Undermining The Constitution
A HISTORY OF LAWLESS GOVERNMENT
IX
IN MAY, 1933, CONGRESS, BY THE AGRICULTURAL ADJUSTMENT ACT, UNLAWFULLY PERMITTED THE PRESIDENT TO REDUCE THE GOLD CONTENT OF THE STANDARD DOLLAR
It was well settled law (293 U. S. 388) that the power conferred on Congress by the Constitution cannot be delegated to another Department. That principle of the law of Agency was found by Bryce to be the best conception of the Constitutional Convention.
Yet the Legislative Department authorized the President, by a Senate amendment to the House Agricultural Adjustment bill, to reduce the content of the gold dollar, but not below 50 per cent. In 1936 the Agricultural Adjustment Act was held (297 U. S. 1) unconstitutional for taking money from one class for the benefit of another. But in the meantime the President had acted on the Senate amendment and cut the gold dollar.
Among the powers conferred on Congress by the Constitution is that "to coin Money, regulate the Value thereof, and of foreign Coin." At the time the Constitution was written there was much coin of other nations in circulation in America. The Spanish silver dollar was the coin of first importance. By the language quoted, recognition was given to the fact that governments had found it necessary
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to change the content of their standard coins, a course which conditions might make necessary in the New World.
President given no authority over money
But all the authority given by the Constitution was conferred, as the language quoted puts beyond question, on Congress alone. Neither in Article I, creating the Legislative Department, nor in Article II, establishing the Executive Department, is there even an intimation that the President should have anything to do with regulating the value of money. That is to say, the power was withheld from him. For another elementary rule of interpretation is that what is not granted is prohibited.
With the authority to regulate the value of coin limited by the Constitution to Congress, the President was, nevertheless, directed (or, what is more probable, allowed) by Congress to perform its task of fixing the value of the dollar. It was for Congress to determine whether the content of the dollar should be changed and, if so, to change it.
Constitutional power cannot be delegated
Delegation of administrative powers to fact-finding bodies which are guided, not by their own will or judgment, but by the specifications and limitations in the Acts of Congress creating them, has been common. The Federal Trade Commission, the Board of Tax Appeals, and many other agencies have been set up to relieve Congress of details not legislative .
But "the Congress, manifestly, is not permitted to abdicate, or transfer to others, the essential legislative functions with which it is invested," said the Supreme Court (293 U. S. 388) in 1934. (Italics inserted.) It pointed out
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the settled practice that Congress, in the act of delegating administrative powers, must declare a policy, establish a standard, and lay down a rule for its agent to follow in executing the Congressional (not its own) will.
In passing to the President an "essential legislative function," not a merely administrative function, second to none conferred by the Constitution on it, Congress did not itself, so far as the Act and the Joint Resolution show, determine anything -- except that the Chief Executive might use his own judgment within a very wide range.
Here began the course of unconstitutional conduct by Congress which brought upon it and its successors the epithet of "rubber stamp."
The beginning of "directives" by the President
So, on January 31, 1934, the President "directed" that the standard gold dollar be reduced from 25.8 grains to 15-5/21 (15.238) grains.
On March 9, 1933, Congress had passed the Emergency Banking Relief Bill, which authorized the Secretary of the Treasury to require all persons to deliver to the Treasurer of the United States "any and all gold coin, gold bullion, and gold certificates" owned by them, and to accept therefor "an equivalent amount of any other form of coin or currency."
Here began the practice of the President and his rubber-stamp Congress of declaring an "emergency" when it seemed desirable to seize power not granted by the Constitution.
But "emergency does not create power," wrote Chief Justice Hughes (1934) in an opinion (290 U. S. 398) sustaining a law of Minnesota (1933) which extended the
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time for an owner of property to redeem it after sale under foreclosure of mortgage.
