Below is part of Chapter 15 of 
The Creature from Jekyll Island
By G. Edward Griffin
To learn more about Mr. Griffin and his work go to www.realityzone.com

Mr. Griffin recommends that everyone send a copy their Congressman and Senator.
Please feel free to make copies of the following material and share it with others.

Just so you know, FIAT MONEY is paper money issued by government decree.  It is paper money that a government issues that cannot be redeemed for gold or silver.  It is what the United States government currently requires for the payment of taxes.  Fiat money is all the paper that we use in America and is actually banned by our Constitution.  Read on to get the full story and then send it to your
Congressman and Senators.


The Creature from Jekyll Island 
Chapter 15
The Lost Treasure Map

     The bitter experience of the American colonies with fiat money; 
     the resolve of the founding fathers to prohibit the new nation 
     from resorting to paper money without backing; the drafting of 
     the Constitution to that end; the creation of a true American 
     dollar; the prosperity that followed.

In the golden days of radio, on the Edgar Bergen Show, the ventriloquist would ask his dummy, Mortimer Snerd, “How can you be so stupid?” And the answer was always the same. After a moment of deep thought on the part of Mortimer, he would drawl his reply, “Well it ain’t easy!”

When we look at the monetary chaos around us today—the evaporating value of the dollar and the collapsing financial institutions—we are compelled to ask: How did we get into this fix? And unfortunately, Mortimer’s response would be quite appropriate.

To find out how we got to where we are, it will be necessary to know where we started, and a good place to begin that inquiry is with the Constitution of the United States. Article I, Sections 8 and 10 say:

Congress shall have the power –
To borrow money…to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; …(and) to provide for the punishment of counterfeiting…
No state shall … coin money; emit bills of credit; [or] make anything but gold and silver coin a tender in payment of debts.

The delegates were precise in their use of these words. Congress was given the power to “coin money,” not to print it. Thomas M. Cooley’s Principles of Constitutional Law explains that “to coin money is to stamp pieces of metal for use as a medium of exchange in commerce according to fixed standards of value.” What was prohibited was to “emit bills of credit” which according to the speeches and writings of those who drafted the document, meant the printing of paper IOUs which were intended to be circulated as money—in other words, the printing of fiat money not backed by gold or silver.

At first, it would seem that nothing could be more clear. Yet, these two simple clauses have become the basis for literally thousands of pages of conflicting interpretation. The crux of the problem is that, while the Constitution clearly prohibits the states from issuing fiat money, it does not specifically prevent the federal government from doing so. That was truly an unfortunate oversight on the part of the document’s framers, but they probably never dreamed in their wildest nightmares that their descendants “could be so stupid” as to not understand their intent.

Furthermore, “it ain’t easy” to miss their intent. All one has to do is look at the monetary history that led up to the Constitutional Convention and to read the published letters and debates of the men who affixed their signatures to that founding document.

As one reads through the debates on the floor of the convention, one is struck by the passion that these delegates held on the subject of money. Every one of them could remember from his personal experience the utter chaos in the colonies caused by the issuance of fiat money. They spoke out against it in no uncertain terms, and they were adamant that it should never be tolerated again in America—at either the state or federal levels.

PAPER MONEY IN THE COLONIES

The first colonial experience with fiat money was in the period from 1690 to 1764. Massachusetts was the first to use it as a means of financing its military raids against the French colony in Quebec. The other colonies were quick to follow suit and, within a few years, were engaging in a virtual orgy of printing “bills of credit.” There was no central bank involved. The process was simple and direct, as was the reasoning behind it. As one colonial legislator explained it:

Do you think, gentlemen, that I will consent to load my constituents with taxes when we can send to our printer and get a wagon load of money, one quire of which will pay for the whole? (See William M. Gouge, A Short History of Paper Money and Banking in the United States, Philadelphia: T.W. Ustick, 1833, Part II, p.27)

The consequences of this enlightened statesmanship were classic. Prices skyrocketed, legal tender laws were enacted to fore colonists to accept the worthless paper, and the common man endured great personal losses and hardship. By the late 1750’s Connecticut had price inflated by 800%, the Carolinas had inflated 900%, Massachusetts 1000%, Rhode Island 2300% (Ron Paul & Lewis Lehrman, The Case for Gold, Washington D.C. Cato Institute 1982)

The situation was so out of hand that, beginning in 1751, the British Parliament stepped in and, in one of those rare instances where interference from the mother country actually benefited the colonies, it forced them to cease the production of fiat money. Henceforth, the Bank of England would be the only source.

