Honest Money Gold & Silver Report

The Constitution of the United States
&
Honest Money

"All the perplexities, confusion and distresses in America arise not from defects in
the constitution or confederation, nor from want of honor or virtue, as much from downright
ignorance of the nature of coin, credit, and circulation." [1]

Abstract

This week’s discussion will be on the fifth monetary clause in the Constitution. As previously occasioned we will first list the seven monetary clauses found within the Constitution.

The seven clauses in the US Constitution that deal with the topic of money are:

The Fifth Clause

Article I, Section 9, Clause 7 states: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.

Keeping with the previous format we will break the above clause down into four sub-sections to more easily facilitate the discussion and understanding of the issues involved.

Money

As we have seen in the previous papers of this series, money, as used in the Constitution, meant the money unit of account of the United States. The money unit was explained in Jefferson’s letters of correspondence named:

NOTES ON THE ESTABLISHMENT OF A MONEY UNIT, AND OF A COINAGE FOR THE UNITED STATES

In the letter of 1784 Jefferson stated:

In fixing the Unit of Money, these circumstances are of principal importance.

I. That it be of convenient size to be applied as a measure to the common money transactions of life.

II. That its parts and multiples be in an easy proportion to each other, so as to facilitate the money arithmetic.

III. That the Unit and its parts, or divisions, be so nearly of the value of some of the known coins, as that they may be of easy adoption for the people.

The Spanish Dollar seems to fulfill all these conditions.

To prepare an Ordinance for establishing the Unit of Money within these States; for subdividing it; and for striking coins of gold, silver, and copper, on the following principles:

That the Money Unit of these States shall be equal in value to a Spanish milled dollar containing so much fine silver as the assay, before directed, shall show to be contained, on an average, in dollars of the several dates in circulation with us.

Coinage Act of 1792

Following Jefferson’s recommendations and further government studies, including those of Hamilton, the Coinage Act of 1792 legislated our money unit to be the Silver Dollar.

Section 9

“And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver, and copper, of the following denomination, values and descriptions, viz. Eagles—each to be of the value of ten dollars or units, and to contain two hundred and forty-seven grains and four eighths of a grain of pure, or two hundred and seventy grains of standard gold.

DOLLARS OR UNITS —each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.”

SECTION 11

“And be it further enacted, That the proportional value of gold to silver in all coins which shall by law be current as money within the United States, shall be as fifteen to one, according to quantity in weight, of pure gold or pure silver; that is to say, every fifteen pounds weight of pure silver shall be of equal value in all payments, with one pound weight of pure gold, and so in proportion as to any greater or less quantities of the respective metals.”

Section 20

“And be if further enacted, That the money of account of the United States shall be expressed in dollars, or units, dimes or tenths, cents or hundredths, and the milles or thousandths, a dime being the tenth part of a dollar, a cent the hundredth part of a dollar, a mille the thousandth part of a dollar, and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation.”

The above was the implementation of Article I, Section 8, Clause 5 of the Constitution, which states in part that: “Congress shall have the power to COIN money;” and with Article I, Section 10, Clause 1, which states: “No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.”

DRAWN FROM TREASURY

Drawn from the Treasury is fairly self-explanatory, as it means withdrawing money that has been deposited with the Treasury. Money is silver and gold coin. The clause says that no money can be drawn from the treasury without being in “Consequence of Appropriations.”

Thus no money can be drawn from the treasury without being in consequence of appropriations. The question then arises: who has the authority to appropriate money from the Treasury? The Treasury does – if it is first authorized by Congress, as the powers were granted to Congress, not to the Treasury.

Made by Law

This is where it the crux of the issue falls, and is most important and telling. As we have seen above, no money can be withdrawn from the Treasury, by the Treasury, unless in consequence of appropriations.

The Treasury can only withdraw money if it has first been authorized to do so by Congress – as a consequence of appropriation made by law.

In other words, Congress must authorize all withdrawals of money, and only as a consequence of appropriations made by law.

Federal Reserve Notes

Federal Reserve Notes are printed under the auspice of the Treasury. Once printed or created they are then transferred for delivery to the Board of Governor’s of the Federal Reserve, and from there into the Federal Reserve Banks.

The question naturally arises: how does Congress fulfil the mandate that such withdrawals must be as a consequence of their appropriation made by law? Where or how does Congress provide this legal appropriation? It doesn't, and never has in regards to Federal Reserve Notes.

Federal Reserve Notes are issued by the sole discretion of the Federal Reserve, and not by any other’s authorization, including Congress’s – nor by any controls or restraints subject to review by Congress.

The Federal Reserve Act states:

S EC. 16.

“Federal Reserve notes, to be issued at the discretion of the Federal Reserve Board for the purpose of making advances to Federal Reserve banks through the Federal Reserve agents as hereinafter set forth and for no other purpose, are hereby authorized…”

Since the above quote shows that Federal Reserve Notes are issued at the discretion of the Federal Reserve Board for the sole purpose of making advances to Federal Reserve banks, AND FOR NO OTHER REASON.

Thus it is quite clear that Congress makes no such appropriation by law, as the Federal Reserve Act clearly states that the Fed, at its discretion, issues FRN’s, as advances to Federal Reserve banks.

The above actions by the Fed are totally unconstitutional, as the Constitution in Article I, Section 9, Clause 7 states: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.

Thus ends our discussion on the fifth monetary clause of the Constitution. Next week we will attempt the sixth clause.

 

[1] John Adams in a letter to Thomas Jefferson

© 2006 Douglas V. Gnazzo

 

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Honest Money Gold & Silver Report