The Online Library of Liberty

A project of Liberty Fund, Inc.

• Shorter Works of Lysander Spooner, Volume I
• The Deist’s Immortality, and an Essay On Man’s Accountability For His Belief.
• The Deist’s Immortality.
• An Essay, On Man’s Accountability For His Belief.
• Worcester Republican.—extra.
• The Deist’s Reply.
• Chapter I.: The Early Spread of Christianity.
• Chapter II.: The Nature and Character of Jesus.
• Chapter III.: The Alleged Miracles of Jesus.
• Chapter IV.: The Prophecies.
• Chapter V.: The Resurrection.
• Supreme Court of United States, January Term, 1839. } Spooner Vs. M’connell, Et, Al.
• Constitutional Law.
• Chap. I.: The Unconstitutionality of All State Laws Restraining Private Banking and the Rates of Interest.
• Chap. II.: What Bank Charters Are Unconstitutional.
• Chap. III.: What Bank Charters Are Constitutional.
• Chap. IV.: The Power of Congress Over the Currency.
• Errata.
• Poverty: Its Illegal Causes and Legal Cure. Part First.
• Chapter I.: Illegal Causes of Poverty.
• Chapter II.: Economical Propositions.
• Chapter III.: Economical Results From the Preceding Propositions
• Chapter IV.: Social, Moral, Intellectual, and Political Results From the Preceding Propositions.
• Chapter V.: The Legal Nature of Debt.
• Chapter VI.: The Legal Nature of Debt.—( Continued. )
• Who Caused the Reduction of Postage? Ought He to Be Paid?
• Illegality of the Trial of John W. Webster.
• A New System Paper of Paper Currency.
• Part First
• Note.
• Chapter I.: Outline of the System.
• Chapter II.: Advantages of the System.
• Chapter III.: Security of the System.
• Chapter IV.: Practicability of the System.
• Chapter V.: Legality of the System.
• Part Second.
• Articles of Association of a Mortgage Stock Banking Company.

CHAP. IV.

THE POWER OF CONGRESS OVER THE CURRENCY.

It is a general rule of construction, that where the constitution has clearly and particularly defined a power given to congress, that definition limits the power. And I know of no reason that has ever been given why this rule does not apply in this case, as well as in any other. What then are the powers of Congress over the currency?

All the powers that are expressly given to Congress, over the currency, are the powers “to coin money, and regulate the value thereof, and of foreign coins”—and “to provide for the punishment of counterfeiting the securities and current coin of the United States.”

These powers are certainly very few, very simple, very definite, and perfectly intelligible. First, “To coin money”—we all know what that means. Second, “To regulate the value thereof, and of foreign coins”—that is, to fix their legal value relatively with each other. This also is a very definite and intelligible power. Third, “To provide for the punishment of counterfeiting the securities and current coin of the United States.” This power is also so clearly expressed, that its limits are distinctly seen. It authorizes the punishment of “counterfeits”—that is, fraudulent imitations, of the securities and current coin of the United States—and it does nothing more. These are all the powers expressed in the constitution, on this subject—and strange as it may appear, not one of them embraces any power “to regulate exchanges,” or to regulate any other currency than coin, or to prohibit or punish the use of any thing, as a currency, except it be “counterfeits,” or fraudulent imitations, of the securities or current coin of the United States.

But collateral with these powers of Congress, is a prohibition upon the States, “to coin money, emit bills of credit, or make any thing but gold and silver coin a tender in payment of debts.”

These are the only provisions relied upon by the advocates of a compulsory metallic currency, to prove that it was the intention of the constitution that the people should not be allowed voluntarily to use any currency except such as might be provided for them by the government, in conformity with these provisions.