What followed was unforeseen by the promoters of fiat money. Amid great gloom about “insufficient money,” a miracle boom of prosperity occurred. The forced use of fiat money had compelled everyone to hoard their real money and use the worthless paper instead. Now that the paper was in disgrace, the colonists began to use their English and French and Dutch gold coins once again, prices rapidly adjusted to reality, and commerce returned to a solid footing. It remained so even during the economic strain of the Seven-Years War (1756-1763) and during the period immediately prior to the Revolution. Here was a perfect example of how an economic system in distress can recover if government does not interfere with the healing process. (Roger W. Weiss, “The Colonial Monetary Standard of Massachusetts, Economic History Review 27 (November 1974), p.589)

WARTIME INFLATION

But all of this came to a halt with the onset of colonial rebellion. Not only did open hostilities throw England deeper into the cogs and wheels of the central-bank mechanism, it also was the compelling motive for the colonies to return to their printing presses. The following figures speak eloquently for themselves:

At the beginning of the ware in 1775, the total money supply for the federated colonies stood at $12 million

In June of that year, the Continental Congress issued another $2 million. Before the notes were printed, another $1 million was authorized.

By the end of the year, another $3 million

$19 million in 1776

$13 million in 1777

$64 million in 1778

$125 million in 1779

A total of $227 million in five year on top of a base of $12 million is an increase of 2000%

On top of this “federal” money, the states were doing the same in an approximately equal amount.

And still more: the Continental Army, unable to get enough money from Congress, issued “certificates” for the purchase of supplies totaling $200 million.

$650 million created in five years on top of a base of $12 million is an expansion of the money supply of over 5000% (Ron Paul & Lewis Lehrman, The Case for Gold, Washington D.C. Cato Institute 1982)

Although the economy wsa devastated by this flood of fiat money, most victims were totally unaware of the cause. In 1777, the sentiment of a large segment of the population was expressed by the words of one patriotic old lady who said: “What a shame it is that Congress should let the poor soldiers suffer when they have power to make just as much money as they choose.” (William M. Gouge, A Short History of Paper Money and Banking in the United States, Philadelphia; T.W. Ustick, 1833; rpt. New York: Augustus M. Kelly, 1968, p. 28, The naiveté of this lady may be humorous, but are Americans any more enlightened today? Would she not feel at home among our modern-day electorate who clamor for legislation to pump Federal-Reserve fiat money into projects to alleviate hardship among the poor and unemployed.)

The immediate result of this money infusion was the appearance of prosperity. After all, everyone had more money and that was perceived as a very good thing. But this was quickly followed by inflation as the self-destruct mechanism began to roll. In 1775, the colonial monetary unit, called the Continental, was valued at one-dollar in gold. In 1778, it was exchanged for twenty-five cents. By 1779, just four years from its issue, it was worth less than a penny and ceased to circulate as money at all. It was in that year that George Washington wrote: “A wagon-load of money will scarcely purchase a wagon load of provisions.” (Albert Bolles, The Financial History of the United States, 4th ed. New York: D. Appleton, 1896. Vol 1.)

The saying “Not worth a Continental” has its origin in this gloomy period.

The true nature of the inflation effect has never been more accurately perceived or more vividly described than it was by Thomas Jefferson:

It will be asked how will the two masses of Continental and of State money have cost the people of the United States seventy-two millions of dollars, when they are to be redeemed now with about six million? I answer that the difference, being sixty-six millions, has been lost on the paper bills separately by the successive holders of them. Every one, through whose hands a bill passed, lost on that bill what it lost in value during the time it was in his hands. This was a real tax on him; and in this way the people of the United States actually contributed those sixty-six millions of dollars during the war, and by a mode of taxation the most oppressive of all because the most unequal of all. (Thomas Jefferson, Observations on the Article Etats-Unis Prepared for the Encyclopedia, June 22, 1786, Writings, Vol. IV, p. 165)

PRICE CONTROLS AND LEGAL-TENDER LAWS

It was natural that people struggled to find ways to escape the destruction of their savings, and the two most obvious methods were (1) to regularly adjust prices upward as the value of the money went downward or (2) exchange their goods and services only for gold coins. In response, the colonial legislatures and the Continental Congress did what governments always do to prevent it. They resorted to wage and price controls and to legal-tender laws with harsh penalties for non-compliance. Under one such law, those who refused to accept worthless money were even described as traitors. It declared:

