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Spring 2005

ISSN 0890-913X

Volume 20, Number 2

Categories: Spring 2005 | Currencies

Money and the Adoption of the U.S. Constitution

Clifford F. Thies , Shenandoah University

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MoneyandtheAdoptionoftheU.S.ConstitutionCliffordF.ThiesShenandoahUniversityThispaperreviewstheexperienceoftheearlyUnitedStateswithpapermoneyfromtheendoftheRevolutionaryWar,in1783,totheratificationoftheU.S.Constitution,in1789.Underthenewconstitution,thestatesoftheUnitedStatessubjectedthemselvestothefederalgovernmentincertainwaysregardingmoneyanddebt.Thecommonmonetaryunitofthecountry,theDollar,wasthereupondefinedbytheU.S.Congressasameasureofsilverorofgold.1TheU.S.ConstitutionreservedfortheCongressthepowerAtocoinmoney,regulatethevaluethereof,andofforeigncoin@(ArticleISection8).And,stateswereforbiddentoAcoinmoney,emitbillsofcredit,makeanythingbutgoldandsilvercoinatenderinpaymentofdebts@(ArticleISection10).Theseprovisionsdidmorethanfixtheexchangeratesamongthecurrencies(Abillsofcredit@)thatmightbeissuedbythestates.Theyprohibitedthestatesfromissuingcurrencies,andsoimposedacommonmonetaryunitontotheunion(Rolnick,SmithandWeber,1993).Statesretainedthepowertocharterbanksthatcouldissuebanknotesthatcouldcirculateasamediumofexchange.But,thesebanknotescouldnotbegivenlegaltenderstatus,andwereonlyacceptedbecauseoftheirconveniencerelativetosilverorgold,andthereputationsoftheirissuers.Inthissystem,choiceandcompetitionincurrency(mediumofexchange)wasunderpinnedbyaconstitutionalprovisionreservinglegaltenderstatustosilverandgold.Inadditiontothisarrangementofmonetarypowers,theU.S.ConstitutiongrantedCongressthepowerAtoestablishYuniformlawsonthesubjectofbankruptciesthroughouttheUnitedStates@1Through1834,theU.S.ratiowas15to1,andsilvercirculatedasmoneyandgoldasacommodity.After1834,whentheU.S.ratiowassetat16to1,bothgoldandsilvercirculatedasmoney,althoughtherewassomethingofaproblemwithsilver(seeCarothers1967,pp.98-101).

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Metadata [hide]

Title	Money and the Adoption of the U.S. Constitution
Authors/Creators:	Clifford F. Thies , Shenandoah University
Year:	2005
Volume:	20
Number:	2
Pages:	148 - 165
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Money, Constitution, Monetary Policy, Credit Policy, Rule of Law, Banking, Hard Currency, Fiat Money

Citation:
Thies, Clifford F. / 2005. "Money and the Adoption of the U.S. Constitution." The Journal of Private Enterprise, 20(2): 148-165.