Currency

One of the principal indicators of sovereignty is the power to issue and control currency—any form of money in actual use as a medium of exchange, including coins and paper money. In his Commentaries on the Laws of England (1765–70), William Blackstone (1723–80), speaking of crimes relating to coins, said that counterfeiting money is “a species of high treason; as being a breach of allegiance, by infringing the royal prerogative, and assuming one of the attributes of the sovereign, to whom alone it belongs to set the value and denomination of coin made at home, or to fix the currency of foreign money.”

The constitutions of federal countries often lodge this power in the national government (see Federalism). Both Austria’s (1934) and Switzerland’s (2000) do so, as does the U.S. Constitution, which states in Article I, section 8: “The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin…[and] provide for the Punishment of counterfeiting the Securities and current Coin of the United States….” Article I, section 10, also mandates, among other things: “No State shall…coin Money; emit Bills of Credit [paper money]; make any Thing but gold and silver Coin a Tender in Payment of Debts….”

In essay 44 of The Federalist (1787–88) (see Federalist Papers), James Madison commented: “The right of coining money, which is here taken from the States, was left in their hands by the Confederation [under the Articles of Confederation] as a concurrent right with that of Congress, under an exception in favor of the exclusive right of Congress to regulate the alloy and value.” He continued: “The extension of the prohibition to bills of credit [to the states] must give pleasure to every citizen in proportion to his love of justice and his knowledge of the true springs of public prosperity.”

The Framers of the Constitution did not hand Congress the power to “emit Bills of Credit.” But in Mcculloch v. Maryland (1819), the Supreme Court upheld Congress’s establishment of a national bank, which could issue paper money. It based its decision on the powers expressly granted to Congress, such as the power to lay and collect taxes, borrow money (see Debt), and regulate commerce, among others, as well as on the doctrine of implied powers reflected in the Constitution’s Necessary and Proper Clause.

The evolution of the federal government’s power to issue paper currency demonstrates one of the ways in which the original intent of the framers can be changed by necessity and interpretation. At the Constitutional Convention of 1787, the draft language giving Congress the power “to borrow money and emit bills on the credit of the United States” was changed by striking out the phrase “and emit bills,” because many delegates feared that giving the national government the power to issue paper money would tempt it to simply print more money to pay its debts rather than adopt more prudent measures. The decision in McCulloch, however, cleared the way for Congress to establish a national bank that could do just that: issue non-interest-bearing paper notes that would be legal tender for the payment of private debts.

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