Why did Lincoln make United States Notes instead of inflating the Silver or Gold Certificates?
And why is the only currency in circulation today a note written by the Federal Reserve Bank and not the US?
And what do they have in common?
As I have written before, The Coinage Act of 1792 is the enactment of the laws that support the United States Constitution. It has been amended and added to, but it is still the controlling legal law for our currency and coin. The Founding Fathers were skeptical of currency. Paper money always comes to a bad end, and the had been bitten by it several times, like a merchant being stuck with a bad check today. Except that the check was drawn on a national bank or even a nation itself.
The dollar is defined in the Act as 371 4/16 grain (24.1 g) pure or 416 grain (27.0 g) standard silver. The piece of paper was never legally a dollar. The dollar is a standard weight and purity of silver.
§ 19 of the Act authorizes the death penalty for government officials who debase the currency. And the law still stands today.
So rather than debasing the currency, Lincoln issued a side currency. Since this currency did not debase the silver and gold Constitutional currencies but instead was like a non-interest bearing bond, it got a pass.
The same appears true with the Federal Reserve Note, but is it? The US Notes were redeemed in silver, gold, or other currency; so the debt was settled. The amount authorized was never increased from the original amount and so was not debased.
Now think of cutting a pie and then re-cutting it to double the number of slices. You do not have more pie. In fact each piece is worth half the pie it used to be.
The Federal Reserve Notes have increased and increased and increased upon the issuance of debt by the Congress of the United States. There is not corresponding increase in the backing, there is no backing at all. In fact, the debt is required to be settled in silver and gold by the US Constitution Silver and gold that has not increased in amount in many decades and even decreased. So the remaining national inventory of precious metals being constant, the value of our currency has dissipated .
Since that dollar is representative of our debt but not our assets, it is steadily being debased so that now it is but pennies on the dollar of as recently as 1964. Debasement may be slow to the eye like Kudzu growing, but like Kudzu, it is strangling everything is grows over.
It is my fervent hope that when section 19 is finally enforced , they bring back the Guillotine.