Constitution 101: The Coinage Clause

In a 2023 Saturday Night Live sketch, George Washington, played by comedian Nate Bargatze, tries to motivate his troops during a desperate moment in the Revolutionary War.

Washington told them they were fighting for a country of their own, a nation where they would choose their own laws, their own leaders, and their own system of weights and measures.

“One day,” Washington declares, “our proud nation will measure weight in pounds, and 2,000 pounds shall be called a ton.” When a soldier asks what 1,000 pounds will be called, Washington simply replies, “Nothing, because we will have no word for that.”

Washington continued to explain that as free men, Americans will measure some liquids in liters and milliliters, but only soda, wine, and alcohol. Milk and paint, however, will be measured in gallons, quarts, and pints, God willing. “How many liters are in a gallon, sir?” a soldier asks.

Washington responds, “Nobody knows.”

While the sketch was one of the funniest SNL has produced in years, it also contained a grain of truth. Article I, Section 8, Clause 5 of our Constitution gives Congress the power “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” While the weights-and-measures portion makes for great comedy, the authority to coin money has been far more significant in American history.

Before the Constitution was ratified, the Articles of Confederation gave the national government very little authority over the nation’s finances.

Individual states issued their own paper money while foreign coins circulated alongside state currencies. As a result, money often had different values from one state to the next, making trade difficult and creating confusion for merchants and consumers alike.

These problems were made even worse during the Revolutionary War. The Continental Congress printed large amounts of paper money, known as Continentals, but because the national government lacked the power to raise sufficient tax revenue, the currency quickly lost its value. This gave rise to the phrase “not worth a continental” and convinced many of the nation’s leaders that the United States needed a stronger central government with authority over the monetary system.

The Coinage Clause, reinforced by later Supreme Court decisions, gives Congress the exclusive authority to coin money and regulate its value.

Article I, Section 10, Clause 1 goes even further by prohibiting the states from coining money altogether. The principle of exclusive federal authority over currency became so well established that the Supreme Court cited it in several early cases as a classic example of the difference between concurrent powers and exclusive federal powers under the Supremacy Clause.

The Constitution, however, did not eliminate every source of monetary confusion.

Early America developed a dual banking system in which both the federal government and the states could charter banks. While only the federal government could officially coin money, state-chartered banks accepted deposits of gold and silver and issued paper banknotes redeemable for those deposits. These notes circulated as currency throughout local economies.

The problem was that state banknotes often varied in value because they depended on the financial health of the issuing bank. A note issued by one bank might be accepted at full value nearby but discounted elsewhere if people questioned the bank’s stability.

This loophole was finally closed during the Civil War. Congress passed the National Banking Act of 1863, creating a uniform national banking system and a national currency. A few years later, Congress imposed a 10% tax on state banknotes, making them too expensive to circulate and effectively eliminating them from the marketplace.

While researching this topic, I came across an interesting use of the Coinage Clause that I had not known before. During the Great Depression, President Franklin D. Roosevelt took the United States off the gold standard.

In 1933, he issued an executive order that made it illegal for most Americans to own gold and required them to exchange their gold for paper currency at the official price of $20.67 per ounce. Adding more currency, FDR intentionally reduced the dollar’s value. The resulting inflation helped many debtors because it lowered the real value of what they owed while increasing the prices they could receive for the goods they produced.

When the government’s actions were challenged in court, the Supreme Court upheld them in Nortz v. United States (1935), relying in part on Congress’s broad constitutional authority over the nation’s monetary system under the Coinage Clause. Although the United States has never returned to the gold standard, President Gerald Ford signed legislation in 1974 restoring the right of Americans to own gold.

Since Bargatze’s sketch centered on weights and measures, it is worth mentioning why that authority appears alongside the power to coin money. The two powers work together to create a stable national economy. Just as a single national currency prevents confusion over the value of money, uniform standards for weights and measures prevent disputes over the quantity of goods being bought and sold.

Whether someone is purchasing a pound of flour, a gallon of milk, or paying with a dollar, our Constitution sought to ensure that everyone across the United States would be operating under the same set of rules.

James Finck is a professor of American history at the University of Science and Arts of Oklahoma. He can be reached at james.finck@swoknews.com. Thanks to the Southwest Ledger and the Lawton Constitution for sharing his column.