Article I § 8 clause 5:
The Congress shall have Power . . . To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
"Money" originates in the broadly defined ecclesiastical impetus. This is because all wealth originates from the combination of land and labor, 2 and when something becomes valuable through someone’s labor on land, this valuable thing can be traded to other people who want it in exchange for something of value that they have. Trading of genuine wealth, whether land, labor, or some combination of the two, is inherently contractual. This trading, this barter, inherently contains the components of contracts: offer, acceptance, and consideration. The consideration is the handing over of valuable property in exchange for the other party’s valuable property. When a common currency is used in trading instead of strict barter, what has inherently happened in the transition from barter to this monetary system, is that a common "Standard" for measuring the value of property has been adopted by the parties to the exchange. Money is therefore a common medium of exchange. For the monetary system to function properly, it is assumed by all participants that such money is readily convertible to substance, i.e., to land, labor, or the products formed by the combination of the two. 3
After the War for Independence, the thirteen newly independent States suffered from a degree of economic chaos, resulting in part from the existence of paper money that could not be readily converted into valuable substance. 4 Some framers had extremely bad experiences with paper money. So they put Article I § 8 clause 5 into the Constitution. What they meant by these words can be seen in how this clause took statutory shape. The Coinage Act of 1792 implemented this term of the Constitution. In this Coinage Act, Congress defined a "dollar" in terms of specific weights and refinements of gold and silver. 5 They thereby "regulate[d] the Value" of the dollar by fixing its value directly to substance, directly to a product of land and labor, directly to gold and silver coins, essentially a commodity. For many decades after this, when gold or silver was deposited in a bank, the bank essentially gave a receipt to the depositor in the form of a gold or silver certificate. There was supposed to be a one-to-one ratio between the dollar enumeration of the "certificate" and the dollar enumeration of the substance warehoused in the bank. The "certificates" were often traded in commerce as though they were real money. 6
During the War Between the States, the general government issued paper money, commonly known as greenbacks. These were UNITED STATES treasury notes, fiat money that "could not be redeemed at the time". 7 "However, as the federal government began to retire its bonds in the 1870s, . . . the government began to redeem the Greenbacks." 8 These greenbacks became redeemable in specie, i.e., as gold or silver. The U.S. Treasury paid them into circulation in exchange for goods and services. They were not loaned into circulation as is now done by Federal Reserve Banks. Because many people were satisfied using the greenbacks, and did not rush to redeem them in specie, 9 some people speculated that the whole monetary system might work without backing the paper money with substance.
In 1913, Congress passed the Federal Reserve Act. 10 The National Bank Act of 1863 had created a national banking system. 11 The most notable common characteristic of this national banking system was that the member banks were able to continue practicing fractional reserve banking. 12 This is roughly how fractional reserve banking works: Suppose Jake is an enterprising young man who has accumulated $1000 in silver and gold. Because there’s no bank close to where Jake lives, he decides to start a bank. He goes to four of his friends, who each agree to invest $1000 in Jake’s bank. So these five friends, based on an initial $5000 investment, own the bank. Each treats his $1000 investment as a time deposit, meaning that the $1000 will be available to the bank for a specific amount of time, say two years. In other words, Jake and his friends will not be able to withdraw their $5000 during this two-year time period. For their trouble, they’ll receive interest payments from the bank. Shortly after they open the bank, ten depositors come to the bank, and each opens a demand deposit account with $100 in gold and silver. So after these ten deposits, the total amount of money in the bank is $6000. Now suppose numerous people in Jake’s community come to the bank to borrow money. Jake and his friends are glad to lend the money, because they earn money on their investments by lending it at interest, and they believe all their debtors are reliable people who will pay their obligations. They lend a total of $5800. They only have $200 left in their bank, one fifth of the $1000 in demand deposit accounts. If two demand depositors come to the bank to close their accounts, Jake and his four friends will have zero money left in their bank. If three demand depositors demand their money, one of them will be turned away. A demand deposit account is by definition an account that can be closed by the depositor on his demand. If the bank fails to keep enough money in reserve to pay demand deposits, it is inherently running the risk of defaulting on its obligations, which could totally ruin the demand depositors. Besides running this risk, the bank is also violating its contractual obligation to the demand depositor. 13 Fractional reserve banking is this type of banking that does not leave all demand deposits in reserve, and thereby risks cheating demand depositors out of their money. The standard set by the united States government via the Federal Reserve Act of 1913 is that a bank only needs to keep a small fraction of demand deposits in reserve. If these ten demand depositors had deposited paper money instead of gold/silver coins, when the bank’s reserve reached zero, and demand depositors demanded their "money", instead of being embarrassed about failing to meet their obligations, Jake could have simply gone to the back room and printed more paper money. This is where fractional reserve banking metamorphoses from being risky, into being undeniably fraudulent. Jake would have been printing counterfeit paper money, and in the process inflating the money supply. 