Background About Constitutionality of Paper Money
Article I, Section 10 of the Constitution explicitly forbids the states from issuing "bills of credit" (paper or "fiat" money) or making anything but gold and silver coin legal "tender", whereas there are no corresponding explicit prohibitions against the federal government, nor any explicit authorization. The Tenth Amendment refers to reserved powers that only the states can exercise, as well as powers not delegated that continue to reside in the people. "Concurrent powers" also exist, which may be exercised by either the states or the federal government, such as the power to repel invasions, and arguably including power to make legal tender (e.g. in federal territories or elsewhere). Article I, Section 8 of the Constitution specifically gives Congress power to "borrow money" and also power to "coin money and regulate the value" of both U.S. and foreign coins, and regulate interstate commerce, but does not explicitly and unambiguously grant Congress the power to print paper money or make it legal tender.
The federal government first issued paper money in 1861 in order to fund the Civil War. Before that, all US paper money was bank issued. For example, paper notes were issued by the First Bank of the United States, which was a private corporation chartered by the federal government. Congress had also authorized paper money (e.g. Continentals) even before the Constitution was adopted. The Continental was issued by both the individual states and the Continental Congress under the Articles of Confederation. Those Articles specifically allowed the issuance of legal tender paper money, at the time called "bills of credit."
Read more about this topic: Legal Tender Cases
Famous quotes containing the words background, paper and/or money:
“Pilate with his question “What is truth?” is gladly trotted out these days as an advocate of Christ, so as to arouse the suspicion that everything known and knowable is an illusion and to erect the cross upon that gruesome background of the impossibility of knowledge.”
—Friedrich Nietzsche (1844–1900)
“Once, when lying in bed with no paper at hand, he began to sketch the idea for a new machine on the back of his wife’s nightgown. He asked her if she knew the figure he was drawing. “Yes,” she answered, “the figure of a fool.””
—For the State of New Jersey, U.S. public relief program (1935-1943)
“... a family I know ... bought an acre in the country on which to build a house. For many years, while they lacked the money to build, they visited the site regularly and picnicked on a knoll, the site’s most attractive feature. They liked so much to visualize themselves as always there, that when they finally built they put the house on the knoll. But then the knoll was gone. Somehow they had not realized they would destroy it and lose it by supplanting it with themselves.”
—Jane Jacobs (b. 1916)