Representative money is an item such as a token or piece of paper that has no intrinsic value but can be exchanged on demand for a commodity that does have intrinsic value, such as gold, silver.

Constitutional Economics 101: What is a Dollar?

By
Dr. Judd W. Patton

The proposal under consideration was: 'The legislature of the United States shall have power. To regulate the value of foreign coin. To borrow money and emit bills on the credit of the United States. The ensuing debate, as recorded by James Madison, the Father of the Constitution, is most telling.
The demand for money is the desired holding of financial assets in the form of money, that is, cash or bank deposits. Real money balances is the real value of the amount of money held by a person, household or firm or the amount in circulation in the economy or the real value of money balances, their purchasing power in terms of goods 4.8K views.

A dollar? Most Americans today think it's a Federal Reserve Note. You know, the one with George Washington's picture on the front. But they are wrong! In point of fact it was the Coinage Act of 1792 that created and defined exactly what a U.S. dollar is. 'Fine,' you might say, 'interesting historical insight, but so what?' 'Is it really significant that Americans no longer know the original definition of a dollar?' Yes, absolutely! In fact, it is vital to know what a dollar is and the authority the Constitution gives our Federal government in regards to monetary affairs.

Howard Buffett, four-term Nebraska Congressman (R) and the father of Warren Buffett, got to the 'bottom line' of this issue in 1948 when he said, 'So far as I can discover, paper money systems have always wound up with collapse and economic chaos. if human liberty is to survive in America, we must win the battle to restore honest money.'

Representative Buffett knew the difference between irredeemable paper money (called bills of credit in the 1700s) and sound honest money, between Constitutional and unconstitutional money. And he recognized the urgency of restoring the 'dollar of our fathers.'

Let's discover what Rep. Buffett knew, by going back to our nation's Founders, by looking at the monetary debate at the Constitutional Convention, the Constitution itself, and the Coinage Act of 1792.

Constitutional Debate

During the Revolutionary War (1776-1783) the Continental Congress issued $225 million dollars of paper money to finance the war. These 'Continental paper dollars' were not redeemable into gold or silver coins (specie) but they were to be 'retired' in seven years through taxes levied on the States. That never happened. As a result of this massive increase in the money supply our nation experienced a runaway price inflation. General
George Washington wrote in 1779 that 'a wagon load of money will scarcely purchase a wagon load of provisions.' By the spring of 1781 the Continentals were virtually worthless, giving rise to the phrase, 'not worth a Continental.'

This hyperinflation experience was fresh in the minds of the delegates as they arrived in Philadelphia for the Constitutional Convention in May, 1787. On August 16th, part of the agenda of that day was to discuss the proposals concerning the monetary affairs for the new nation. The proposal under consideration was: 'The legislature of the United States shall have power. to coin money. to regulate the value of foreign coin. to borrow money and emit bills on the credit of the United States. The ensuing debate, as recorded by James Madison, the Father of the Constitution, is most telling.

Gouverneur Morris, delegate from Pennsylvania, moved to strike out and emit bills onthe credit of the United States.' He went on to say, 'If the United States had credit such bills would be unnecessary; if they had not, unjust and useless.' Pierce Butler of South Carolina seconded the motion. Later in the discussion he remarked that 'paper was a legal tender in no country in Europe.' He was 'urgent for disarming the government of such a power.' James Mason of Virginia had a 'mortal hatred to paper money' but was unwilling to tie the hands of the legislature. A few others agreed with him, but most of the delegates were vehement in their opposition to irredeemable paper money.

Oliver Ellsworth of Connecticut 'thought it was a favorable moment to shut and bar the door against paper money.' He went on to say, 'Paper money can in no case be necessary.
Give the government credit, and other resources will offer. The power may do harm, never good.' James Wilson of Pennsylvania believed, 'It will have a most salutary influence on the credit of the United States, to remove the possibility of paper money.' George Read of Delaware 'thought the words, if not struck out, could be as alarming as the mark of the beast in Revelation.' And John Langdon of New Hampshire 'had rather reject the whole plan (Constitution) than retain the three words, and emit bills.'

On the motion for striking out the phrase, nine state delegations voted 'aye' and two 'no.' New Jersey and Maryland were the 'no' votes. The New York delegates were not present. The next day, August 17th, the delegates adopted a measure to punish the counterfeiting of coins and U.S. securities.

Then on August 28th, the delegates debated two articles concerning the role of coinage and paper money for the States. During the debate Roger Sherman of Connecticut expressed the view that, 'this is a favorable crisis for crushing paper money.' The delegates agreed. The vote was 8 to 1 (Maryland was divided and abstained) to prohibit 'bills of credit' (paper money) and 11 to 0 to require States to pay their debts in gold
or silver coin only.

On September 12 the committee of revision reported back to the delegates a revised draft of the Constitution. It was not modified. Therefore our Constitution, in regards to monetary affairs, reads as follows:

What Is Real Money In Economics

Article I Section 8: The Congress shall have Power.

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; and To provide for the Punishment of counterfeiting the Securities and current Coin of the United States.

Article I Section 10: No State shall coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of debts.

Such was the action of our Founders. Irredeemable paper money is unconstitutional. Only the minting of coins is lawful.

Coinage Act of 1792

Our Second Congress (1791-1793) then implemented the Constitutional requirements by passing the Coinage Act of April 2, 1792. It established the U.S. Mint and defined and
'regulated the coins of the United States.' (The complete Act can be found on the Internet at: http://www.logoplex.com/shops/leaders/coinage1792.txt). Black's Law Dictionary at the time defined 'regulate' as meaning 'fix, establish, or control.' The Act established or
de

Real Money Meaning Economics