Congress repudiated its contract with the people
By a Joint Resolution of June 5, 1933, Congress proclaimed that the promises of the United States in the law under which the Second, Third, and Fourth Liberty Bonds were issued "are hereby repealed" so far as they pledged any payment except "dollar for dollar in any coin or currency which at the time is legal tender." The United States had borrowed money of the people for carrying on World War I and had issued bonds therefor payable as to both principal and interest "in the United States gold coin of the present [1918] standard of value." That is, in dollars containing 25.8 grains of gold nine-tenths fine.
The vastness of the debt repudiated
Just before this legislation, in 1932, the interest-bearing debt of the Nation was $19,161,273,540.[1]
At that time the States had submerged themselves in an interest-bearing debt of $17,589,515,000.[2]
Thus, the two governments of the American had loaded him in a time of peace with a burden of $36,750,788,540.
On the National Debt he was paying a yearly interest of $599,276,631, and the debt of his States cost him yearly in interest $527,685,450.
His interest load for the two debts was $1,126,962,081 per year, or $155,399,491 more than the National Debt the year before we entered World War I.
1. Report Secretary of Treasury, p. 405.
2. Financial Statistics States, pp. 52, 64.
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National and State governments had agreed with those who lent to them $36,750,788,540 to pay in dollars containing 25.8 grains gold. They had likewise promised to pay in such dollars yearly in interest $1,126,962,081.
But the governments would henceforward measure their debt to those who had lent money to them in time of need by a dollar containing 15-5/21 grains of gold instead of the promised dollar of 25.8 grains. Nor, as before said, would their creditors, under the decision of the Supreme Court, to be noticed presently, get the lesser gold dollar. They would be obliged to take paper money. Neither would they, the Supreme Court held, be entitled to enough additional paper money to compensate for the difference between the dollar lent and the dollar paid back.
The "profits" to governments from repudiation
The measure of value by which debtor and creditor had contracted was cut down not quite 41 per cent. If the debts of the Nation and the States just before given were to be cut down 40 per cent the debtor governments would gain over 15.7 billion dollars; and, of course, the people from whom they borrowed would be out of pocket that much, only a little less than the National Debt amounted to in 1931 after Secretary Mellon, by wise management, had reduced it almost 9 billion from the World War I peak of 25 billion, 234 million.
In like manner, all the other debtors in the United States, those not holding bonds or other obligations of Government, would receive in the depleted dollar from their creditors a forced forgiveness of 40 per cent of their debts.
That this was the effect of the performance was ad-
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mitted of record by the Secretary of the Treasury in the report for the fiscal year ending June 30, 1946, where (p. 364), under receipts of money, there was entered "increment resulting from devaluation of gold dollar, $2,811,375,756." Whether that amount was allocated to 1946, or to all the years up to that time, does not appear; but the "clip" on all the bonds of the United States outstanding was $7,760,315,773.
Chief Justice Marshall on honor in government
On the action of the Government in favoring debtors -- and most of all itself and the States -- by clipping the dollar 40 per cent, in one of the opinions of Chief Justice Marshall this is to be found:
"It may well be doubted whether the nature of society and of Government does not prescribe some limits to the legislative power; and, if any be prescribed, where are they to be found if the property of an individual, fairly and honestly acquired, may be seized without compensation."[3]Hamilton on inviolability of governmental contracts
Long before that, Alexander Hamilton, who was Secretary of the Treasury in the Cabinet of Washington, stated with his characteristic clarity and force the position of a contracting Government, as ours was a contracting Government when it borrowed money from the people and promised to pay in dollars containing 25.8 grains of gold:
"When a government enters into a contract with an in-3. Fletcher v. Peck, 6 Cranch. 87, 135.
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dividual, it deposes, as to the matter of the contract, its constitutional authority, and exchanges the character of legislator for that of a moral agent, with the same rights and obligations as an individual. Its promises may justly be considered as excepted out of its power to legislate, unless in aid of them. It is in theory impossible to reconcile the idea of a promise which obliges with a power to make a law which can vary the effect of it."[4]
Hamilton was a member of the Constitutional Convention, which "told the world" that the new Government would pay the creditors of the old.