14 But if Jake and his friends had joined the Federal Reserve System, rather than going into the back room to print funny money, they could have called up their buddies at the nearest Federal Reserve branch bank, and said, "Hey! Send us over some of that phoney money printed by the U.S. Treasury.". It would still be fundamentally fraudulent, and inflationary, but it would be legal, even if it wasn’t lawful. By being inflationary, it disregards the mandate to just weights and measures, because it devalues everyone’s cash. The same amount of cash buys less. — This is what fractional reserve banking is. Keeping only a fraction of demand deposits in reserve is risky, sloppy banking that manifests as fraud when the bank cannot pay demand depositors. But as long as demand depositors don’t demand their money at a time when the bank doesn’t have it, the fraud might not be found out. But the instant the banker starts creating "money" out of thin air, everyone in the entire market-place is defrauded. The Federal Reserve Act of 1913 not only encouraged fractional reserve banking to continue, and built a central banking system that would ensure its perpetuation, but it also encouraged the creation of "money" that was not backed by substance. This was, and continues to be, a colossal case of mass-fraud. 15
Fractional reserve banking and fiat money are the root causes of the stock market crash of 1929 and the national bankruptcy of 1933. 16 The Federal Reserve Act of 1913 was inherently an establishment of an arbitrary – some say "elastic" – monetary scale, precisely the opposite of the intent of the framers. 17 In 1933 the President essentially confiscated all the nation’s gold coin, and eliminated the gold standard. 18 A few years later, the same thing was done with silver. 19 These are all historical facts, easily verified by studying the historical record. 20
Some people decry the abandonment of the gold and silver standards because they believe that these metals have intrinsic value. Whether they do or not is probably moot. But what’s not debatable, but rather obvious, is that the refusal to back money with these substances leaves us with some huge questions, of which we’ll only look at three: (1)If the monetary system is not backed by gold or silver, then what’s it backed by? (2)If the money has no intrinsic value, and you have saved a great deal of it in order to trade it for something of substantial value, why should anyone who owns the thing that you want, trade it for all your apparently worthless money? (3)If you trade the money for a substantial and valuable object, and find in the process that you have a contractual dispute with the person you gave the money, who will adjudicate this dispute? — We’ll address these issues in reverse order.
(3)Some might claim that a modern Federal Reserve note (frn) is readily convertible to substance, evidenced by the fact that every time one "pays" some of this "money" for something of substance, one is indeed able to get that object of substance in exchange for the frns. This is true. On any given day in America, a given number of "dollars", so called by the Federal Reserve, can be converted into a substantial object, as long as the "dollar" enumeration meets the "purchase" price. This trade is essentially a contract, a glorified form of barter. But what if there is a contractual dispute in the process of the exchange? — If one does barter, one is trading substance for substance, and two parties are entering into an ad hoc contract with one another. If these two parties have a contractual dispute that relates to their trading, then to what third party do they go to resolve the dispute? In barter, this might not be known beforehand, and there might not be a third party at all. 21 If both parties are members of the same narrowly defined ecclesiastical society, then it might be assumed that they would adjudicate any possible contractual disputes in their ecclesiastical courts. — But what if the parties are using a common currency, say, a currency redeemable in gold or silver? If the parties use a common currency that’s backed by a precious metal, they are entering into contractual relationships with one another just as though they were bartering, except that whoever minted the coins is the default nominee for adjudicating any possible contractual disputes. For example, in the 1830s in the united States, such a contractual dispute would probably go automatically to a local or State equity court, with possible appeals going to district courts of the general government and into the supreme Court. The general government minted the coins. So the coins by default operate under the jurisdictions of the local, state, and general judicial systems. They by default operate by the rules of these courts. — But what if the parties are using a common currency, say, a currency not convertible to gold or silver, say, Federal Reserve notes? If the parties use a common currency that’s not backed by a precious metal, and that doesn’t claim to be redeemable at all, they are still entering into contractual relationships with one another just as though they were bartering, except that whoever printed the frns is the default nominee for adjudicating any possible contractual disputes. The U.S. Treasury prints the frns. The Treasury hands the frns over to the Federal Reserve. By using accounting practices that make Enron, Worldcom, and Arthur Andersen look like angels, the Federal Reserve lends these newly acquired frns to member banks, which lend the money into circulation. So who will adjudicate a possible dispute? Unlike currency that’s backed by precious metals, these frns go into circulation through the process of debt-creation. Whatever legal structures have jurisdiction over such debt-creation, have default jurisdiction over whatever contractual disputes you may have while using these frns.
