THE WRITER’S FREE INTERNET EDITION – VOLUME III __________________________________________________________________ THE U.S. CONSTITUTION AND MONEY Corruption and Decline by Michael S. Rozeff Emeritus Professor of Finance University at Buffalo EAST AMHERST 2010 DEDICATED To NORMAN AND ROBERT True Brothers PREFACE This is Volume III of The Writer’s Free Internet Edition Series. Volume I has not been written yet. Volume II is Essays on American Empire. This volume is a summary of Edwin Vieira Jr.’s Pieces of Eight: The Monetary Powers and Disabilities of the U.S. Constitution. I composed this book’s thirteen chapters between March and June of 2010, writing them sequentially as I worked through Vieira’s masterwork for the second time. Upon my first reading of Vieira’s two-volume work, I recognized its importance to our knowledge of both the U.S. Constitution and money. Wanting to understand it thoroughly, I decided to write a summary. This served a broader purpose. I saw that the book was out of print and, even if it were in print, was long and technical. I believed that the presentation of the book’s contents to a broader audience would benefit from condensation, distillation, and from the unified perspective of someone like me who is versed in finance. Yet I did not want to water down the content. The result is what you have before you. It contains a summary but it is more than a summary. I have integrated the content, which at times required reordering and going beyond that content into my own research and formulations; and I have also pared down that content without losing Vieira’s central arguments, observations, and findings. Why devote some months to such a project? This is part of a larger quest of mine to understand money and banking to my satisfaction and to be able to communicate what truths about money and banking that I think are firm, the reason being that this field is subject to a high degree of confusion and disagreement. My personal motivation was, in part, that I found that I could not invest properly without becoming more expert in this and related fields. I have worked on the money projecPtR oEffF aAnCdE on since 2005 without it yet v culminating in a single book with my thoughts on the subject; I’ve produced several articles along the way with preliminary ideas and conclusions. Money and banking is an area connected to large social and political ideas and to government. It is one of the major areas so to be connected. That is a major reason why it occupies the attention of many observers and critics of existing political arrangements. Money and banking is an area connected to the economic travails of the past few years and connected as well to many issues of corporate, public, and investment finance, both domestic and international. These are other reasons why I believe Vieira’s work and the subject are worthy of intensive study. And beyond these is the fact that money is a constitutional matter. We can learn much about government and the Constitution by examining the conjunction of money and the Constitution. Vieira’s political philosophy differs very greatly from mine. In the face of what I see as irreconcilable differences in the views of Americans, I believe that choice in government on a non-territorial basis (panarchy) is the only reasonable solution that preserves peace and the rights of all, while furthering justice and opening avenues to prosperous developments. Panarchy means that those who wish to continue living with and under the existing U.S. government can choose to do so, while those who wish to choose other governments can do so without dividing up territory into separate bordered jurisdictions. Vieira, by contrast, believes in the law represented by the Constitution. He accepts the Union. He wants change within the Union. He documents the ways in which successive U.S. governments have undermined that Constitution in one important area, which is that of money. He calls for reforms to restore the righful constitutional money. He would keep the territorial U.S. government intact for all Americans but on a reformed basis that obeyed the Constitution. Naturally, this would call for other important reforms beyond the area of money. In his book on money, Vieira does not entirely spell out his concept of a proper constitutional Union and government. That was not his purpose, and it would take him several more volumes, such as his new work on militia. I am somewhat sympathetic to the outcome that he prefers, which is a dissolution of the corporatist nature of existing government and its replacement by a greatly reduced and well-controlled government If it could be done and this is what most Americans wanted, it would be a vastly different arrangement than the current one. It would, in