If any person shall hereafter be so lost to all virtue and regard for his Country as to refuse to accept its notes, such person shall be deemed an enemy of his Country. (F. Tupper Saussy, The Miracle of Mainstreet (Sewanee, Tennessee:Spencer Judd, 1980), p. 12. Also see Anthony Sutton, The War on Gold (Seal Beach, Calif.: ’76 Press, 1977), pp.47, 48)

Rhode Island not only levied a substantial fine for non-acceptance of its notes but, upon a second offense, an individual lost his citizenship. When this was declared unlawful by a panel of judges, the legislature reacted by dismissing the judges from offices. (Merrill Jensen, The New Nation. New York: Vintage Books, 1950, p. 324)

Then, as now, those who suffered the most from fiat money were those who held the most trust in government. In 1777 these were mostly the Whigs, for it was they who patriotically held paper money and, as a result, lost their livelihoods and their life savings. The Tories, on the other hand, mistrusting both government and its paper money, passed the bills as quickly as possible in trade for real assets, especially gold. Consequently, as a group, they weathered the storm fairly well. But they often were deride by their less prudent neighbors as “Torie speculators,” “hoarders,” and even “traitor.”

All of this was painfully fresh in the memories of the delegate to the Constitutional Convention and, as the opening session convened in Philadelphia in 1787, there were angry mobs in the streets threatening the legislators. Looting was rampant. Businesses were bankrupt. Drunkenness and lawlessness were everywhere to be seen. The fruit of fiat money had ripened, and the delegates did not enjoy its taste.

In October of 1785, George Washington wrote: “The wheels of government are clogged, and … we are descending into the vale of confusion and darkness.” (Atwood, Harry. The Constitution Explained. Merrimac, Massachusetts: Destiny Publishers, 1927, 2nd ed. 1962, p.3) A year later, in a letter to James Madison, he said: “No day was ever more clouded than the present. We are fast verging to anarchy.” (ibid., p.4.)

In February of 1787, Washington wrote to Henry Knox: “If any person had told me that there would have been such formidable rebellion as exists, I would have thought him fit for a madhouse.” (ibid, p. 4.)

Just three months prior to the opening of the convention, Washington voiced his reasons for rejecting the notion of fiat money. In answer to the complaint that there was not enough gold coin (specie) to satisfy the needs of commerce, he replied:

The necessity arising from a want of specie is represented as greater than it really is. I contend that it is by the substance, not the shadow of a thing, we are to be benefited. The wisdom of man, in my humble opinion, cannot at this time devise a plan by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. Wherein, then, is the farmer, the planter, the artisan benefited? An evil equally great is the door it immediately opens for speculation, by which the least designing and perhaps most valuable part of the community are preyed upon by the more knowing and crafty speculators. (Washington to Stone, 16 February, 1787. Quoted by Bancroft, pp. 231-32.) (Bancroft, George. A Plea for the Constitution. New York: Harpers, 1886; rpt. Sewanee, Tennessee:Spencer Judd Publisher, 1982).

THE CONSTITUTIONAL CONVENTION

This was the prevailing view held by the great majority of delegates to the Convention. They were adamant in the resolve to create a constitution which would prevent any state, and especially the federal government itself, from ever again issuing fiat money. And they said so in unmistakable terms.

Oliver Ellsworth from Connecticut, who later was to become out third Chief Justice of the Supreme Court, said:

This is a favorable moment to shut and bar the door against paper money. The mischief of the various experiments which have been made are now fresh in the public mind and have excited the disgust of all the respectable parts of America. (For the context of this and the following statements expressing a similar sentiment, see Bancroft, pp. 30, 43-44, 82; also Paul and Lehrman, p. 168) (Bancroft, George. A Plea for the Constitution. New York: Harpers, 1886; rpt. Sewanee, Tennessee:Spencer Judd Publisher, 1982).

George Mason from Virginia told the delegates he had a “mortal hatred to paper money.” Previously he had written to George Washington: “The may pass a law to issue paper money, but twenty laws will not make the people receive it. Paper money is founded upon fraud and knavery.”

James Wilson from Pennsylvania said: “It will have the most salutary influence on the credit of the United States to remove the possibility of paper money.”

John Langdon from New Hampshire warned that he would rather reject the whole plan of federation than to grant the new government the right to issue fiat money.

George Reed from Delaware declared that a provision in the Constitution granting the new government the right to issue fiat money “would be as alarming as the mark of the beast in Revelation.”

Thomas Paine, although not a delegate to the Convention, had written the previous year that he was strongly opposed to fiat money, which he called counterfeiting by the state, and he especially abhorred legal tender laws which force people to accept the counterfeit. He said: “The punishment of a member [of a legislature] who should move for such a law ought to be death.”