Debt-creation is inherently a subset of the narrowly defined ecclesiastical compact, because it is inherently contractual. But debt-creation pertains to a specific type of contract. Historically, in Anglo-American jurisprudence, debt-creation fell by default into the jurisdiction of courts whose subject matter was defined by the lex mercatoria, also known as the law merchant. In modern times, the law merchant has been codified into the Uniform Commercial Code. All banks (including the Federal Reserve), the Internal Revenue Service, and (to a huge extent) any incorporated enterprise, fall by default under the jurisdiction of courts that know and enforce the Uniform Commercial Code. Likewise, if you have a dispute with someone to whom you traded frns, your dispute defaults into one of these U.C.C. courts. — In passing, we need to ask this question: Is this change of jurisdiction from the 1830s to the present, from a monetary system backed by precious metals to one based on debt-creation, from equity court to U.C.C. court, is this transition precisely what the framers were talking about when they wrote the following into the Declaration of Independence: "He [the king] has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation"?
(2)If frns have no intrinsic value, and you have saved a great deal of them in order to trade them for something of substantial value, why should anyone who owns the thing that you want, trade it for all your apparently worthless money? — It’s absolutely critical for the common currency that’s used in trading to be convertible to substance. But every day in America, frns are traded for substance. So why should anyone think frns are not convertible to substance? They may not be redeemable as substance the way gold and silver certificates were, but the average American can see with his or her own eyes how they can convert frns to valuable substance. — When American money was backed by gold and silver, practically all citizens had hands-on experience with certificates that were redeemable as substance. Their confidence in their government and laws was based on their belief that their money had intrinsic value. Their government did not use the monetary system to try to control people, or to control the economy. The government merely offered a service to anyone who would bring gold or silver to the mint. The government would mint their gold and silver into coins that indicated the narrowly defined ecclesiastical jurisdiction of the united States. If people generally valued that ecclesiastical jurisdiction, then the newly minted coins would be more valuable after minting than they were as bullion. If people generally held that ecclesiastical jurisdiction in low regard, then the coins could have no more value than they did as bullion. So if the government went belly up, their coins would be at least as valuable as bullion. So they didn’t need to rely entirely upon the government, as though the government were the source of all their supply. They relied upon themselves, and upon those with whom they traded. 22 — Now that American "money" is not backed by anything, people are inherently dependent upon the government for their supply. If the government goes belly up, then all the frns in the world will be worthless. We, as American citizens, are entirely dependent upon the Federal Reserve to manage the money supply in such a manner as to keep the "dollar" valuable. The confidence that people have in frns derives from two basic sources: (a)the ability of the Federal Reserve to manage the money supply; (b)the fairness of the judicial system of which the Federal Reserve is an appendage. As long as people have confidence in these two things, they will value frns, and they will be readily convertible into substance. But whenever serious numbers of people have serious doubts about either of these two things, people will search hard for other exchange media.
So what supports both the substance-based monetary system and the debt-based monetary system is the confidence of the people who use these types of currency. Generally, people these days have little or no confidence in "hard money". As long as the Federal Reserve minimizes deflation and keeps inflation low enough so that these same people can hardly recognize it from day-to-day – being much like cold-blooded animals in slowly heated water – and as long as they think the judicial system (and the government in general) is just (or is at least not hurting them personally), the confidence of the average American, in his/her precious frns, will not be swayed. Collect as many as you like, with confidence that they’re convertible to substance. 23
(1)Like we’ve already noted, the monetary system is backed by the confidence of the people who use it. This is true regardless of whether it’s backed by gold and silver, or not. But the fact that our present "monetary system" is based on debt, rather than on substance, has extremely serious legal ramifications. As long as people are ignorant of these ramifications, and as long as people are not being personally damaged by the judicial system and the government, and as long as the "money supply" is managed in such a manner as to keep these ramifications cloaked, it’s not likely that great numbers of people will lose confidence in the present "monetary system". But anyone who has taken the time to study these things has at least gotten a glimpse into how serious these legal ramifications are. 24
Whenever anyone goes to a modern American bank and asks for a loan, the bank asks for security. People generally put up their substance as collateral in exchange for a designated amount in frns. In this process, people are putting up their substance in exchange for debt instruments. By giving you something that has virtually no intrinsic value for something that does have intrinsic value, the bank is not trading with you value for value, as in the barter system. The bank is taking your substance, in the form of collateral, and giving you what is otherwise worthless paper. This paper is created in the back rooms of the banks the same way fractional reserve banks have often made money out of thin air since well before the 1933 Bank Holiday. The only thing that makes this system work is the confidence of the people who use these Federal Reserve notes. Their confidence derives in large part from the fact that they are contractually trapped in this system by a broad net of government benefits that covertly make people party to contracts whose terms are unknown to the debtor class, but adequately known to the creditor class. 25
