The US Constitution does permit paper currency to serve as legal tender. But that currency must be backed by gold or silver coinage. By definition, there are only 3 coins made by the US Mint that is by definition US money or coinage. The only 3 coins made by the US Mint with face value on them are the Gold American Eagle, The Gold American Buffalo, and the Silver American Eagle.
The face value of a coin is the nominal value assigned to it by the issuing authority, typically the government or a central bank. It is the value that is officially stamped on the coin and is often expressed as a monetary unit of the country, such as dollars, euros, pounds, etc. The face value of a coin is distinct from its intrinsic or market value. While the face value represents the legal value assigned to the coin, the intrinsic value is based on the metal content of the coin, such as gold, silver, copper, or nickel. In many cases, especially with precious metal coins, the intrinsic value is higher than the face value.
The US Constitution’s Five Monetary Rules are based on coinage
According to Mr. Dean Clancy, the US Constitution has Five Monetary Rules:
- The basic unit is the dollar, a silver coin containing 371.25 grains of pure silver.
- Only gold or silver coins and currency (specie-backed banknotes) can be legal tender.
- No state may issue coins or currency.
- No one may counterfeit US Government-issued coinage or currency.
- Fiat money notes (bills of credit) are forbidden.
The US Constitution paved the way for US Minted Coinage
The United States Constitution does address the issue of coinage. The relevant clause is found in Article I, Section 8, Clause 5, often referred to as the Coinage Clause. This clause grants Congress the power:
“To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.”
This clause empowers Congress to have control over the coinage of money, determine its value, and set standards for both domestic and foreign coins. It reflects the Founding Fathers’ understanding of the importance of a unified and regulated monetary system for the new nation. The Coinage Clause has played a crucial role in shaping the US monetary system and allowing for the establishment of the US Mint, which is responsible for producing coinage.
The US Constitution originally did not specifically authorize the use of paper currency, and it did provide for a bimetallic monetary system where both gold and silver were considered legal tender. The Coinage Act of 1792 established the US Mint and regulated coinage, and it specified the value of gold and silver coins in terms of one another. The US Mint today produces the coinage of the Gold and Silver Eagle and the Gold American Buffalo.
The Legal Tender Act of 1862 experimented with paper currency
However, in the mid-19th century, the United States faced a shortage of coins, especially small-denomination coins, due to various factors, including the increasing population and economic activity. As a result, Congress passed the Legal Tender Act of 1862, which authorized the issuance of paper currency, commonly known as greenbacks, as a legal tender. This paper currency was not initially backed by gold or silver.
The Coinage Act of 1873 supported gold coinage again
Later, during the post-Civil War period, the US moved toward returning to the gold standard. The Coinage Act of 1873 demonetized silver for most transactions, effectively putting the country on a de facto gold standard. The Gold Standard Act of 1900 formally reaffirmed gold as the standard for the US currency. The Federal Reserve Bank was formed in 1913, which forecasted a big move away from gold coinage as money. The gold coinage of this era was the Liberty, the Indian Head, and the Saint-Gaudens. The silver coinage was represented by the Morgan Dollar and the Peace Dollar.
FDR ended gold and silver coinage by the US Mint in 1933
The United States fully abandoned the gold standard during the Great Depression in 1933 when President Franklin D. Roosevelt issued an executive order requiring all gold coins, gold certificates, and gold bullion to be turned in to the government. In 1933, Congress also passed a joint resolution nullifying the right of creditors to demand payment in gold. In essence, the move in 1933 by FDR eliminated US gold coinage for US citizens as money. There would be no more gold coinage produced by the United States until 1986 with in introduction of the American Eagle program.
The fiat money experiment started globally in 1971 and still no US Mint coinage
In 1971, President Richard Nixon officially ended the convertibility of the US dollar to gold, completely severing the link between the US dollar and a specific commodity. Since then, the US has operated on a fiat currency system, where the value of the currency is not backed by a physical commodity but derives its value from the trust and confidence of the people using it and the government that issues it. But this did set the way for President Gerald Ford to reintroduce gold coinage ownership by US citizens in 1974 by signing the Gold Reserve Act. Some of the only gold coins available to Americans in 1974 were the South African Gold Krugerrands and the Mexican Gold Peso.