Constitutional Convention for payment of all debts
Among the final words of the Constitution are these:
"All debts contracted and engagements entered into before the adoption of this Constitution shall be as valid against the United States under this Constitution as under the Confederation."That provision gave the United States high standing and credit among the nations.
On the morality of government respecting its debt, Madison made this interesting observation ( The Federalist , No. 43):
"This can only be considered a declaratory proposition; and may have been inserted, among other reasons, for the satisfaction of the foreign creditors of the United States, who cannot be strangers to the pretended doctrine that a change in the political form of civil society has the magical effect of dissolving its moral obligations."4. Hamilton's Works, 518.
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The fine example set to the nations by the Constitutional Convention has not been accepted by them.
Once we upbraided governments of Europe for repudiating the obligations to us which they had incurred for World War I. But we can do that no longer.
Insolence attended repudiation of gold contracts
From the review which has been made of opinion on both sides of this subject, it is manifest that the Government of the United States, without adequate explanation to the people, took a step respecting their property of tremendous importance to them. The only pretense of explanation by the Government, as a Government, was in the authority given by a rider on the Agricultural Adjustment Act to the President to "fix the weight of the gold dollar ... as he finds necessary ... to stabilize domestic prices or to protect foreign commerce against the adverse effect of depreciated foreign currencies"; and in the Joint Resolution of Congress (June 5,1933) declaring that "the holding or dealing in gold" had been disclosed by "the existing emergency" to "obstruct the power of Congress to regulate the value of money," for which reason "any obligation" purporting to give to the lender of money "a right to require payment in gold" was "declared to be against public policy."
But just how the cut by the President of 40 per cent from the gold dollar would stabilize domestic prices or protect foreign commerce, or how the repudiation by Congress of its promises to pay its bonded debts in gold, with the release of all other debtors from such promises, would help it "to regulate the value of money," was left without
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explanation beyond the bare recitals just quoted from the acts.
The opinions of some writers on finance
Some writers on finance had contended that the value of the gold in a dollar had increased in the market, and that therefore the creditor (the holder of bonds, the depositor of money, and some others) were receiving value above that intended by their contracts, for which reason a reduction of the content of the gold dollar was called for. But, as before indicated, the representatives of the Government said that the purpose was to increase the price of agricultural commodities, to stabilize American money against foreign currencies, and to make a profit for the Treasury of the United States.
While the depletion of the dollar quickly lifted the prices of wheat and other products in demand in foreign markets, it less quickly, but just as surely, increased the costs at home -- of food, of clothing, of housing, of living. If the writers on finance were right, then the wearying burden of living costs carried by the American for fifteen years is in considerable part attributable to the devaluation of the gold dollar.
Supreme Court expounded repudiation
In one of the three Gold Clause Cases the Supreme Court held, on February 18, 1935, in an opinion by Chief Justice Hughes, that the Fourth Liberty Bonds of the United States, promising to pay the buyer (the lender of money to the Government) "in the United States gold coin of the present [1918] standard of value," could not be repudiated as to the form of payment. The bonds having
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been issued under the clause of section 8 of Article I of the Constitution authorizing Congress "to borrow money on the credit of the United States," and being affected by the provision of the Fourteenth Amendment that "the validity of the Public Debt of the United States authorized by law . . . shall not be questioned," those quoted expressions stating the sovereign will of the people, it was not within the power of Congress, a servant of the people with inferior authority, "to override their will thus declared," and by the joint resolution of June 5, 1933, to proclaim that the promises in the law under which the bonds were issued "are hereby repealed" so far as they pledged any payment except "dollar for dollar in any coin or currency which at the time is legal tender."[5]
Yet the bondholder won a Pyrrhic victory. He got nothing but a favorable judicial declaration that he should be paid in gold when the gold of the country had been seized and withdrawn from circulation.
