Moreover, the Constitution itself created a government of enumerated powers thus, absent an express grant, Congress lacked the power to act. Given the Framers’ general hostility to paper money (James Madison, for instance, bemoaned its “pestilent effects” under the Articles), it is likely that the Framers’ intended to prohibit the federal government from issuing bills of credit, just as they expressly barred the states from doing so. As a result, the Constitution’s monetary clauses expressly grant Congress the power to coin money and to borrow money by issuing “notes” (i.e., interest-bearing government bonds), but not to issue bills of credit. At the Constitutional Convention, it was proposed to give the federal government the power to “emit bills on the credit of the United States,” but the language was defeated as being too prone to abuse. With respect to Congress’s power, however, the issue is not as clear. In response to the revolutionary history, Article I, Section 10, of the Constitution expressly prohibits the states from issuing bills of credit. Under the Articles of Confederation, both the federal and state governments were guilty of rampant inflationary issuance of bills of credit to finance the Revolutionary War. Linguistic and conceptual usage during the Founding era distinguished between several different concepts: the power to “coin” specie money (i.e., money backed by gold or silver), the power to borrow money through the issuance of interest-bearing “notes,” and the issuance of “Bills of Credit.” Unlike coined money, whose value was inherent in the metal that composed the coin, and unlike “notes” that accrued interest, a bill of credit was non–interest-bearing paper money issued on the good credit of the United States with no tangible backing in precious metal. In particular, although the Coinage Clause empowers Congress to coin money from precious metals, it is not clear whether the federal government could also issue paper money. The Constitution gave both powers to Congress to encourage domestic and foreign commerce by preventing the states from attaching disparate valuations to circulating coins.īeyond these simple issues, however, the scope of the federal government’s powers under the Coinage Clause is unclear. Under the Articles, Congress held the former power but not the latter. Second, Congress is empowered to regulate the value of the coins struck domestically and to set the value of foreign coins. The elimination of the states’ power to coin money and the exclusive grant to Congress provoked controversy because the power to coin money was traditionally understood as a symbol of political sovereignty.
To create a more standardized monetary system and reduce the costs of running mints, the Constitution granted this power to Congress exclusively. Under the Articles of Confederation, the power to coin money was a concurrent power of Congress and the states. First, Congress is granted the authority to “coin money,” which authorizes Congress to coin money from precious metals such as gold and silver. An excerpt:Ĭongress’s power to coin money is exclusive: under Article I, Section 10, the states are not permitted to “coin Money emit Bills of Credit make any Thing but gold and silver Coin a Tender in Payment of Debts….” Whereas the prohibitions on the states are clear and detailed, Congress’s grant of power under the Coinage Clause is open-ended.
The Heritage Foundation’s Guide to the Constitution contains an analysis on the Constitution’s provisions relating to the federal government’s monetary powers written by Todd Zywicki, Foundation Professor of Law , George Mason University School of Law. Originally posted on Tuesday, December 24th, 2013
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