The confusion that has arisen on this point, seems all to have resulted from confounding the terms “money” and “currency.” It seems to have been taken for granted that all currency is necessarily money. But this is by no means the fact. It is true that “money” is pretty likely to be used as currency, to some extent—though it is not necessarily so to any considerable extent—and there can be no legal compulsion upon the people to use it as currency at all. But there may be many kinds of currency besides money. Currency may be any thing having value, or presumed to have value, which, on account of its greater convenience, or for lack of money, or for any other reason, is by mutual consent of the parties to bargains, given and received in lieu of, or in preference to, money.

Coined money, which is the only kind of money recognized by our constitution, consists of pieces of metals stamped by authority of government. The metals, previous to being stamped, are mere merchandize like any other commodity. The pieces of metal stamped, are of a particular weight and fineness prescribed by law—and the object and effect of the stamp are merely to fix upon them the government certificate to their amount and quality.

It was undoubtedly supposed that these coins, on account of their portableness, and on account of their amount and quality being accurately known, would be bought and sold, to a considerable extent, from hand to hand, as a currency, that is, in exchange for other commodities. But there is no evidence of any intention, on the part of the constitution, to preclude the people from the enjoyment of their natural right freely to buy and sell, from hand to hand, any other articles of property, which the parties might agree upon—whether those articles should be notes of hand, certificates of stock, bills of exchange, drafts, orders, checks, or whatever else might happen to be convenient for such purposes.

The more important object of the coins probably was to provide an article or subject of “tender in payment of debts,” that should be uniform throughout the country, and of nearly equal value in every part of it. It was of very great importance to the promotion of free commercial intercourse between the citizens of the different states, (which was one of the greatest objects the constitution was intended to secure,) that the subject of “tender” should be uniform throughout the country—otherwise contracts, made in one state, might not be strictly, or even tolerably, enforced, in the other states. And hence it is provided that “no state shall make any thing but gold and silver coin a tender in payment of debts.”*

“Currency” may consist of any thing that is a legitimate subject of bargain and sale, provided it be so portable, and its value capable of being so nearly and readily judged of, as that parties to bargains are willing frequently to buy and sell it, in exchange for other commodities.—The use of any article as currency, (whether the article be coined money or any thing else,) consists merely in buying and selling it frequently—or more frequently than property in general. Now the constitution of the United States lays no restraint upon the frequent purchase and sale of any article of marketable property whatever.

Experience proves, that the value of promissory notes, checks, bills of exchange, certificates of stock &c., can, in many cases, be so nearly and readily judged of, that men as readily agree upon their value, and as willingly buy and sell them in the course of their dealings with each other, as they do coined money, and that in many cases they even prefer them to money. In so far as they are voluntarily bought and sold in this manner, they constitute as legitimate and legal a currency, as money itself. The principal practical difference between this kind of currency and money, is this. The latter is a legal subject of “tender,” that is, a debtor can require his creditor to receive it, or nothing, in payment of his dues—whereas he cannot require him to receive any other “currency.” If the creditor voluntarily receive the other currency, the debt is cancelled as legally and effectually as if the payment had been made in money. But if the creditor, either because he doubt the solvency of the paper currency, or for any other reason, elect to refuse it, the debtor must then procure and tender the money, before he can demand that his debt be cancelled.

The principles contended for by some advocates of metallic currency, that coined money is the only article that can constitutionally be used as a currency—that is, that it is the only article of property that can be legally bought and sold frequently—would lay very great restraints upon trade, and be a manifest violation of men’s natural and constitutional right to contract, make bargains, and exchange and acquire property.

Again. The constitution expressly provides for an exclusive “tender”—but it has no provision whatever in prohibition of any merely voluntary currency that might obtain among the people. Nor could there consistently have been any such prohibition, unless on the supposition that the people were incompetent to make their own bargains. This express provision for an exclusive “tender,” and the entire omission of any provision in regard to an exclusive currency, could not have been matters of accident. It was well known, at the adoption of the constitution, that paper currency was in use both in this country and elsewhere, and if the constitution had intended to lay any restraint upon its use, so far as it might be voluntary between individuals, it certainly would have contained some explicit provision on the subject.

