Pose this question to a federal government or Federal Reserve official, and he will run you around the bush for months, mumbling blather like, “The value of the dollar depends on the productive capacity of the U.S. Economy” or “Dollar currency is backed by the full faith and credit of the United States Government.” They may even read to you from a dollar bill, “This note is legal tender for all debts, public and private”—perhaps adding to the mystification by citing some public law of such and such date.

Ask this question in a state court (say, when a judge assesses a fine), and you will most likely land in jail. “Judge, I want to pay all my debts, not just discharge them but the law makes conflicting Statements about what a dollar is. Can you tell me what this state has declared a dollar to be, pursuant to the U.S. Constitution at Article I, Section 10? Then I can be sure I have paid the fine in dollars.”

You will set off on a hilarious, rollicking journey through numerous damp penal institutions as the judge and every other state official from Governor to Second Assistant Tire Checker ducks, dodges, and weaves to avoid answering your question. They all know that every state violates Article I, Section 10, enforcing payment in “dollars” of bank credit or Federal Reserve [bank]notes, but they surely won’t be the ones to admit it. The emperor has no clothes, but I don’t want to be the one to tell him.

Congress shall have power . . . 

Under the common law, which is still our right, nothing but gold and silver was money. The United States Constitution at Article I, Section 8 granted Congress power to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and ‘measures.’”

No State shall . . .

The Constitution at Article I, Section 10 withdrew from the states power to declare anything other than gold or silver a tender in payment of debts. “No State shall *** emit Bills of Credit [legal tender paper money]; make any Thing but gold and silver Coin a Tender in Payment of Debts.”

The Standard Dollar & Dollar Standard

Pursuant to the Constitution, Congress later enacted the Coinage Act of April 2, 1792,1 which forever set and immutably fixed the standard dollar as a weight of silver equal to 371.25 grains (0.7734 troy ounce or 24.0565 grams or 1.292929 dollars of silver to the ounce). The same act provided for gold coins valued but not denominated in dollars ($10 eagles, $5 half-eagles, and $2.50 quarter eagles). Once a standard has been set, it cannot be changed, any more than Congress could declare that the present “foot” measure should comprise ten inches rather than twelve. The only constitutional standard money of the United States is the 371.25 grain dollar of silver.

At first, dimes, quarters, and halves were simply the tenth, fourth, or half weights of a silver dollar. However, the Act to Devalue the Subsidiary Silver Coinage of February 21, 18532 reduced the weights of the dime, quarter, and half-dollar to 173.61 grains (0.3617 troy ounce), 86.805 grains (0.1808 troy ounce), and 34.722 grains (0.07234 troy ounce), respectively, and made them legal tender for $10.00 only. 

Adjusting the Gold Coins

Because Congress set the silver price of gold too low in the Coinage Act of 1792 (at fifteen ounces of silver to one ounce of gold), gold fled the U.S. to other world markets where it bought more silver. Thus in 1834, Congress finally had to adjust the weight of the gold coins to reflect their market value in silver. The Coinage Act of 18343 reduced the gold coins’ weight slightly. The Coinage Act of 18374 minutely reduced the weight of gold valued at one dollar to 23.22 grains of fine gold (0.04375 troy ounce or 1.5046 grams), 20.6718 dollars to the ounce.

A Gold Standard?

The Gold Standard Act of March 14, 19005 defined a dollar of gold as a weight of fine gold (24 karat) of 23.22 grains (0.04375 troy ounce or 1.5046 grams), 20.6718 dollars to the ounce, no different from the Coinage Act of 1837.

What Are Federal Reserve Notes?

Federal Reserve notes are not “dollars,” but they are “legal tender.” Whenever a contract payable in “dollars” fails to specify payment in a certain form of “dollars,” the payee must accept whatever sort of “dollars” are defined in the law as “legal tender.” The law states, “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts. Foreign gold or silver coins are not legal tender for debts.”6

The law defines Federal Reserve notes as “obligations of the United States *** receivable for all taxes, customs, and other public dues.”7

Another Gold Standard?

The Gold Bullion Coin Act of 19858 provided for the American Eagle gold coins containing one troy ounce (denominated “$50”), one-half troy ounce (denominated “$25”), one-fourth troy ounce (denominated “$10” [sic]), and one-tenth troy ounce (denominated “$5”).

Another Silver Standard?

The Liberty Coin Act of 19859 provided for 0.999 troy ounce (not 1.0000 troy ounce) silver coins denominated “one dollar” and “one Oz. Fine Silver.” Although their official name is “Liberty [silver] coins,” they are commonly but erroneously called “silver American Eagles.”

Multiple Legal Tenders

Since 1985, Congress has provided the United States with a complex multiple legal tender monetary system composed of many sorts of “dollars”: irredeemable United States notes,10 irredeemable Federal Reserve note “dollars,”11 base metal token coins and debased silver coins,12 1792-standard dollars of silver,13 1900-standard “dollars” of gold,14 American Eagle gold “dollars,” and silver Liberty 0.999 troy ounce “dollars.”15 All are denominated in “dollars,” although markets value these various “dollars” at vastly different rates.

Not Since the War of Northern Aggression

The last time this situation prevailed was after the War Between the States when United States notes, national bank currency, U.S. silver coins, and U.S. gold coins were all legal tender denominated in “dollars” and all valued at differing rates. In 1878, the United States Supreme Court construed these contradictory laws as meaning that “a dollar is a dollar is a dollar” for legal tender purposes.16

One owing a debt may pay it in good coin or legal tender notes of the United States, as he chooses, unless there is something to the contrary in the obligation out of which the debt arises. A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money—that is to say, as a medium of exchange—the law knows no difference between them [emphasis added].17

What Is a Dollar?

The implications, especially in accounting for revenue and paying taxes, are staggering but untried and unproven in court. In personal business, you are unquestionably free to write contracts specifying payment in legal tender gold18 or silver coin and thus contract out of the paper money system. But one point is clear: the only thing that gives the government and the Federal Reserve power over our economic system is our own willingness to use their irredeemable paper notes in our daily lives. If you are a slave of the paper money system, you are forging your own chains.

Continue to Part III: Terms and Presuppositions