An interesting thought.

If any further evidence is needed that the Founding Fathers intended to prohibit the federal government from issuing “bills of credit,” consider this. The first draft of the Constitution was copied in large measure from the original Articles of Confederation. When it was taken up for consideration by the delegates, therefore, it contained the old provision that had caused so much chaos. It stated: “The legislature of the United States shall have the power to borrow money and emit bills of credit.” But, after a level discussion on the matter, the offending provision was voted to be removed from the Constitution by an overwhelming margin. (For an excellent summary of the interplay of ideas between the delegates, see Edwin Vieira, Jr,. Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution (New Jersey:Sound Dollar Committee, 1983), pp. 71-76.) Voicing the sentiment of the majority of the delegates, Alexander Hamilton said: “To emit an unfounded paper as the sign of value ought not to continue a formal part of the Constitution, nor ever hereafter to be employed; being, in its nature, repugnant with abuses and liable to be made the engine of imposition and fraud.” (Alexander Hamilton, Works, Part II, p. 271, as cited by Bancroft, p. 26)

The journal of the Convention of August 16 contains this notation:

It was moved and seconded to strike out the words and “and emit bills of credit,” and the motion…passed in the affirmative. [The vote cleared by a margin of better than four to one.] (Quoted by Bancroft, pp. 39, 40.)

The tenth Amendment states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” The power to issue bills of credit is definitely not delegated to the United States, and it is specifically prohibited to the States. Therefore, if any power to issue fiat money legally exists at all, it is reserved for the people. In other words, individuals and private institutions, such as banks, have the right to issue IOUs and hope that the public will use them as money, but government, at any level is clearly prohibited by the Constitution from doing so.

A SUGGESTION FOR YOU CONGRESSMAN

Incidentally, the Constitution has never been amended on this point, nor has the provision that only silver and gold can be used as lawful money. It would be interesting if each reader of this book would send copies to his or her elected representatives in Washington, or at least a photocopy of this section. Every member of Congress has sworn to uphold the Constitution, and you might attach a short note asking them when they intend to begin.

Do not be disappointed if your reply is less than satisfactory. Politicians have a similar problem to that which judges have. It is permissible to rock the boat from time to time, but they are not supposed to sink it. Suits against the government challenging the constitutionality of our monetary system seldom get to court. It is safer for the justices to decline to accept these cases or to dismiss as supposedly “frivolous.” Otherwise they would face a difficult choice. Either they would have to mutilate logic in order to uphold the present inconsistencies—thus, opening themselves to possible ridicule—or they would have to declare in favor of the Constitution and literally cause the collapse of te entire deficit-spending, central-bank mechanism. Such an act would take a considerable amount of courage. Not only would they suffer the wrath of the Establishment that is nourished by that mechanism, they also would have to face a bewildered public which, because of the lack of knowledge about the Constitution or the nature of money, could easily be convinced that the judges had lost their minds. Likewise, it is safer for politicians to respond to inquiries of this kind merely by quoting some self-serving government document, which makes our fiat monetary system sound quite legal and marvelously constitutional.

Unfortunately, that is reality. Until the public becomes considerably better informed than it is at present, we cannot expect too much from the courts or from Congress. Bringing this matter to the attention of your elected representatives, however is still well worth the effort, because the process of education has to start somewhere, and Washington is an excellent place to begin.

Returning to the point of this digression, however, it is important to know that the federal government was given a precisely limited monetary function: “to coin money” and to “regulate the value thereof.” In view of the fact that gold and silver coin was specifically defined as the only kind of money to be allowed, there can be no doubt of what was meant by the first half of that power. To coin money meant to mint precious-metal coins. Period.

The second half is equally clear. Both in the Constitution and in the discussions among the delegates, the power to regulate the value of gold and silver coin was closely tied to the power to determine weights and measures. They are, in fact, one and the same. To regulate the value of coin is exactly the same as to set the nationally accepted value of a mile or a pound or a quart. It is to create a standard again which a thing may be measured. The wording of this section of the Constitution can be traced to the original Articles of Confederation which further clarifies the meaning that was generally understood at that time.

The United States in congress assembled shall…have the sole and exclusive right and power of regulating the alloy and value of coin struck by their own authority, or by that of the respective states—fixing the Standard of Weights and Measures throughout the United States.

The intent, therefore, was simply for Congress to determine the exact weight of a precious metal that would constitute the national monetary unit.