Constitution Lecture Extra: Coining Money and Legal Tender


Uploaded by shanedk on 23.09.2011

Transcript:
I think it's worthwhile occasionally to look around at claims that are being made and to
try and apply what we've learned so far in this series to try to reach conclusions.
This is a response to a video made by Dr. Tom Woods called, "Is Ron Paul Wrong on Money
and the Constitution?" He made this video as a response to critics who claim that Ron
Paul is wrong when he says that the Constitution requires gold and silver money, not fiat money.
I invite you to watch this video, and you may wish to do so before playing the rest
of this lecture. Dr. Woods does a good job of responding to these critics, however, he
misses what I believe is the most powerful argument in support of Ron Paul and those
who believe that the Constitution requires a commmodity money standard based on gold
and/or silver.
First, let's consider the arguments Dr. Woods made. His first argument is that there would
be a contradiction if the Federal government made copper coins a legal tender, but the
states could only use gold and silver. It's not his best argument, but okay.
His next argument is better: nowhere in Article I Section 8 is the Federal government given
the power to create a legal tender. However, there is a response to this that I've heard
over the years, and that is that the power to coin money includes the power to create
a legal tender. It is that argument that I will address later in this video.
But before I do, let's consider Dr. Woods's third argument: that the word "dollar" meant
something specific when the Constitution was ratified: specifically, a Spanish coin of
a particular weight and purity of silver. The Constitution uses the word "dollar" twice:
once in Article I Section 9 where it imposes a cap on the tax from the slave trade, and
again in the 7th Amendment, where it guarantees the right of trial by jury in suits where
the value in controversy exceeds 20 dollars.
Remember from Lecture 2 that the proper interpretation of the Constitution is to use the meaning
of the words as they were understood at the time. This is what Woods is doing. However,
as good an argument as this is, it does fall a little flat, in that neither of these clauses
directly deals with the government's power to coin money or to create legal tender. Although
it should be said that Woods did an excellent job showing that, by expressing this value
as a standard for taxation and for lawsuits, the Constitution was acknowledging the existing
standard by which the country's money was to be set, as evidenced by the fact that this
was standardized in the Coinage Act of 1792.
But I really don't think this is enough to convince the naysayers. There is a much better
argument that we can use, within a pure construction of the Constitution's original meaning, without
having to leave the Constitution itself.
As we discussed in Lecture 5, Article I Section 8 gives the Federal government the power to
coin money, while Article I Section 10 prohibits the states from coining money, and from making
anything except gold and silver coin legal tender. If the power is given anywhere to
the Federal government to create a legal tender, it's in the power to coin money, according
to those arguing that fiat money is Constitutional. But we can use these two clauses to soundly
refute that argument.
Since Section 10 expressly prohibits the states from coining money, then that power--and everything
included with it--is prohibited to them while Section 8 grants it to the Federal government.
But later in that very same clause, the Constitution says that states CAN extablish a legal tender,
it just can't be anything other than gold and silver coin. So, according to the Constitution,
the power to establish legal tender is a different power from the power to coin money. And as
it's a different power, then under Section 8 Congress only has the power to coin money,
not the power to establish a legal tender.
It is a vital part of any legal system that legal documents must at least be self-consistent,
and this is especially true of the Constitution. Saying that the power to coin money includes
legal tender in one section, but doesn't include it just two sections later, violates this
very important principle of justice. The Federal government has no power whatsoever under the
Constitution to establish a legal tender, and the states can only establish gold and
silver as legal tender, nothing else.
To say that the meanings of words and phrases in the Constitution are not even self-consistent
is to open the door to any kind of wacky interpretation you want, and justify any abrogation of our
rights, any power the governemnt wants to grab, and any tyranny they want to engage
in. For that reason, this argument is important not just for legal tender purposes, but for
the purposes of protecting our rights, our safety, and our very lives. Until next time,
stay strong and be free.