Monetary Policy and the Coin Money Clause: What the Founders Intended

The U.S. Constitution gives Congress the power "to coin Money, regulate the Value thereof" (Article I, Section 8). This seems straightforward—Congress has the authority to mint coins and establish their value. But what did the Founders intend with this power, and how has it changed over time?

The Founders' Original Intent: Stability and Trust

When the Founders debated the Constitution, they were very concerned about the value and stability of money. In the years leading up to the Constitutional Convention, the colonies and early states had used various forms of money, including paper currency, which often lost value quickly. This led to economic instability and lack of trust in the system.

The Founders, especially people like James Madison and Thomas Jefferson, wanted to avoid the chaos of unstable currency. Madison said the government needed the power to "regulate" money to create a stable, trustworthy system. But they were wary of paper money. Jefferson was particularly vocal in his distrust of paper money, stating it led to economic speculation and instability.

Instead, they favored a currency backed by precious metals, like gold and silver. The idea was that coins made from valuable metals would have intrinsic value, meaning their worth wouldn't depend on the decisions of government officials or market fluctuations.

What’s Happened Since Then?

The Founders' vision of a stable, metal-backed currency worked for many years, but that changed during the 20th century. In 1913, the creation of the Federal Reserve shifted much of the control over monetary policy from Congress to an independent central bank. The Federal Reserve was meant to stabilize the economy, but it also began issuing paper money and manipulating interest rates to influence economic growth.

Perhaps the biggest change came in 1971 when President Richard Nixon took the U.S. off the gold standard. Up until then, paper money could be exchanged for a certain amount of gold. After 1971, however, U.S. currency became fiat money, meaning it’s not backed by any physical commodity—its value depends entirely on trust in the government.

This move to fiat currency allows the government to print more money as needed, but it also opens the door to inflation. The more money printed without an increase in real value, the less each dollar is worth. This has led to cycles of inflation that the Founders tried to avoid by basing the money supply on something of real value, like gold or silver.

How Do We Return to the Founders' Vision?

To return to the stability the Founders envisioned, we need to reconsider how we handle money. Here are a few ways we can do that:

1. Limit the Federal Reserve's power: The Federal Reserve controls monetary policy in a way the Founders never intended. Reducing its role and returning control to Congress would bring us closer to the Constitution’s original design.

2. Explore a return to asset-backed currency: While a full return to the gold standard may be difficult, exploring alternatives where currency is backed by tangible assets could restore trust in the value of our money.

3. Promote the use of physical currency: The shift to digital payments gives banks and governments more control over our money. By encouraging the use of physical cash, we can reduce the risk of government overreach and maintain individual privacy in financial transactions.

In summary, the Founders wanted a stable, reliable form of money that would protect against inflation and economic instability. By moving away from their vision, we’ve faced cycles of inflation and uncertainty. A return to principles of sound money management, rooted in the Constitution, can help us regain control over our economy and protect individual wealth.