by Rick Lynch, Future of Freedom Foundation
Why do we have a Constitution? How and why did it come into existence? Just what, exactly, prompted the calling of the Constitutional Convention, which gave birth to it? Most Americans believe, logically enough, that with the passing of the British from the scene it was simply time to create a new government to take the place of the old. That notion, however, ignores the facts that Americans already had a functioning government at the time of the Convention and that that government had been in effect for six years following the final British defeat at Yorktown.
No, the overthrow of the old government and the establishment of the new were prompted by an internal tumult, by domestic corruption, oppression, and chaos, all but forgotten today, that had nothing to do with the departure of the British. That crisis revolved around the printing of paper money by some of the newly freed states. As the Federal Farmer, one of the Anti-Federalists, stated in opposition to the Constitution,
Our governments have been new and unsettled; and several legislatures, by making tender, suspension, and paper money laws, have given just cause of uneasiness to creditors. By these and other causes, several orders of men in the community have been prepared, by degrees, for a change of government; and this very abuse of power in the legislatures, which, in some cases, has been charged upon the democratic part of the community, has furnished aristocratical men with those very weapons, and those very means, with which, in great measure, they are rapidly effecting their favourite object…. The conduct of several legislatures, touching paper money, and tender laws, has prepared many honest men for changes in government, which otherwise they would not have thought of…. [Emphasis added.]
It is vital, first, to see the printing of paper money for what it was â€” a welfare scheme and an erosion of property rights enacted by impoverished majorities with the sole intent of taking money (property) from the creditor class. It is no exaggeration, no stretch of the imagination, no revisionist or wild-eyed conspiracy theory to state that the Constitution of the United States of America came into being, more than any other reason, to crush a welfare program, to stop the poor from ganging up on the rich and, endowed with the power of democracy, stealing their money.
In their book Decision in Philadelphia: The Constitutional Convention of 1787, Christopher Collier and James Lincoln Collier state,
What concerned Madison most in â€œVicesâ€ was not only that the states were flouting national regulations, but that they were treating unjustly certain minorities within their own borders…. Madison was especially troubled by the stay laws and tender laws and the paper money that so many of the plain people of the country were clamoring for. These laws, Madison believed, were â€œoppressingâ€ the creditor minority. [Emphasis added.]
In several state legislatures, a new breed of politicians, often from lower social backgrounds, was passing debt-relief measures, most notoriously by issuing inflationary paper money. Such legislative action, Madison believed, was an attack on the rights of creditors and amounted to the few being plundered by the many.
The story of paper money is a simple one of greed and corruption fueled by the power of unchecked democracy degenerating into oppression and turmoil. For the Framers, the paper-money crisis was the manifestation of all their fears of mob rule followed by chaos, and it was paper money, far more than anything else, that prompted them to convene the assembly that gave birth to the Constitution. Yes, there were other issues and concerns, chiefly the tendency of the states to strangle interstate trade, and the fear that 13 separate states would constantly war with each other, much like the European powers, or be weak in the face of foreign attack; but, other than the trade issue, those things were merely theoretical in nature, while paper money was all too real.
As you read of paper money, you might wonder just exactly what all the fuss was about. After all, in 21st-century America, when debt-relief measures to the detriment of creditors are this very hour in front of Congress; when battling over which legislator gets the biggest share of your paycheck for distribution to his constituents is all government seems to do; and when thereâ€™s a welfare program for virtually every ill that can be imagined by even the most creative among us, â€” I recently read of the California legislator who has secured funds to pay for tattoo removal because tattoos might hurt a job applicantâ€™s chance of getting hired â€” just exactly what physical form state-issued money takes might not seem to be the kind of thing over which to change governments. But if the paper-money shenanigans outlined below seem rather tame to the modern American reader, that just goes to show how very far weâ€™ve fallen from the days when the Framers had â€œan almost religious respectâ€ for property rights.
Paper money and the Articles of Confederation
Paper-money schemes could not stand on their own and necessarily spawned a whole series of additional laws, each one more odious than its predecessor, to prop up the whole corrupt edifice. Property rights aside, the Framers believed that the baneful effects of all the legislative chaos, the internal turmoil, and the international ridicule and disrepute generated threatened the very existence of the nation.
So frightening was the specter of paper money that one Convention delegate said that granting the federal government the power to issue it â€œwould be as alarming as the mark of the Beast in Revelation.â€ Another delegate said he would â€œrather reject the wholeâ€ Constitution than see the federal government granted that power.
The paper-money crisis began when debtors, usually farmers struggling to make loan payments, would turn to their state legislatures and push for the creation of paper money. That was welfare pure and simple, as the paper money had nowhere near the worth of the gold, silver, or other medium of payment specified in original loan documents, and that, of course, was exactly the idea behind the legislation. Debtors also forced the creation of such extraordinary measures as â€œstay laws,â€ which postponed or even canceled debt collection. Then there were the awful â€œtender laws,â€ and â€œex post facto laws,â€ which actually compelled unwilling creditors to accept the newly printed paper money regardless of what the preexisting contract specified. Printing paper money was one thing, but to actually nullify preexisting contracts and force creditors to accept it in payment was simply more than the Framers could tolerate.
But it was the example of Rhode Island that most horrified the Framers. The legislature, dominated by indebted farmers, circulated paper money that creditors naturally refused to accept. The legislature then made acceptance mandatory. Many creditors at this point actually fled the state to avoid the dreaded paper. The governmentâ€™s answer was simply to pass more corrupt legislation, this time allowing debtors to legally discharge the debt by depositing money with courts and posting an advertisement attesting to such in newspapers. Things got nastier still. When Rhode Islandâ€™s supreme court declared the paper-money law unconstitutional, the legislature threw the court out of office and replaced the justices.
Paper money and the Constitution