Today we bring you Part IV of “A Brief Monetary History of the United States” from the Ron Paul Monetary Policy Anthology. The full series can be found at the following links:
Part I – Colonial Money and the Coinage Act of 1792
Part II – The Banks of the United States, McCulloch v. Maryland, and Private Coinage
Part III – Government Begins to Monopolize Currency
Part IV – The Legal Tender Cases and the “Crime of ’73”
Part V – The Rise of the Fed
Part VI – The Great Depression, Gold Confiscation, and the Gold Exchange Standard
Part VII – The Dollar Reigns Supreme: From Bretton Woods to Stagflation
Part VIII – The 1980s to the Great Recession and on to the Future
Legal Tender Cases
Supreme Court Justice William Strong, author of the majority opinion in Knox v. Lee.
The government understood the need to return to specie redemption, but was loath to let go of its issue of greenbacks. After all, greenbacks were an interest-free form of debt that circulated as money and could be used to pay off creditors, thus saving the government from having to use its valuable gold and silver. However, from the very inception of the Legal Tender Act, the constitutionality of legal tender paper currency had been called into question. That question was finally resolved after the decisions handed down in a series of Supreme Court cases known as the Legal Tender Cases.
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February 9, 1793 marks the signing into law of “An Act Regulating Foreign Coins,” the first bill passed by the United States Congress declaring certain foreign coins to be legal tender for the payment of debts. Remember that the Coinage Act of 1792 had been passed less than a year before, and the US Mint in Philadelphia was at this point only producing cents and half-cents, with full mintage of silver coinage commencing in 1794 and gold coinage in 1795. Thus the only coins really circulating in commerce were those from foreign nations, particularly the Spanish milled dollar. While the Constitution provides Congress with no power to declare a legal tender, like many other government actions during the first years of the republic, the Constitution was quietly ignored. The full text of the bill is below.
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