my opinion, result in a large but probably only temporary improvement. Would it work out in the long run? I don’t think so. vi PREFACE At best, the game of growing government would restart because government would still be needlessly coercive. I do not endorse minarchism. Would a vastly reduced government be a step toward panarchy and choice in government or would it be an obstacle? This depends on what is in the hearts and minds of people. I believe that any single and exclusive government over a territory and one that has the power to tax remains an oppressive entity that will tend to get more oppressive over time. I think that any government that purports to govern all of America, even if it starts out small as did the government in 1789, will accrete power over time. It will be an obstacle to panarchy. After completing this book and seeing in more detail what government had done and how it had done it in the area of money alone, I became more convinced than ever that implementing what constitutionalists like Vieira conceive to be a correctly interpreted Constitution is such an uphill struggle with such uncertain outcomes, none of which gets to a truly consensual constitution, that going for panarchy is a direction more likely to eventuate in a significantly improved situation. A properly-interpreted U.S. Constitution that gives rise to a well-governed territorial society, in which the U.S. government has tax and other powers, is a mythical construction. It has never existed, and I doubt that it ever can exist. Such a government, that forces people to pay taxes, is, in my view, inherently evil, inherently prone to become more evil, and inherently a government that produces wrong results. The differences in political philosophy between Vieira and me did not influence my summary of Vieira’s work in any important respect of which I am aware. Regardless of philosophy, his work challenges the justifications of those who believe in a living Constitution. It challenges those who believe in judicial supremacy. It challenges Americans who have failed to preserve their liberties. It challenges those who believe that fiat money is constitutionally- allowable. It challenges those who believe that the Federal Reserve System is constitutionally-allowable. It challenges the government’s gold seizure. It points out serious shortcomings and fatal flaws in many Supreme Court and lower court decisions. It points out serious shortcomings in the political workings of the nation. So, no matter what one’s political philosophy is, the knowledge that Vieira has given us is valuable. No doubt, people who support fiat money, central banking, the living Constitution, and judicial supremacy will try to ignore Vieira’s work and my summary. Failing that, they will attempt to re-interpret what has happened and vii PREFACE downplay past events and decisions. They will try to justify the status quo. They will defend the government’s subversion of the Constitution by all sorts of irrelevant considerations. No defense will stand up against Vieira’s work. It is too well documented and argued. I will demonstrate this throughout this book. That is the most important reason why his work on constitutional money is so significant. He has provided us with a factual and interpretative legal framework that any further rational argument or proposals cannot ignore. I can only hope to have done justice to that framework in placing it before you in such forms that make it as clear as possible while maintaining its essential truth and integrity. Michael S. Rozeff, East Amherst, New York. TABLE OF CONTENTS CHAPTER I MONEY AND THE DOLLAR IN THE U.S. CONSTITUTION Introduction . 1 Vieira’s view of constitutional meaning. 2 Arguments for original meaning . 3 Living Constitution faulty . 4 Criticisms of judicial supremacy . 5 Common law background . 7 Bills of credit . 8 Regulating the value of coin and the Spanish dollar .11 Constitution’s money provisions . .12 Meaning of money in the Constitution . .13 Meaning of the dollar . .14 Legal tender, borrowing, and counterfeiting . .17 Conclusion . .19 CHAPTER II COINAGE ACTS AND TREASURY NOTES: 1789-1860 Introduction . .22 Hamilton’s report in 1791 . .23 Coinage Act of 1792 . .27 Coinage Acts of 1834, 1837, 1849, 1853, and 1857 .29 ix TABLE OF CONTENTS Regulation of value: the floating solution . .31 Regulation of value: the fixed ratio method . .34 Fairness to creditors: example . .36 Knox v. Lee on the Coinage Act of 1834 . .37 Issuance of Treasury notes: 1812-1861 . .42 Veazie Bank v. Fenno (1869) . .46 Conclusion . .48 CHAPTER III CASES ON STATE BILLS OF CREDIT Prefatory remarks . .49 Introduction . .49 Craig v. Missouri (1830) . .51 Briscoe v. Bank of Kentucky (1837) . .59 Darrington v. Bank of Alabama (1851) .