This Day in History: What if the U.S. never had paper money?
On this day in 1792, the Coinage Act creates the U.S. Mint and provides for the construction of a new building in Philadelphia. That building was the first federal building to be built under the new U.S. Constitution.
In the wake of the American Revolution, the country faced persistent problems because of the monetary system and because of the debts accrued during the war. At least in our early years, there was no uniformity. Under the Articles of Confederation, the states typically issued their own money and made their own rules. Paper money, in particular, had long been a problem, as it was often devalued because of the actions of the state governments.
Given this history, you can understand that the issue of paper money was a bit prickly at the Constitutional Convention. An early draft of the Constitution allowed the federal government to “emit bills on the credit of the United States,” but some delegates were unhappy with such a provision and the phrase was eventually omitted. As a result, our federal government of enumerated powers was never expressly delegated the power to create paper money, although it was given the power to “coin Money” (Article 1, Section 8). (Note, however, that states are expressly prohibited from “emit[ting] Bills of Credit.”)
What does all this mean? Well, the federal government’s authority to issue paper money was a bit more controversial than you might think. It wasn’t until the late 1800s that the Supreme Court finally determined that paper money could be used as legal tender.
When the mint struck coins, the first coins that it produced were “half dimes.” Legend has it that they were produced from silverware provided by George and Martha Washington. Later, the first circulating coins to be produced were copper cents.
So, did you ever wonder? What was the very first U.S. cent spent on? What do you think the merchant thought when he saw that copper coin? Did he have a tiny qualm, wondering if it was legitimate?
History (United States Mint website)
Madison's Notes of Debates in the Federal Convention of 1787 (August 16) (reprinted HERE)
Money in Colonial Times (Federal Reserve Bank of Philadelphia website)
Robert G. Natelson, Paper Money and the Original Understanding of the Coinage Clause (Harvard Journal of Law & Public Policy) (Vol. 31)
The Coinage Clause (The Heritage Guide to the Constitution)
United States Continental Paper Currency: 1775-1779 (Massachusetts Historical Society website)