Then, as now, those who suffered the most from fiat money were those who held the most trust in government. In 1777 these were mostly the Whigs, for it was they who patriotically held paper money and, as a result, lost their livelihoods and their life savings.
The Tories, on the other hand, mistrusting both government and its paper money, passed the bills as quickly as possible in trade for real assets, especially gold. Consequently, as a group, they weathered the storm fairly well. But they often were derided by their less prudent neighbors as 'Torie speculators,' 'hoarders,' and even
'traitors.'
All of this was painfully fresh in the memories of the delegates to the Constitutional Convention and, as the opening session convened in Philadelphia in 1787, there were angry mobs in the streets threatening the legislators. Looting was rampant. Businesses were bankrupt. Drunkenness and lawlessness were everywhere to be seen. The fruit of fiat money had ripened, and the delegates did not enjoy its taste.
In October of 1785, George Washington wrote: 'The wheels of government are clogged, and ... we are descending into the vale of confusion and darkness.'1 A year later, in a letter to James Madison, he said: 'No day was ever more clouded than the present. We are fast verging to anarchy.'2
In February of 1787, Washington wrote to Henry Knox: 'If any person had told me that there would have been such formidable rebellion as exists, I would have thought him fit for a madhouse.'3
Just three months prior to the opening of the convention, Washington voiced his reasons for rejecting the notion of fiat money. In answer to the complaint that there was not enough gold coin (specie) to satisfy the needs of commerce, he replied: The necessity arising from a want of specie is represented as greater than it really is. I contend that it is by the substance, not the shadow of a thing, we are to be benefited. The wisdom of man, in my humble opinion, cannot at this time devise a plan by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. Wherein, then, is the farmer, the planter, the artisan benefited?
1. Quoted by Atwood, p. 3.
2.
THE LOST TREASURE MAP
315
An evil equally great is the door it immediately opens for speculation, by which the least designing and perhaps most valuable part of the community are preyed upon by the more knowing and crafty
speculators.1
THE CONSTITUTIONAL CONVENTION
This was the prevailing view held by the great majority of delegates to the Convention. They were adamant in their resolve to create a constitution which would prevent any state, and
And they said so in unmistakable terms.
Oliver Ellsworth from Connecticut, who later was to become our third Chief Justice of the Supreme Court, said:
This is a favorable moment to shut and bar the door against paper money. The mischief of the various experiments which have been made are now fresh in the public mind and have excited the disgust of all the respectable parts of America.
George Mason from Virginia told the delegates he had a
'mortal hatred to paper money.' Previously he had written to George Washington: 'They may pass a law to issue paper money, but twenty laws will not make the people receive it. Paper money is founded upon fraud and knavery.'
James Wilson from Pennsylvania said: 'It will have the most salutary influence on the credit of the United States to remove the possibility of paper money.'
John Langdon from New Hampshire warned that he would
rather reject the whole plan of federation than to grant the new government the right to issue fiat money.
George Reed from Delaware declared that a provision in the Constitution granting the new government the right to issue fiat money 'would be as alarming as the mark of the beast in Revelation.'
Thomas Paine, although not a delegate to the Convention, had written the previous year that he was strongly opposed to fiat money, which he called counterfeiting by the state, and he especially abhorred legal tender laws which force people to accept the L Washington to Stone, 16 February, 1787. Quoted by Bancroft, pp. 231-32.
2. For the context of this and the following statements expressing a similar sentiment see Bancroft, pp. 30,43- 44,82; also Paul and Lehrman, p. 168.
316 THE CREATURE FROM JEKYLL ISLAND
counterfeit. He said: 'The punishment of a member [of a legislature] who should move for such a law ought to be
An interesting thought.
If any further evidence is needed that the Founding Fathers intended to prohibit the federal government from issuing 'bills of credit,' consider this. The first draft of the Constitution was copied in large measure from the original Articles of Confederation. When it was taken up for consideration by the delegates, therefore, it contained the old provision that had caused so much chaos. It stated: 'The legislature of the United States shall have the power to borrow money and emit bills of credit.' But, after a lively discussion on the matter, the offending provision was