The holder of Government bonds thoroughly "frisked"
Nor did he get in paper money the additional sum to equate the difference between the two gold dollars for the reason that "the plaintiff," the Court said, "has not shown, or attempted to show, that in relation to buying power he has sustained any loss whatever." Congress having withdrawn gold from circulation, it was unascertained what the new gold dollar would be worth to plaintiff in the "domestic and restricted market." He had not proved that, and as he had sued for damages for violation of contract, he failed for want of proof.
5. Perry v. United States, 294 U. S. 330.
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Dissenting Justices found the milk in the cocoanut
In the dissenting opinion in the Gold Clause Cases by Justices McReynolds, Van Devanter, Sutherland, and Butler, this was said (italics inserted):
"The Agricultural Adjustment Act of May 12,1933, discloses a fixed purpose to raise the nominal values of farm products [6] by depleting the standard dollar. It authorized the President to reduce the gold in the standard, and further provided that all forms of currency shall be legal tender. The result expected to follow was increase in nominal values of commodities and depreciation of contractual obligations. The purpose of section 43, incorporated by the Senate as an amendment to the House bill, was clearly stated by the Senator who presented it. It was the destruction of lawfully acquired rights."Congress recognized damage by repudiation
That destructive result was admitted by the Government, for by an act of Congress of June 14, 1934, a credit of $25,862,750 was established on the books of the Treasury in favor of the Philippine Islands, that amount compensating for the cut in its gold-standard fund held by the banks in this country.
The fact deserves special emphasis that it was by an act of Congress taking a course of avowed favor to agricul-
6. Where did Congress get authority "to raise the nominal value of farm products"?
This is one more support of the statement frequently made herein, namely, that those in places in Government have generally ceased to ask or raise the question: Does the Constitution warrant this action? Or, does the Constitution forbid it?
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ture, as the dissenting justices stated in the foregoing quotation, that the President was empowered to reduce the gold content of the dollar. In the act the purpose of stabilizing "domestic prices or to protect foreign commerce against the adverse effect of depreciated foreign currencies" is recited. It is not clear why a dollar supported by the resources and productive power of this country could not stand up against foreign money. No explanation was vouchsafed by the prestidigitators of finance who drafted and put through the bill.
A senator clearly explained the trick
But this from the senator who incorporated section 43 as an amendment to the House bill, referred to in the foregoing quotation from the dissenting justices, is to a high degree lucid (italics inserted):
"The amendment has for its purpose the bringing down or cheapening of the dollar, that being necessary in order to raise agricultural and commodity prices. . . . The first part of the amendment has to do with conditions precedent to action being taken later."It will be my task to show that if the amendment shall prevail it has possibilities as follows: it may transfer from one class to another class in these United States value to the extent of almost $200,000,000,000. This volume will be transferred, first from those who own the bank deposits. Secondly, this value will be transferred from those who own bonds and fixed investments."[7]
There is nothing in that about cutting the value of the dollar over 40 per cent to protect it against "depreciated
7. Congressional Record, April, 1933, pp. 2004, 2216-7, 2219.
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foreign currencies," which Congress gave as one of its reasons, without saying how that would help against what.
Secretary of Treasury not concerned about foreign moneys
Justice McReynolds quoted from a radio address of the Secretary of the Treasury to the American people on August 28, 1934, the following unctuousness:
"But we have another cash drawer in the Treasury, in addition to the drawer which carries our working balance. This second drawer I will call the 'gold' drawer. In it is the very large sum of 2,800,000,000, representing 'profit' resulting from the change in the gold content of the dollar. Practically all of this 'profit' the Treasury holds in the form of gold and silver. The rest is in other assets."I do not propose here to subtract this $2,800,000,000 from the net increase of $4,400,000,000 in the National Debt, thereby reducing the figure to $1,600,000,000. And the reason why I do not subtract it is this: for the present this $2,800,000,000 is under lock and key. Most of it, by authority of Congress, 1s segregated in the so-called stabilization fund, and for the present we propose to keep it there. But I call your attention to the fact that ultimately we expect this 'profit' to flow back into the stream of our other revenues and thereby reduce the National Debt."
