I recently came into possession a $1 “presidential coin,” issued by the U.S. Mint. Although this particular series of coins, which honor American presidents, started in 2005, it was the first time I have seen one of the coins.
My reaction to the coin: Pathetic, mostly because it has a gold-like color to it, which, presumably, is supposed to harken back to the era in which gold coins were the official money of the United States. Unlike those gold coins, which had real intrinsic value, the presidential coins are effectively junk, being composed of a copper core clad by manganese brass. Their only real value is the fact that the U.S. government has made them legal tender.
The junk nature of the presidential coins serves as a reminder of what the U.S. government has done to the monetary system that the American people established under the Constitution.
Keep in mind, first of all, that the American people called the federal government into existence with the Constitution. When they did that, they set forth terms and conditions under which the federal government would be permitted to operate. Among those conditions was a monetary system that was based on gold coins and silver coins.
Why not paper (fiat) money, like we have today? Because our American ancestors opposed paper money. They knew that paper money was the time-proven way by which governments plunder and loot people by simply printing ever-increasing amounts of paper bills and notes, thereby debasing their money through the process known as inflation.
Americans understood that government cannot print gold coins and silver coins. That’s why they chose to adopt a gold-coin, silver-coin monetary system for America.
How did they do that? Through the Constitution, the charter that sets forth what the federal government can do and cannot do. The Constitution gave the federal government the power to coin money and regulate the value of that money. Coining money, obviously, means minting coins out of metals. Equally obvious, coining money does not mean printing paper money.
The Constitution did not give the federal government the power to issue paper money. That’s important because if a power isn’t enumerated within the Constitution, the federal government is prohibited from exercising it.
At the same time, the Constitution prohibited the states from issuing paper money, or “bills of credit” as paper money was referred to back then. The Constitution also prohibited the states from making anything but gold and silver legal tender.
The result: a monetary system based on gold coins and silver coins. No, not “paper money backed by gold.” There was no paper money. There were debt instruments — bills and notes — but everyone understood that they were promises to pay money, not money themselves. The money was the gold coins and silver coins.
During the gold-standard era, the U.S. mint coined money. Among the many coins issued were $1 gold coins and silver dollar coins. The gold coins consisted of 90 percent pure gold. The silver dollars consisted of 90 percent silver.
Compare the composition of those gold coins and silver coins with the junk “presidential coins” that the Mint now issues. Gold and silver coins versus copper-brass coins.
So, how is it that Americans now live under a monetary system based on paper money and junk alloyed coins rather than the gold-coin, silver-coin standard established by our American ancestors? Was there a constitutional amendment adopted that changed America’s monetary system?
Nope. The change was made by decree and legislation as part of President Franklin Roosevelt’s New Deal program to address the Great Depression. Embracing emergency powers, much like dictators have done throughout history during crises, Roosevelt decreed that America would no longer have the monetary system established by the Constitution and instead would have one that all other countries have had — one based on irredeemable paper money.
Was the constitutional monetary system restored once the economic crisis was over? Nope. Roosevelt made certain that his “emergency” decree would be made permanent. He did that by ordering every American to deliver his gold coins to federal officials in return for Federal Reserve paper bills and notes that effectively promised to pay nothing. Anyone caught owing gold coins would be prosecuted as a felon.
Ever since, the federal government has gone on a spending and borrowing spree that the Federal Reserve has accommodated with ever-increasing amounts of paper money and cheap, alloyed coins. When Congress permitted Americans to own gold again, few people were stupid enough to use gold coins to purchase things at the face value of the coin. What idiot is going to put a $1 gold coin into a vending machine to purchase a soft drink rather than the cheap, junk “presidential coin”? The $1 gold coin is worth around 300 of those cheap, junk $1 presidential coins.
According to Wikipedia, “Dollar coins have never been very popular in the United States since the removal of specie coins from circulation.” Maybe that’s why I haven’t seen a junk copper-brass $1 “presidential coin” until now.