But it is said that coined money is established as a “standard of value,” and that it was the intention of the constitution, that all other commodities should be “measured” by it—that is, bought and sold with and for it—(for that is the only way of measuring the value of commodities by money)—and that the use of any other currency, varies the value of this standard. This is a very common, but certainly a very groundless and preposterous argument. Strange as the fact must be presumed to appear to these “standard” advocates, it is nevertheless true, that the constitution no where authorizes or suggests the establishment of any “standard” for measuring the “value” of commodities in general. It expressly authorizes a “standard of weights and measures”—but it nowhere alludes to a “standard of value.” And the reason of this omission probably was, that the framers of the constitution understood two things, viz, that the value of any “standard” must of necessity be as uncertain and conjectural as the value of the commodities to be measured by it—and, secondly, that as the value of any standard must depend principally upon the value of the commodity of which it should be composed, the standard itself must necessarily and constantly vary and fluctuate in value like other commodities—that is, according to the wants, necessities and caprices of mankind in regard to the use of that commodity.

Money or coin, properly speaking, instead of being a “standard of value,” is a mere commodity, whose quantity and quality are ascertained—but whose “value” is a matter of conjecture, caprice and fluctuation, like the value of all other commodities. Instead of measuring the value of other commodities, it is merely sold for other commodities, just as other commodities are sold for it. It no more measures the value of other commodities, than other commodities measure its value.

It was undoubtedly supposed by the framers of the constitution, that the “money,” which was to be “coined,” and which was to constitute the only legal “tender in payment of debts,” would be the commodity, in which debts would generally be promised to be paid. And the government itself coins this money, and places its stamp upon it, and prohibits and punishes any counterfeiting or imitation of it, in order that parties, and especially courts of justice, may always know with certainty, (without having the article weighed and assayed again,) whether the thing tendered by the debtor, be the identical thing, in quantity and quality, that he had promised to pay. But the government does not at all assume to fix the value of this money that is promised. It only adopts the means necessary for having the thing itself indentified—its quantity and quality proved. It leaves the “value” of the thing to be conjectured, as the value of all things must be. The value of the thing too, may be greater, or it may be less, at the time when it is paid or delivered, than it was at the time the promise was made. This will depend, in a measure, upon the greater or less consumption or use there is, by the community, of the material of which the money is composed. But the government takes no note of this variation. It leaves the parties, debtor and creditor, to take each their respective risks as to whether the value of the money promised, will be greater or less, at the time of payment, than at the time of making the contracts. The government provides only that the identical thing promised, shall be paid—it at no time attempts to dictate the value that either party, or the public, shall put upon that article. The government, in short, prescribes only the quantity and quality of their coins—leaving their value to be regulated by the wants of society, and to be conjectured by each individual who may at any time buy or sell them. It does nothing, and has a right to do nothing, to prevent a depreciation in their value, in consequence of the people’s buying and selling other articles of property in preference to them.

But it will be said that Congress are authorized “to coin money, and regulate the value thereof, and of foreign coins.” This is true—but its obvious meaning is, that Congress shall fix the value of each kind or piece of coin, relatively with the other kinds or pieces,—that they shall, for instance, decide what weight and fineness in a silver coin, shall constitute it equal in value to a gold coin of a certain weight and fineness. It means that they shall have power to declare that a dollar of silver shall be equal in value to a dollar of gold, and that they shall decide what weight and fineness of each of these metals shall constitute the dollar, or unit of reference. Congress, then, have power to fix the value of the different coins, relatively with each other—or to make them, respectively, standards of each other’s value. But they have no power to make them “standards of the value” of anything else, than each other—or to fix their value relatively with any thing, but each other. Nobody will pretend that Congress have power to fix the value of coin relatively with wheat, oats or hay—that they have power to say that a dollar shall be equal in value to a bushel, a peck, or even a pint, of wheat or oats. And it is only in the single case of a “tender in payment of debts,” that the legal value of the coins, relatively with each other, can be set up. In all other cases individuals are at perfect liberty to give more or less for any one of the coins than they would for any others of the same legal value.

