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We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.1

It is my contention that the lofty aspirations formulated in the Preamble to The Constitution of the United States certainly cannot be realized if we are unable to provide ourselves with a just system of the one absolute, man-made necessity for survival in modern society — money (see my “The Necessity for Monetary Reform and a Just System of Money“).

I am not a Constitutional scholar, merely a citizen. But I fail to see how an unjust money system can allow us to fulfill the vision of our constitution’s Preamble. I also have grave doubt that either the Framers or Ratifiers of the Constitution intended for future generations to become debt slaves to a fraudulent money system (see my “Drain the Monetary Swamp“)

The Congress shall have Power… To coin Money, regulate the Value thereof. (Art. I, Sec. 8)

Our Constitution gives the power to coin (create) Money to the Congress. This Constitutional Money Power cannot be given away legislatively by the Federal Reserve Act or any other legislation without a Constitutional Amendment. Despite the fact that the Federal Reserve System has been in place since 1913, its legitimacy and that of private banks creating our money has never been ruled upon by the U.S. Supreme Court.

The Constitution capitalized important nouns such as Power and Money and used the lower case for verbs such as coin. The verb ‘to coin’, in addition to meaning make or mint a coin, also means to create or invent such as ‘to coin a phrase’. The entire constitutional justification for the Federal Reserve System and private money creation rests on the false premise that the Constitutional statement on the Money Power vested to Congress refers to only the creation of coins.

This fallacious logic is evidenced by the Federal Reserve and banking system paying our federal government the full face value of every coin shipped to the Federal Reserve, while at the same time paying our federal government only the cost of printing our paper currency. The Federal Reserve pays us 5.6 cents for every $1 bill and 13.2 cents for every $100 dollar bill. We are paid more for a quarter and a nickel than for two $100 bills.2

The Federal Reserve System does, after paying operating costs and fixed dividends to its private bank owners, return all profits to the U.S. Treasury. But the private banks are allowed to keep all profits they amass in the creation of credit which accounts for almost the entirety of the U.S. money supply.

Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region….we hold that the Reserve Banks are not federal agencies for purposes of the Federal Tort Claims Act and we affirm the judgment of the district court. 3

The U.S. Court of Appeals for the 9th Circuit, Lewis v. U.S., 1982 upheld the separation of the Federal Reserve Banks from the federal government.

“Paper Money and the Original Understanding of the Coinage Clause

Law Professor Robert Natelson argues that the Coinage Clause in the Constitution gives Congress the power to create paper money. In his seminal study “Paper Money and the Original Understanding of the Coinage Clause” published in the Harvard Journal of Law and Public Policy, Natelson analyzes the Constitution in the way that lawyers in the founding generation would have.4

He calls his originalist method, ‘original understanding originalism’. Instead of basing the analysis on the understanding of the Framers of the Constitution as is commonly done, he bases it on the understanding of the Ratifiers of the Constitution. The Constitution was a proposal by the Framers, it was only the Ratifiers’ consent that made it law.

Natelson believes that the first standard, when interpreting the Constitution, is the understanding of the Ratifiers. The second standard is the original public meaning of the words. His paper provides a compelling argument that the creation of our nation’s money belongs to the people through our elected Congress, by meeting both Constitutional interpretation standards.

As already mentioned I am not a Constitutional scholar, but I have read arguments about how the Constitution should be interpreted. These arguments tend to focus on the understanding and intent of the Framers. Natelson’s interpretation of the Constitution through the understanding of the Ratifiers, makes so much more sense to me.

The Ratifiers of the Constitution understood the phrase “to coin Money” to include paper money

The method of originalist analysis employed in this Article is the same that lawyers in the Founding generation would have used. (15) It might be called “original understanding originalism,” as opposed to “original public meaning” or “original intent originalism.” (16) Under the original understanding method, the interpreter seeks and applies the ratifiers’ subjective understanding of the constitutional language, to the extent that subjective understanding is recoverable. If it is not recoverable, then one applies the original public meaning of the words. Note that the subjective understanding sought is that of the ratifiers rather than that of the drafters, for it was the ratifiers who transformed the Constitution from a proposal into basic law. (17) 5 

Natelson quotes a 1819 Supreme Court decision making the same point:

The Convention which framed the constitution was indeed elected by the State legislatures. But the instrument, when it came from their hands, was a mere proposal, without obligation, or pretensions to it. It was reported to the then existing Congress of the United States, with a request that it might ‘be submitted to a Convention of Delegates, chosen in each State by the people thereof, under the recommendation of its Legislature, for their assent and ratification. . . . From these Conventions, the constitution derives its whole authority.6

Natelson provides examples of the drafters of the Constitution coming down on both sides of the meaning of “to coin”, before moving on to the evidence of the Ratifier’s understanding.

