Honest Money Gold & Silver Report
"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."
This week's discussion will be on the fourth monetary clause in the Constitution. As previously occassioned we will first list the seven (7) monetary clauses found within the Constitution.
The seven clauses in the US Constitution that deal with the topic of money are:
Article I, Section 8, Clause 2. The Congress shall have Power...To borrow Money on the credit of the United States.
Article I, Section 8, Clause 5. The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.
Article I, Section 8, Clause 6. The Congress shall have Power...To provide for the Punishment of counterfeiting the Securities and current Coin of the United States.
Article I, Section 9, Clause 1. The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.
Article I, Section 9, Clause 7. No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.
Article I, Section 10, Clause 1. No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.
Amendment VII. In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved...
The Fourth Clause
Article I, Section 9, Clause 1. states that "the Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person."
As has been our custom, we will split the clause down into four (4) sub-topics to more easily facilitate the understanding of just what was said and meant.
Migration or Importation
Prohibited by Congress
Tax or duty not exceedng ten (10) dollars
Before proceeding with a discussion of the above listed sub-topics, we would like to quote a paragraph from the first paper of this series, which alluded to the definition of a dollar:
"Most striking is the fact that nowhere in the Constitution is a literal definition of the dollar provided. Was the lack of such an important definition as to the unit of account of our monetary system an oversight by such an august and learned group of men as the First Congress? Perhaps our investigations will shine some light on this question as well."
As we now proceed with the examination of the fourth clause, the exigesis of the definition of a dollar will naturally come about.
Migration or Importation
One of the more important aspects of the constitutional convention is not often discussed or written about: the secretacy that it took place behind closed and guarded doors; that the debates that took place inside were not divulged by the delegates to the news media or others outside the room; and that many deals or compromises were made to produce the final result, i.e. the Constitution.
One of the most sensitive of issues was that of slavery, which pitted pro-slavery factions against anit-slavery factions. The issue caused some representatives to walk out of the convention never to return - referring to the convention as a compact of evil intentions. But that is another story for another time.
The deal that was struck was that slavery was to be allowed or overlooked for the time being, or in the words of the clause: "the Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight..."
So if the States thought is was proper to admit such Persons (the reader can determine who such Persons referred to) they could do so if certain provisions were meant. What were the provisions?
Tax or Duty
As the clause continues on: "but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person..."
Ah yes - the infamous tax or duty - the States cut or vig for permission; for permission to do what? For permission to now do what before the vig was paid was illegal to do, but once the money is paid - everything is cool, as you have paid for your permit . What had been illegal, now becomes legal - at least in the eyes of the State. Greased palms can do wonders.
The pro-slavery advocates had to pay a ten dollar fee for each "person" in order for slavery to be allowed. This provision would not fly if the slave traders were not able to know the exact definition and value of the dollar that they had to pay.
In other words the dollar had to have a fixed value, otherwise the anti-slavery faction could force the slave trader's hand by increasing the purchasing power of the dollar. Thus more monetary value or purchasing power would exchange per imported person according to the stipulated rate of ten dollars.
Now the importance of the definition of a dollar is more easily seen. Not only is there an economical and monetary reason as to why the dollar should have a fixed standard of value - there was also the profit issue of slave trading, and the quantity and value of tax to be paid per person, i.e. ten dollars.
The question then is: what is a dollar according to the Constitution? As we said in the first paper - there is no exact or specific definition of a dollar spelled out in the Constitution.
Does this mean that there wasn't one? No it does not. Was there a definition for tax in the Constitution, or for letters of marque - no there was not, yet these things all existed and were known by the then current definition and usage that such afforded - the common and accepted definition.
We will now provide some examples as to the current definition of a dollar in pre-constitutional America. First, let us go back a bit in time, and then progress up to the writing of the Constitution, to better show the evolution of the term - a dollar.
An Act for Ascertaining the Rates of Foreign Coins in Her Majesty's Plantations in America, 1707, 6 Anne, ch 30, Section I.
In 1704, Queen Anne issued a proclamation declaring to the American Colonies that all foreign silver coins were to be "regulated, according to their weight and fineness" and compared to the standard of "the pieces of eight."
Next we have a letter from Thomas Jefferson, or a series of letters actually, which describe many aspects of the government soon to be put in place via the Constitution. The letter is dated April 1784.
NOTES ON THE ESTABLISHMENT OF A MONEY UNIT, AND OF A COINAGE FOR THE UNITED STATES.
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.
As can be seen from the dates of the above documents, this was the current state of affairs from 1704 to 1174 - just before the writing of the Constitution: about three-quarters of a century of pre-constitutional monetary history and usage. The letter from Jefferson was the immediate forerunner of the hard currency system of silver and gold coin of the Constitution.
If further evidence is needed there is the original The Coinage Act of 1792 that states:
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.
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 evolution of a dollar is seen by the above historical events to have taken place by the natural progression of free market dynamics. The market decided what was the most common medium of exchange most widely accepted. As Carl Menger has said:
"Money is not the invention of government, and requires no political authorization for its use."
Which is one of the many reasons why the government should not have the money power - it was never given to them by We The People. The government does not produce goods for sale in the market, why should an entity that does not bring goods to market have control of the money power - the common medium of exchange for the buying and selling of all goods and services. The money power should reside with those that make the market - We The People. It is by our hard labor that all is produced. It is for our consumption that all is produced. What does the government have to do with it? Remember this well and vote accordingly.
This ends our discussion of the fourth monetary clause of the Constitution. Next week the fifth clause will be attempted.
COMING SOON: A REQUEST FOR AN AUDIT OF US GOLD RESERVES