But it will perhaps be argued that the custom of mankind is to measure the value of commodities generally by the value of coin—and that it was the intention of the constitution that coin should be, in practice, a “standard of value.” But this custom is by no means universally observed, for different kinds of property are continually exchanged, or bought and sold with and for each other, without the value of either being estimated in coin—and nobody doubts the legality of such purchases and sales. And even when the value is estimated in coin, it is the result of habit and convenience, and not of any requirement of law. But, in point of fact, when any article of property is sold for coin, such article as much measures the value of the coin, as the coin measures the value of such article. If a dollar in coin and a bushel of wheat are exchanged for each other, the wheat as much measures the value of the dollar, as the dollar measures the value of the wheat.

We hear much of an analogy between a “standard of weights and measures,” and a “standard of value”—as if the constitution recognized such an analogy. But no such analogy is recognized by the constitution, nor does it, nor can it exist in fact. It exists mainly in sound. They differ in the essential quality of a standard, viz, that of being fixed. Standards of quantity can be fixed, and when fixed, they remain unalterable—because they consist of certain amounts of matter, and matter is indestructible. They also bear a fixed, ascertainable and unalterable proportion to other quantities of matter. But the values of different commodities, as compared with each other, can only be conjectured at any time, and the values of all articles, (as well those that may be selected as standards, as any others,) necessarily fluctuate with the ever varying wants and caprices of mankind—for it is only the wants and caprices of mankind that give value to any thing.*

But admitting, for the sake of the argument, that coins are “standards, of value”—and that there is presumed to be, by the constitution, and that there actually is, an analogy between a “standard of weights and measures,” and a “standard of value”—still nothing can be inferred from that analogy, to justify any restraint upon the free use of such other currency than coin, as parties may voluntarily agree to give and receive in their bargains with each other. Congress fixes the length of the yard-stick, in order that there may be some standard, known in law, with reference to which contracts may conveniently be made, (if the parties choose to refer to them,) and accurately enforced by courts of justice when made. But there is no compulsion upon the people to use this standard in their ordinary dealings. If, for instance, two parties are dealing in cloth, they may, if they both assent to it, measure it by a cane or a broom-handle, and the admeasurement is as legal as if made with a yard-stick. Or parties may measure grain in a basket, or wine in a bucket, or weigh sugar with a stone. Or they may buy and sell all these articles in bulk, without any admeasurement at all. All that is necessary to make such bargains legal, is, that both parties should understandingly and voluntarily assent to them—and that there should be no fraud on the part of either party. The use of a paper currency is somewhat analogous to the use of some other measure of quantity than those standards specially instituted by law. Whenever other currency than coin is given and received, it is necessarily done with the knowledge and consent of both parties—because the difference between the form and material of a promissory note, and those of a metallic dollar, is so great as to render the substitution of one for the other, without the knowledge of both parties, impossible.

One argument more is perhaps worthy of notice. It is said that the “regulation of the currency, is a prerogative of sovereignty”—and it is hence taken for granted to be a prerogative of our own governments. It may be, and probably is, an assumed prerogative of all despotic governments—for such governments assume to control every thing they please. But our governments have no prerogatives except what the people have given to them* —and among those, is no one to dictate what articles of property may, and what may not, be bought and sold so frequently as to become practically a currency. The power to coin money, and regulate the value thereof, and of foreign coins, and to make those coins an exclusive “tender in payment of debts,” and to provide for the punishment of counterfeiting the securities and current coin of the United States, are the only prerogatives conferred by the people upon our governments, with any direct or evident view to a “control of the currency.” The object of conferring these prerogatives on the government, obviously is, to prevent litigation, and facilitate the enforcement of contracts by courts of justice, by providing a legal medium for paying debts, where the parties cannot otherwise agree between themselves. And it was doubtless also another object, incidentally, to furnish a convenient currency, which the people should be at liberty to use, (that is, buy and sell,) if they should choose to do so. But such prerogatives as these are as different from that of restraining the people from the frequent purchase and sale of any thing else that they may prefer to these coins, as liberty is from tyranny.