Gold American Eagle coinage started in 1986 as money
The Gold American Eagle coin is a gold bullion coin that has been minted by the United States Mint since 1986 started under President Ronald Reagan. It is one of the most popular and widely recognized gold coins in the world. The Gold American Eagle is legal tender in the United States and comes in various denominations and weights. The Gold American Eagle is available in four different denominations: $5, $10, $25, and $50. However, these denominations do not necessarily reflect the actual value of the gold content.
The Gold American Eagle is made from gold mined in the United States. The actual gold content is standardized based on the weight of the coin. For example, a 1-ounce Gold American Eagle contains one troy ounce of pure gold. The Gold American Eagle is 22-karat gold, meaning it is composed of 91.67% gold, with the remaining alloy being copper and silver. This alloy gives the coin added durability and a distinctive color. While the Gold American Eagle has a face value (denomination) stamped on it, its market value is primarily determined by the current price of gold.
Silver American Eagle coinage started in 1986 and is money
The Silver American Eagle coin is a silver bullion coin produced by the United States Mint. It was first issued in 1986 by President Reagan and has since become one of the most widely collected and traded silver coins in the world. The Silver American Eagle is recognized for its iconic design, silver content, and official status as legal tender in the United States.
Despite having a face value stamped on it, the Silver American Eagle’s market value is primarily determined by the current price of silver. The coin is legal tender in the United States, with a face value of $1. The Silver American Eagle contains one troy ounce of .999 fine silver. The coin’s weight and silver purity are guaranteed by the US Government.
Gold American Buffalo coinage started in 2006 and is money
The Gold American Buffalo is another popular gold bullion coin produced by the United States Mint. It was first released in 2006 and is known for its classic and iconic design, reminiscent of the historic Buffalo Nickel that was in circulation from 1913 to 1938. The Gold American Buffalo is highly regarded for its purity and aesthetic appeal.
The Gold American Buffalo has a face value of $50, but like other modern bullion coins, its market value is primarily determined by the current price of gold. The coin is made from 24-karat gold, making it one of the purest gold coins produced by the US Mint. It contains one troy ounce of .9999 fine gold. The Gold American Buffalo is legal tender in the United States, and it is backed by the US Government for weight and gold content.
Legal tender refers to a form of currency that is recognized by law and accepted as a means of payment for goods, services, or debts within a particular jurisdiction. It is the official medium of exchange that the government has declared to be acceptable for transactions. Legal tender status is typically established through legislation or government regulation. Under the US Constitution by definition, the Gold American Eagle, the Gold American Buffalo, and the Silver American Eagle are legal tender, coinage, and money. When and how this coinage is officially recognized and sanctioned by the government as a valid form of payment shall be seen.
Why would anyone want to hold gold and silver coinage?
The banking system is sitting on huge unrealized losses and is allowed to trade derivatives that will eventually blow up. FDIC insurance for our bank accounts is severely lacking when we compare the FDIC assets to our uninsured deposits at banks. Our politicians continue to deficit spend in the trillions and the cost to service our federal debt is now trillions annually. There is geopolitical risk. The global economy is struggling and all of these issues are being addressed with more printed money and more debt. The governments will say they have to print trillions more to save the world. We all know eventually we will have a CBDC (Central Bank Digital Currency). Why would anyone want all of their assets tied up to this type of system?
Purchasing power refers to the ability of a currency to buy goods and services, indicating how much one can buy with a specific amount of money. It is a reflection of the real value of money in terms of what it can acquire in the marketplace. The concept is influenced by inflation, which erodes the purchasing power of a currency over time. The main reason to own gold and silver coinage is to have purchasing power outside of the financial system. Gold and silver coinage will allow you to distance yourself from the inevitable problems that our currency, the financial system, and the markets will inevitably have. Freedom, privacy, and financial survival are pretty important too!