Usefulness of gold clause in American life stated
The dissenting justices pointed out that the gold clause in any agreement, employed by Americans for more than 100 years, "secures protection, one against decrease in the
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value of the currency, the other against an increase." Such clauses, they said, "have rendered possible our great undertakings -- public works, railroads, buildings. . . . Furthermore," the dissenters wrote, "they furnish means for computing the sum payable in currency if gold should become unobtainable." Then the borrower pays "for each dollar loaned the currency value of that number of grains." He would thereby get, what was denied by the Supreme Court, enough additional currency to make up the difference between the value of the money lent by him and that paid back.
The whole case, as seen by the dissenting justices, was stated as follows:
"The fundamental problem now presented is whether recent statutes passed by Congress in respect of money and credits were designed to attain a legitimate end. Or whether, under the guise of pursuing a monetary policy, Congress has really inaugurated a plan primarily designed to destroy private obligations, repudiate National debts, and drive into the Treasury all gold within the country in exchange for inconvertible promises to pay, of much less value."The President did not guard against foreign currencies
It was reported in the dispatches on March 15, 1941, that President Roosevelt told his conferees of the Press, whom he used as boosters of his exploits, that "the Treasury's $2,000,000,000 stabilization fund had made a profit of $22,000,000," which, he said, was "not such a bad record for what he called facetiously a bunch of rank amateurs in
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finance." The stabilization fund was established in 1934, the dispatch said, "from profits obtained from the devaluation of the dollar." It was the opinion of the President that he had given "a pretty good illustration of the fact that the American Government was not wholly amateurish in the financial part it plays in the country."
What the Government accomplished proceeded, not from its financial ability, but from an illegal and ruthless exertion of power.
Did predatory wealth or economic royalty ever "put over" anything comparable to that? Did either, even in its dreams, ever see such easy money picked from the gullible?
On "just compensation" for private property taken
Were Congress to authorize the Secretary of the Treasury to order all of the farmers in the country to drive in their herds and accept the pay offered by the Government, "just compensation" would be given for them under the command of Article V of the Bill of Rights. On whether gold could thus be called in and appropriated by the Government without paying grain for grain, the dissenting justices said:
"Congress has power to coin money, but this cannot be exercised without the possession of metal. Can Congress authorize appropriation without compensation of the necessary gold? Congress has power to regulate commerce, to establish post roads, etc. Some approved plan may involve the use or destruction of A's land or a private way. May Congress authorize the appropriation or de-148
struction of these things without adequate payment? Of course not. The limitations prescribed by the Constitution restrict the exercise of all power."
On the point in the opinion of the majority of the Court, that as the holders of the bonds were forbidden to possess gold, it would do them no good to get payment in coin which they would be obliged to surrender immediately, and that consequently they were without damage, the dissenting justices said:
"Congress brought about the condition in respect of gold which existed when the obligation matured. Having made payment in this metal impossible, the Government cannot defend by saying that if the obligation had been met the creditor could not have retained the gold; consequently he suffered no damage because of the non-delivery.Had an individual done such a thing
"Obligations cannot be legally avoided by prohibiting the creditor from receiving the thing promised. . . .
"If an individual should undertake to annul or lessen his obligation by secreting or manipulating his assets with the intent to place them beyond the reach of creditors, the attempt would be denounced as fraudulent."
The dissenting opinion concluded:
"Under the challenged statute it is said the United States have realized profits amounting to $2,800,000,000. But this assumes that gain may be generated by legislative fiat. To such counterfeit profits there would be no limit; with each new debasement of the dollar they would149
expand. Two billions might be ballooned indefinitely -- to twenty, thirty, or what you will.
"Loss of reputation for honorable dealing will bring us unending humiliation; the impending legal and moral chaos is appalling."