As previously shown, one cannot prove that the drafters of the Constitution specifically intended “coin” to have a broader meaning, because their intents appear to have varied, and not all of their views are recoverable. (297) Yet the ratifiers could easily have understood the word in a broad way. The ratification records should now be evaluated to determine the direct evidence of their understanding. 7 

Some points made by Natelson:

  • The British American colonies in the 17th and 18th centuries enjoyed a very fast growing economy, quite possibly the fastest in the world.

  • Their primary circulating medium was a woefully inadequate number of Dutch, Portuguese and Spanish coins.

  • Because of the dearth of an adequate supply of coins, all sorts of commodities were used for money, including animal skins, corn, beeswax, tobacco and even wampum.

  • Their experience with substitute forms of paper money, such as bills of exchange, promissory notes and letters of credit, led to Massachusetts in 1690 issuing the first government-sponsored American paper money in the form of 7000 [pounds sterling] in bills of credit. The other colonies soon followed suit.

  • The results of paper money were mixed in the different colonies, but it was popular with the colonists. Historian Mary M. Schweitzer said that in Pennsylvania, “paper money was virtually an ‘apple pie and motherhood’ issue throughout the colonial period.”

  • “The overwhelming majority of the colonists favored paper money and inflationary policies in general, regarding them as economically beneficial”. 8

  • The British Parliament passed the Currency Act of 1764 that banned the issuance of legal tender paper currencies in all the colonies.

  • When war broke out the Continental Congress issued paper money to fight the war: debt-free bills of credit referred to as the Continentals. A total of $240 million were issued, in addition to $200 million of state issued paper money. By 1780 the Continentals had been reduced in value to 2 1/2 cents on the dollar with specie.

  • It is easy to condemn the Continental Congress’s venture into hyperinflation, but difficult to see how Congress could have financed the Revolution otherwise. At the time, many people did not see the episode as a failure at all. The liquidity was received favorably (at least at first), and the depreciation was seen as an informal tax for financing the war. (211) And, of course, the war had been won. 9

Natelson’s paper is well researched and argued.  I only wish that Professor Natelson had the opportunity to meet my late friend and mentor in monetary reform Stephen Zarlenga, Director of the American Monetary Institute and author of The Lost Science of Money.  Natelson refuses to condemn “the Continental Congress’s venture into hyperinflation”, acknowledging its necessity because it was was “difficult to see how Congress could have financed the Revolution otherwise.”  He relates that the American colonists fighting the war supported the Continentals. “At the time, many people did not see the episode as a failure at all. The liquidity was received favorably (at least at first), and the depreciation was seen as an informal tax for financing the war.”  Natelson concludes,  “And, of course, the war had been won.” 

Using multiple sources, Zarlenga, in his Lost Science of Money, tells of the British counterfeiting:10

The artists they employed performed so well that immense quantities of these counterfeits which issued from the British Government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass. (Benjamin Franklin) 11

In a confidential letter to Lord George Germaine about 1781 [perhaps a bit earlier], General [Henry] Clinton observed “That the experiments suggested by your Lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried; but still the currency…has not failed”. 12

I think a Natelson/Zarlenga meeting of minds might have brought out two things.  First that the British counterfeiting, in addition to the amounts of money created by the colonists to fight the war, were both responsible for the hyperinflation.  Second that the Ratifiers of the Constitution were comfortable enough with a system of public money such as the Continentals, realizing that after the war a democratic government could bring the inflation under control, that they preferred it to the alternative of the absence of a public money system that they suffered under British rule.  

These are but a few of the highlights of Natelson’s position that the colonists were familiar with and not afraid of paper money. All this going to the state of mind of those who voted to ratify the Constitution. They accepted the fact that money could be coin, paper or even wampum. Since they had witnessed their own actions defeating the world’s dominant military on the backs of the paper Continental Currency, in spite of massive British counterfeiting, they were unlikely to be afraid of paper currency in their new republic.

