No. 130: Pieces of Eight: Monetary Policy and U.S. Constitution

• Edwin Vieira, Jr.: Pieces of Eight, Sheridan Books, 2002, 1666 pp. (two vols.), $49.95

Take out your wallet and examine the rectangular pieces of greenish paper in it. You’ll probably first think “money” and then “dollars.” Looking closely, you see the words “federal reserve note” and “legal tender” printed on the paper. You have perfect confidence that you can exchange the pieces of paper for valuable goods and services. Whether those paper bills have any constitutional validity certainly does not cross your mind. The government prints the stuff, so it must be legit, right?

If, however, you have read Edwin Vieira’s monumental work on our monetary system, you would look quite differently upon the money in your wallet. With remarkable breadth and depth of scholarship, lawyer and constitutional expert Vieira has given us a treatise on, as the subtitle of this two-volume work says, “The monetary powers and disabilities of the United States Constitution.” First published in 1983, this is a second, expanded edition, beautifully printed and bound. The author has woven together constitutional provisions, statutes, court decisions, and his own sharp legal analysis into a encyclopedic work on our monetary system that should be the starting point for anyone with an interest in the chasm between the system we now have and that which the Constitution ordained.

What is the Constitution’s definition of a “dollar?” For Vieira, that is the essential first question. The answer, under Article I, Section 9, Clause 1, is that it is a coin containing 371.25 grains of fine silver. How odd that seems. But that was the weight of the most widely circulated coin in the colonies and early United States. The coin was the Spanish milled dollar, commonly know as a “Piece of Eight” and hence the title of the work. Vieira writes that silver coins of 371.25 grains are the lawful foundation of our monetary system, “not any gold coin or base-metallic coin, let alone any paper currency, be it the first legal-tender United States notes (the “Greenbacks”), the later National Bank Notes, or today’s Federal Reserve Notes. And, the Constitution never having been amended in this particular since 1788, that meaning remains legally controlling today.”

Or at least it should be. What Vieira subsequently shows is that the Constitution’s monetary strictures, like its strictures in so many other areas, have been evaded and destroyed by politicians and that the Supreme Court has chosen to turn a blind eye to the monetary shenanigans of Congress. The surprising conclusion of Pieces of Eight is that there is no legal authority for our present system of irredeemable fiat currency. “To introduce the FRN (federal reserve note) as a new paper currency in 1913, the government had to tie it by a right of redemption to the circulating money of that day, gold coin. And then, to transmogrify the FRN into a currency fit for limitless inflation, the government had to cut that tie to gold (and silver as well)… If the FRNs were not ‘dollars’ when they explicitly promised to pay in gold, they did not magically become ’dollars’ when they stopped promising to pay in anything at all, and statutorily can be redeemed in nothing better than base-metallic coin,” Vieira says.

Inflation. There’s the key. The Constitution gave the United States a monetary system under which money could be coined by the government, but not created out of thin air. Once they had been freed from the Constitution’s restraints, politicians were able to spend money without the unpopular need to levy taxes. Absent the monetary mismanagement of our central bank, the Federal Reserve, our economy would have been spared the boom and bust cycles that we have endured at its clumsy hands. In the court of history, those who planned and acquiesced in the destruction of the Constitution’s monetary framework have much to answer for.

There is no part of this fascinating story that Vieira doesn’t cover in detail. The precise meaning of the relevant constitutional provisions; the several Coinage Acts of the early 1800s, the First and Second Banks of the United States; the Supreme Court’s blunder in sustaining the constitutionality of legal tender U.S. notes; the institution of the Federal Reserve system; FDR’s gold seizure; the severing of the final ties to redeemability in gold and silver — all that and far more is covered in these volumes.

People who fancy themselves as “realists” might snicker and say, “So what — we can’t go back to an antique system with people carrying around silver dollars to make their purchases.” Vieira’s task here is not to set forth the ways in which our monetary system could have evolved to suit modern commercial needs without destroying the constitutional base, but other scholars have done so. The problem is not that a modern economy is impossible without government monetary control, but that the politicians will fight like mad to keep the power they have taken illegitimately.

Pieces of Eight is an indispensable work for anyone who believes in upholding the Constitution.