In spite of all these implicit and quasi contracts, it might be OK to go along with this system if it weren’t for two very serious problems. (1)By basing the entire monetary system on debt / credit transactions, rather than on barter and substance, everyone who uses this system automatically puts his or her self under the jurisdiction of the bankruptcy clause of Article I § 8 clause 4. That’s because the banks that issue this "money" are inherently engaged in the interstate commerce of Article I § 8 clause 3. That’s because the Federal Reserve System is a quasi-private banking system, authorized by Congress to operate throughout the United States. Legally, this monetary system, and this banking system, is therefore inherently a massive intrusion into the private life of every American. (2)If we had never legalized fiat money, we could rightly claim that our monetary system is a just way of measuring the value of property. But the fact that we did legalize fiat money means that ever since, our monetary system has been inherently skewed. It’s right that Congress "fix the Standard of Weights and Measures", so that people call a pound a pound, and gallon a gallon. But since 1933, a dollar is no longer a dollar. 26 When the value of a dollar fluctuates, rather than simply the value of property that we evaluate with a dollar, our monetary system is inherently in violation of the just weights and measures standard mandated by Scripture (Leviticus 19:35-36; Deuteronomy 25:13-15; Proverbs 11:1; 16:11; 20:10; 20:23; Micah 6:11). It’s true that on a precious metals standard, the money supply expanded whenever more bullion was available for minting, and contracted whenever coins were exported to foreign countries. It’s true that this expansion and contraction of the medium of exchange caused a certain amount of instability in the scale by which we measure the value of property. It’s true that we can think of the Federal Reserve System as a grand attempt at finding a medium of exchange that meets the just weights and measures standard. But the fact that inflation since 1933 has been withering compared to any degree of inflation or deflation that would have occurred under a substance-based monetary system, is serious evidence that we should consider this attempt, this experiment, a failure. The lifestyle of the average American may seem better than it was before 1913, but (1)at what price?; and (2)with what credit to the Federal Reserve System? — (2)Every improvement to the American lifestyle could have been accomplished with a substance-based monetary system. (1)The price of this inflation-based conception of prosperity is, among other things, the almost total destruction of church-based communities. Such communities were once the moral backbone of this nation. Now, there are precious few signs of moral backbone. Most of us are too busy paying debts to care. — Perhaps worst of all, this monetary system, and this banking system, are essential parts of the modern American welfare state. This welfare state consists of laws that are generally contrary to Biblical guidelines on practically every front. They are also contrary to the moral superstructure that spawned the Declaration, the Constitution, and the Bill of Rights. 27 And they are contrary to the idea that governments are based on consent. A monetary system that’s based on debt, rather than substance, is also contrary to consent, especially to those who don’t consent to being in debt, or to using "money" that’s based on debt. 28
By legitimizing fiat money, and turning the responsibility "To coin Money, regulate the Value thereof" over to private bankers, Congress essentially turned control of the nation’s destiny over to these private bankers. Issues like what enterprise deserves to receive investment capital, what research deserves to be funded, what schools deserve funding, what political campaigns deserve funding, etc., were in essence turned over to bankers. Prior to 1933, these issues may have been the province of people who had the capital to invest in these things. After 1933, they became the province of people who could with perfect legitimacy, create money out of thin air. For the most part, they are people who have secular humanist inclinations, 29 at best, collectivist and socialistic inclinations at worst, and power-craving inclinations in between. — Because human beings generally do not "seek . . . first the kingdom of God, and his righteousness" (Matthew 6:33a: KJV), but seek instead to first gratify worldly needs and desires, laws are generally the servants of money, rather than the other way around. We therefore hold to the view that the legal system is easily manipulated by whoever controls the monetary system. We therefore hold to the view that the Federal Reserve has had covert control of much of the nation’s destiny since 1913. 30
There is nothing inherently at odds with the global covenant in Article I § 8 clause 5. We believe this because just weights and measures, and just money, are aids in the protection of property. As long as the use of such standards of weights and measures, and such standardized money, is voluntary and consensual, the maintenance of these standards is a legitimate function of any jural society and any narrowly defined ecclesiastical society. Such jural societies and ecclesiastical societies exist to protect property rights. The maintenance of standardized money, weights, and measures exists to protect property rights. But fiat money is not the maintenance of standardized money. It is precisely the opposite. Likewise, the whole monetary system that has come into existence since 1913 is also precisely the opposite. Congress has abdicated their responsibility "To coin Money, regulate the Value thereof" to a quasi-private banking cartel. They have put even Bible-believing citizens under a "jurisdiction foreign to our constitution", and have suborned "to extend an unwarrantable jurisdiction over us". In short, they have trapped us into contracts through fraud and deceit, and turned us into a debtor class that has no concept of what it is like to live as free, God-fearing Americans.