Meaning of “to coin Money”

What is the meaning of the verb ‘to coin’? If the usage at the time included the more expansive use of the word to create or invent, then the intent of the Ratifiers would have been:

The Congress shall have Power…  To coin [create] Money, regulate the Value thereof, . . .

Natelson continues,

The more common meaning of “coin” in the eighteenth century, as now, referred to metallic tokens. (262) Madison used the word this way in The Federalist, when he wrote that “the same reasons which eschew the necessity of denying to the states the power of regulating coin, prove with equal force that they ought not to be at liberty to substitute a paper medium in the place of coin.” (263) Nonetheless, other possible definitions of “coin’–recognized even in monetarist Britain–were “Payment of any kind” (264) and “all Manner of the several Stamps and Species in any Nation.” (265) The verb “to coin” could mean “to make or forge any thing” (266) (represented today by the common expression, “to coin a phrase”); so, pursuant to this usage, paper money could be ‘coined.’

To the modern speaker of English, the metallic meaning seems the more natural one, (267) but this was less so in the eighteenth century. When speaking of matters other than the financial practices of the British government, eighteenth-century English speakers, like Shakespeare’s Falstaff before them, (268) often used both the noun and verb form of “coin” in broader ways. This was true not only of rogues like Falstaff, but of quite respectable people. For example, in his celebrated Cyclopedia, Ephraim Chambers wrote, “The Hollanders, we know, coined great quantities of pasteboard in the year 1574.” (269) This formulation was later adopted almost word-for-word by the Encyclopedia Britannica. (270)

What could be said of pasteboard and the Dutch could also be said of paper. In 1700, the anonymous author of a pamphlet on trade reflected on how other nations might compete with the English woolen trade by “Coining Paper Money.” (271) In 1720, economist John Law proposed “Coining Notes of one Pound” (272) and otherwise “coining” paper money. (273) A few years later, Daniel Defoe related how tradesmen “coined bills payable from one to another.” (274) When the American colonies declared their independence, John Shebbeare attacked them for “coining paper money.” (275) The debates in the Irish Parliament of 1784 include a reference to “coining paper into money.” (276) Thomas Paine argued that “[o]f all the various sorts of base coin, paper-money is the basest.” (277) When Benjamin Franklin urged issuance of Pennsylvania paper money secured by land, he characterized it as “Coined Land.” (278) In the 1742 case of Charitable Corporation v. Sutton, (279) Chancellor Hardwicke referred to “notes coined” (280) by private parties, and to “coining notes.” (281) These are not isolated examples. (282) And although not everyone approved of applying the word “coin” to non-metallic media, the existence of a recorded protest testifies that the usage was common enough. (283) 13

William Shakespeare had certainly paved the way forward for a broader usage of the verb ‘to coin’.

Shakespeare used “coin” in the broader sense quite frequently. 14

Natelson provides the following examples.

Poor? Look upon his face. What call you rich? Let them coin his nose, let them coin his cheeks. (Henry IV, part 1 3.3)

So shall my lungs Coin words. (Coriolanus 3.1)

A mother hourly coining plots. (Cymbeline 2.1)

Tis not so dear, yet ’tis a life; you coined it. (Cymbeline5.5)

This is the very coinage of your brain. (Hamlet 3.4)

Those who support the century old transfer of the Money Power to the privately owned Federal Reserve and the private banks, do so with the argument that Congress is granted the Money Power only for coins by the Constitution. It strains credulity to take a leap of faith and assume that our forefathers, who fought for independence and then voted for delegates to ratify and thus make the Constitution the law of the land, meant to limit the people’s Power to create (coin) money through our elected Congress to the making of coins and give the real Money Power to create currency and the vast majority of our money supply, bank-created debt-money, to the private banks and the Federal Reserve System they own and control.

One can only assume that even those colonists that were opposed to paper money in any way, shape or form, would have preferred the federal government to have the Money Power, in lieu of granting it to private banking corporations. In 2014 the Bank of England released its 1st Quarter Bulletin in 2014, “Money creation in the modern economy”

This article explains how the majority of money in the modern economy is created by commercial banks making loans. • Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

The reality of how money is created today differs from the description found in some economics textbooks:

Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.” 15

As you like it, if the Bard were with us today, perhaps he would have commented to the effect,

But alas, almost the whole of the people’s very lifeblood is neigh tin nor parch, but conjured blips, begat from the ether of the atmosphere, on the screens of the huge counting houses, each blip enslaving the masses while enriching the top crust of society.

