses, — in the one authorizing congress “to borrow money;” in the one authorizing congress “to coin money;” in the one declaring that “no money” shall be drawn from the treasury, but in consequence of appropriations made by law; and in the one declaring that no state shall “coin money.” And it is a settled rule of interpretation that the same term occurring in different parts of the same instrument shall be taken in the same sense, unless there is something in the context indicating that a different meaning was intended.

Now, to coin money is, as I have said, to make coins out of metallic substances, and the only money the value of which congress can regulate is coined money, either of our mints, or of foreign countries. It should seem, therefore, that to borrow money, is to obtain a loan of coin money; that is, money composed of the precious metals, representing value in the purchase of property and payment of debts. Between the promises of the government, designated as its securities, and this money, the constitution draws a distinction, which disappears in the opinion of the court. The opinion not only declares that it is in the power of congress to make the notes of the government a legal tender and a standard of value, but that under the power to coin money and regulate the value thereof, congress may issue coins of the same denominations as those now already current, but of less intrinsic value, by reason of containing a less weight of the precious metals, and thereby enable debtors to discharge their debts by payment of coins of less real value.

This doctrine is put forth as in some way a justification of the legislation authorizing the tender of nominal money in place of real money in payment of debts. Undoubtedly congress has power to alter the value of coins issued, either by increasing or diminishing the alloy they contain; so it may alter, at its pleasure, their denominations; it may hereafter call a dollar an eagle, and it may call an eagle a dollar. But if it be intended to assert that congress can make the coins changed the equivalent of those having a greater value in their previous condition, and compel parties contracting for the latter to receive coins with diminished value, I must be permitted to deny any such authority. Any such declaration on its part would be not only utterly inoperative in fact, but a shameful disregard of its constitutional duty.

‘Shallow and impudent artifice’

As I said on a former occasion: “The power to coin money, as declared by this court, is a great trust devolved upon congress, carrying with it the duty of creating and maintaining a uniform standard of value throughout the Union, and it would be a manifest abuse of this trust to give to the coins issued by its authority any other than their real value. By debasing the coins, when once the standard is fixed, is meant giving to the coins by their form and impress a certificate of their having a relation to that standard different from that which in truth they possess; in other words, giving to the coins a false certificate of their value. Arbitrary and profligate governments have often resorted to this miserable scheme of robbery, which Mill designates as a shallow and impudent artifice, the “least covert of all modes of knavery, which consists in calling a shilling a pound, that a debt of one hundred pounds may be canceled by the payment of one hundred shillings.”

No such debasement has ever been attempted in this country, and none ever will be so long as any sentiment of honor influences the governing power of the nation. The changes from time to time in the quantity of alloy in the different coins has been made to preserve the proper relative value between gold and silver, or to prevent exportation, and not with a view of debasing them. Whatever power may be vested in the government of the United States, it has none to perpetrate such monstrous iniquity. One of the great purposes of its creation, as expressed in the preamble of the constitution, was the establishment of justice, and not a line nor a word is found in that instrument which sanctions any intentional wrong to the citizen, either in war or in peace.

The framers of the constitution, as I have said, were profoundly impressed with the evils which had resulted from the vicious legislation of the states making notes a legal tender, and they determined that such a power should not exist any longer. They therefore prohibited the states from exercising it, and they refused to grant it to the new government which they created. Of what purpose is it, then, to refer to the exercise of the power by the absolute or the limited governments of Europe, or by the states previous to our constitution? Congress can exercise no power by virtue of any supposed inherent sovereignty in the general government. Indeed, it may be doubted whether the power can be correctly said to appertain to sovereignty in any proper sense, as an attribute of an independent political community. The power to commit violence, perpetrate injustice, take private property by force without compensation to the owner, and compel the receipt of promises to pay in place of money, may be exercised, as it often has been, by irresponsible authority, but it cannot be considered as belonging to a government founded upon law.

If not enumerated, you can’t do it

But be that as it may, there is no such thing as a power of inherent sovereignty in the government of the United States. It is a government of delegated powers, supreme within its prescribed sphere, but powerless outside of it. In this country, sovereignty resides in the people, and congress can exercise no power which they have not, by their constitution, intrusted to it; all else is withheld.

It seems, however, to be supposed that, as the power was taken from the states, it could not have been intended that it should disappear entirely, and therefore it must, in some way, adhere to the general government, notwithstanding the tenth amendment and the nature of the constitution. The doctrine that a power not expressly forbidden may be exercised would, as I have observed, change the character of our government.

Impairing private contracts

Mr. Madison, in one of the articles in the Federalist, declared that laws impairing the obligation of contracts were contrary to the first principles of the social compact, and to every principle of sound legislation. Yet this court holds that a measure directly operating upon and necessarily impairing private contracts, may be adopted in the execution of powers specifically granted for other purposes because it is not in terms prohibited, and that it is consistent with the letter and spirit of the constitution.

From the decision of the court I see only evil likely to follow. There have been times within the memory of all of us when the legal-tender notes of the United States were not exchangeable for more than one-half of their nominal value. The possibility of such depreciation will always attend paper money. This inborn infirmity no mere legislative declaration can cure. If congress has the power to make the notes a legal tender and to pass as money or its equivalent, why should not a sufficient amount be issued to pay the bonds of the United States as they nature? Why pay interest on the millions of dollars of bonds now due when congress can in one day make the money to pay the principal?

And why should there be any restraint upon unlimited appropriations by the government for all imaginary schemes of public improvement, if the printing-press can furnish the money that is needed for them?

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