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A Brief History of American Paper Money, with emphasis on Georgist Perspectives

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The Revolution

Both Franklin and economic historian Alexander Del Mar attributed the true cause of the Revolution to the suppression of paper money in the colonies. [6]   It was this, and not some small tax on tea, or other duties, they say, which led to the Revolution.

During the revolution, the fate of the Continental is well-known from the phrase "not worth a Continental" but underappreciated is the "Massive British Counterfeiting of the Continentals" [7] during the Revolution, debasing the currency greatly.   This, combined with the States' own continued over-issuance of paper money, contributed to tremendous inflation.

The Constitution and the Coinage Clause

"Poor? Look upon his face. What call you rich? Let them coin his nose, let them coin his cheeks." - William Shakespeare 

The meaning of the phrase to "coin Money" (capitalization in the original) in Article 1, Section 8, has been greatly debated, by the "coiners" of the phrase itself, as well as the ratifiers, and in subsequent Legal Tender Cases by the Supreme Court.

These Legal Tender Cases were argued after president Lincoln first issued United States Notes to fund the Civil War ($450 million); a move that was later challenged after the war, even by his own then-Secretary of the Treasury, Salmon Chase (later the Chief Justice of the Supreme Court)!   Timothy Canova, writing for the Nova Southeastern University Shepard Broad Law Center says [8] :

This was the nation's first fiat currency - "United States Notes," also known as the greenback - which made up about 40 percent of the nation's money supply during the peak of the Civil War.

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Forty percent.   That is an extraordinary amount of new currency to introduce in about a year, via three Legal Tender Acts (1862 -- 1863), but even though there was short-term inflation, in large part caused by shortages due to the war itself, over the Greenback's heyday in the late 19th century, the Greenback became so popular that a political party was formed to insure its future. [9]  

Robert G. Natelson, writing in the Harvard Journal of Law and Public Policy , opens his long and heavily sourced academic paper with the Shakespeare quote above, immediately casting doubt on the popular, but erroneous, interpretation of the constitutional phrase "coin Money" as meaning to "make any Thing but gold and silver Coin a Tender in Payment of Debts"" (capitalization in the original), a phrase which is actually from Article 1, section 10 -- the only place gold or silver Coin is mentioned in the constitution.   The constitution makes it clear that gold and silver Coins are to be used as payment by the States alone, not the Federal Government.   And in fact, there is no precedent for the States ever having paid their debts in species (gold or silver coin [10] ). 

It is clear that, after some rulings, and reversed rulings, but culminating in Legal Tender case Julliard vs. Greenman, (1884) that the Federal Government does have the power, albeit under the borrowing clause of the constitution, to issue paper money. [11]

From the opening of the court decision: [12]

"Congress has the constitutional power to make the Treasury notes of the United States a legal tender in payment of private debts, in time of peace as well as in time of war.

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Under the Act of May 31, 1878, c. 146, which enacts that when any United States legal tender notes may be redeemed or received into the Treasury, and shall belong to the United States, they shall be reissued and paid out again, and kept in circulation, notes so reissued are a legal tender".

MR. JUSTICE GRAY delivered the opinion of the Court.

The notes of the United States, tendered in payment of the defendant's debt to the plaintiff, were originally issued under the Acts of Congress of February 25, 1862, c. 33; July 11, 1862, c. 142, and March 3, 1863, c. 73, passed during the war of the rebellion, and enacting that these notes should "be lawful money and a legal tender in payment of all debts, public and private, within the United States," except for duties on imports and interest on the public debt. 12 Stat. 345, 532, 709.

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Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:

Scott is President of Common Ground-NYC (, a Geoist/Georgist activist group. He has written dozens (more...)

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Every Federal Reserve Note printed and in circulat... by Lance Ciepiela on Friday, Oct 12, 2012 at 2:56:54 PM
It is known among those who are paying attention t... by Dennis Kaiser on Saturday, Oct 13, 2012 at 6:55:21 AM
when we all continuously create our own money ever... by David Chester on Sunday, Oct 14, 2012 at 9:46:17 AM
Yes, after we fix the monetary system, we also hav... by Scott Baker on Sunday, Oct 14, 2012 at 6:59:14 PM
Which is that we cannot fix the money system unles... by David Chester on Monday, Oct 15, 2012 at 5:35:23 AM
Note what George had to say about Gold as the basi... by Scott Baker on Monday, Oct 15, 2012 at 11:41:42 AM
Scott, after a long quote from George you finally ... by David Chester on Tuesday, Oct 16, 2012 at 5:28:01 AM
Too often we deal with SYMPTOMS of our problems, r... by Rudy Avizius on Monday, Oct 15, 2012 at 2:10:29 PM