As noted before, the Federal Reserve System, after paying expenses and payment of dividends to the private banks that own the Federal Reserve Banks, does return to the federal government all surplus income. But the private banks keep all profits accrued from their debt-money creation scheme.

An argument monetary economists may make is that the debt-money created from thin air by banks when they make loans (almost the entirety of our money) is only credit and not real money. Therefore the system is okay.

It reminds me of a discussion at the American Monetary Institute’s Annual Conference on Monetary Reform in Chicago a few years ago. A vigorous back and forth discussion developed on whether or not banks actually create money when they make loans. An economist was making the above point that money was not being created, only credit. Our late beloved, American Monetary Institute Director Stephen Zarlenga strode to the front of the room. Like Alexander fulfilling the prophecy of the Gordian Knot with his sword, Stephen cut through the confusion and fog of economist speak by stating,

Banks don’t create money, banks create what we use for money.

Of course it is not real money. It is debt, but our country’s very existence demands that we have a sufficient supply of sovereign, debt-free money for the needs of the nation and its people. Banks are debt factories and nothing more. Another money system is possible, founded on Aristotle’s statement “Money exists not by nature, but by law.” Money is not a commodity like gold or silver, money is an abstract power and extension of the people through their legal framework.

Only our federal government has both the sovereign power and responsibility to create and spend into existence, debt-free US Money, in non-inflationary/deflationary amounts for the needs of the nation and its people, as determined by our elected Congress. We the people must rise up and demand that our federal government carry out this necessary responsibility of creating a circulating medium of debt-free money in sufficient amounts to address the needs of the nation, its people and our planet.

Researchers at the American Monetary Institute Stephen Zarlenga, Robert Poteat and Jamie Walton composed the American Monetary Act that was given to Congressman Dennis Kucinich and put into legislative language so that it was compatible with all other legislation by the Congressional Legislative Counsel James Wert and was then introduced to Congress in 2011 by Dennis Kucinch and co-sponsored by John Conyers as the NEED Act (National Emergency Employment Defense Act). The NEED Act would give people, country and planet a just system of money.16

Nick Egnatz


2. Board of Governors of the Federal Reserve System. “How much does it cost to produce currency and coin?” 27 Dec 2018.

3. John L. Lewis, Plaintiff/appellant, v. United States of America, Defendant/appellee, 680 F.2d 1239 (9th Cir. 1982)

4. Natelson, Robert G. 2008. “Paper Money and the Original Understanding of the Coinage Clause.” Harvard Journal of Law & Public Policy, 31: 1017-81.

5. Natelson, 1022. In quoting Natelson, I have retained his parenthetical footnotes.

6. Natelson, 1022, ftn. 17. Quote from: McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 403 (1819) (Marshall, C.J.).

7. Natelson, 1067.

8. Natelson, 1040, ftn. 141. Quote from: Studenski, Paul & Krooss, Herman. 1952. Financial History of the United States.

9. Natelson, 1050.

10. Zarlenga, Stephen. 2002. The Lost Science of Money : The Mythology of Money – The Story of Power. Valatie, NY: American Monetary Institute, 377-387.

11. Zarlenga, 380-1. Attributed to Benjamin Franklin in: Holdsworth, John Thorn. 1910. The First And Second Bank of the United States. Washinton, DC: National Monetary Commission.

12. Zarlenga, 381. Quoted from: Schuckers, J.W. 1874. Finances and Paper Money of the Revolutionary War. Philidelphia: John Campbell.

13. Natelson, 1061-4.

14. Natelson, 1062, ftn. 268.

15. McLeay, Michael et al. 2014. Money Creation in the Modern Economy“. Monetary Analysis Directorate. Quarterly Bulletin, 2014 Q1, Bank of England.

16. Zarlenga, Stephen. 2009 (2006). “Presenting the American Monetary Act”. Valatie, NY: American Monetary Institute.

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Govert Schuller
4 years ago

Nick, this is a great article. Much to learn from and apply in our discussions.