Below is an excerpt of my e-book “Monetarism and the Constitution

In 1871, the United States Supreme Court, in Knox v. Lee, held that Congress has the power to “give to treasury notes the character and qualities of money.”[1]  This power allowed the federal government to move our country away from a currency system of gold and silver coins and towards one of paper money.  Consequently, a paper money system has remained with us ever since, existing today in the form of greenback Federal Reserve Notes.

But, despite over a century of paper money circulating as America’s currency, many constitutional textualists (those who adhere firmly to the original meaning of the Constitution) have argued persuasively that paper money does not comport with the language of the Constitution or with the intent of its drafters.  Unfortunately, no matter how convincing these men are in demonstrating the Framers’ intent, the idea of abolishing our current monetary system seems, at best, unrealistic.  So what can be done?  Is there a way to amend our monetary system that will allow us to continue using our well-known and universally accepted greenback dollars while at the same time complying with the language and objectives of the Constitution?

This essay will attempt to show that such a system is possible and that it can be accomplished by adopting two simple amendments[2] to the U.S. Constitution.  The first would prohibit the government from inflating the currency beyond an annual rate of 5 percent.  This prohibition, to a great extent, would eliminate the arbitrary power the federal government and Federal Reserve now have to deprecate our money with excessive inflation.  The second proposed amendment would require the government’s debts, measured in dollars, to adjust annually according to the value of the dollar. This would remove the government’s incentive to print new money to pay its debts with devalued currency.

To demonstrate just how these amendments could ameliorate the constitutional problems that textualists find with paper money, we must consider both amendments in relation to the most notable legal arguments against paper money; these are the arguments of Justice Chase in the Legal Tender cases.

The conclusion will be that these amendments, if adopted, would return us to a stable monetary system governed by laws and not men, a system consistent with the philosophy of our Founders and congruent with the spirit of our Constitution.

[1] Knox v. Lee, 79 U.S. 457, 530 (1871)

[2] Both amendments are the work of one of the twentieth-centuries most notable economists, Milton Friedman.