But—granting all that the advocates of a compulsory metallic currency claim—that it is a prerogative of government to regulate the currency—that our coins are standards of value—and that the value of these standards will be varied, unless the use of all other currency be prohibited—grant all this, and it makes nothing in favor of any power in the state governments to regulate the value of this standard, either by usury laws, or by restraining the use of any other currency that the people may choose. Congress have all the power that exists in either government, for “regulating the value of coined money,” and if they, either from choice, or because they have no power to do otherwise, have left the value of this money to be regulated by the best of all regulators—the laws of trade, and the wants of the people—any attempt, on the part of the state governments, to interfere with such regulation, is as impertinent as it is unconstitutional.

[* ] The decision, of some of our state courts, that bank bills are a legal tender, unless objected to by the creditor, are palpably unconstitutional. The courts have as much right to say that the promissory notes of any other individuals, who are supposed to be solvent, are a legal tender, unless objected to, as to say that the promissory notes of a company of bankers are such a tender.

[* ] The value of gold and silver, as currency, depends mainly upon the value they have for other purposes, such as gilding, dentistry, watches, ornaments &c. And their value for these latter purposes, depends upon their beauty and utility, compared with those of other articles, that are continually manufactured, invented and discovered, and made to compete with them in gratifying the wants and vanity of men. This value is affected again, by prevailing fashions, and the greater or less fondness of society for trinkets, ornaments &c. This value is modified still further, by the scarcity or abundance of the metals themselves—by the discovery of new mines, the barrenness and fertility of old ones, and the price of labor in mining countries. Their value is also controlled and changed, in one country, by the legislation of other countries. And their general value, throughout the world, is continually varied by the ever changing conditions of society—by war, by peace, by the progress of the arts, and the increase of wealth, population and commerce. If it were, (as it is not,) in the nature of things, that a “standard of value” could be established at all, a more unstable and tensile standard than gold and silver, could hardly be found. And every touch of legislation, instead of fixing, serves but to contract or extend it. When the various elements of value, viz, fancy, fashion, caprice, utility, necessity, supply, demand, production, consumption, labor, legislation, war, peace, the progress of the arts, wealth, population, commerce, and, above all, the judgments of men in estimating value, shall all be brought under the jurisdiction of the legislature, and made to obey the statutes in such cases made and provided, it will then be in time to talk about establishing “standards of value.”

[* ] I am aware that it is the judicial doctrine, in this country, that our state governments possess all powers, except what are expressly prohibited to them. But this doctrine had the same origin with the one that the law makes a part of the contract. It is a purely despotic doctrine, and is borrowed from governments founded originally in force and usurpation, and which have retained all powers, except what have been wrested from them by the people. It is a consistent principle, that such governments have all powers, except what are prohibited to them. And our judges, in blind obedience to monarchical precedents, or in base subserviency to legislative usurpation, have introduced the principle into this country. But our governments, neither state nor national, were founded in force or usurpation; nor do they exist either by natural or divine right. They are mere institutions, voluntarily created by the people. Their very existence and all their powers are derived solely and wholly from the grants of the people. Of necessity, therefore, they can have no powers, except what are granted. This principle is universally admitted to be true of the national government, and it is equally true, (and for the same reason,) of the state governments. The contrary doctrine is the authority, and the only authority, for a large mass of state legislation, destructive of men’s natural rights. Of this legislation, the laws restraining private banking and the rates of interest, are specimens. These two doctrines, that the law makes a part of the contract, and that the state legislatures have all powers, except what are specially prohibited to them are illustrations of the insidious manner, in which the judiciary lend their sanction to the most sweeping encroachments upon individual liberty, and the vital principles of our governments.