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Did the Supreme Court Err in Holding the Legal Tender Laws Constitutional?

In 1870, the U.S. Supreme Court decided the case Hepburn v. Griswold. In this case the Chief Justice who delivered the opinion of the Court found that there was no constitutional authority vested in the national government to decree paper currency legal tender. As such, the legal tender laws were struck down as unconstitutional.

In this case the Chief Justice said:

There is a well-known law of currency, that notes or promises to pay, unless made conveniently and promptly convertible into coin at the will of the holder, can never, except under unusual and abnormal conditions, be at par in circulation with coin. It is an equally well-known law, that depreciation of notes must increase with the increase of the quantity put in circulation and the diminution of confidence in the ability or disposition to redeem. Their appreciation follows the reversal of these conditions. No act making them a legal tender can change materially the operation of these laws.

In 1871, the U.S. Supreme Court decided the case Knox v. Lee. The composition of the Court had changed as on the day Hepburn V. Griswold was decided President Ulysses Grant appointed two new justices. This time the Court found the legal tender constitutional under the power of the national government to carry on war.

This time the Chief Justice said “When the government compels the people to receive its notes … it practically represents itself insolvent.” He also pointed out that during the convention that framed the constitution Mr. Webster said "[m]ost unquestionably there is no legal tender and there can be no legal tender in this country, under the authority of this government or any other, but gold and silver … This is a constitutional principle perfectly plain and of the very highest importance.’

In 1884, the U.S. Supreme Court decided the case Julliard v. Greenman. This time the question was are the legal tender laws constitutional during times of peace. The court found that the borrowing power coupled with the coining power allowed for legal tender laws.

In his closing dissent Chief Justice Field said

If congress has the power to make the notes a legal tender and to pass as money or its equivalent, why should not a sufficient amount be issued to pay the bonds of the United States as they nature? Why pay interest on the millions of dollars of bonds now due when congress can in one day make the money to pay the principal? And why should there be any restraint upon unlimited appropriations by the government for all imaginary schemes of public improvement, if the printing-press can furnish the money that is needed for them?



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