Armstrong Economics Blog/Canada Re-Posted Jan 29, 2021 by Martin Armstrong
QUESTION #1: If Canada is not a dictatorship, how can Trudeau cancel the dollar? How can he do so in secret?
QUESTION #2: Why can’t Biden follow Trudeau and cancel the dollar?
ANSWER: The answer lies in the difference in history. Because the paper currency called bills-of-credit back then became worthless, the Framers of the Constitution expressly took into account currency. I have written before that when I was a market-maker in gold and one of the three largest in the country, the IRS walked in and declared me to be a bank and then I was supposed to report everyone who bought or sold gold in $10,000 amounts or more. They cited the Constitution saying that gold and silver were money thereby making me a bank because Nixon only closed the gold window, he never DEMONITIZED gold. So I was suddenly a bank in no need of such a license for the purposes of the IRS. Hence, I retired.
This raises an interesting question. Can Congress create a digital dollar constitutionally?The question of money was thus settled directly in the Constitution because each state had previously issued its own coinage and paper bills-of-credit (paper money).
Article 1 – The Legislative Branch
Section 10 – Powers Prohibited of States
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No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.
No State shall, without the Consent of Congress, lay any duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.
Under the Articles of Confederation, both the federal and state governments were guilty of issuing limitless bills of credit to finance the Revolutionary War. This led to hyperinflation. In response to this Revolutionary history, Article I, Section 10 of the Constitution expressly prohibits the states from issuing bills-of-credit. With respect to Congress’s power, however, the issue is not as clear. At the Constitutional Convention, it was proposed to give the federal government the power to “emit bills on the credit of the United States,” but the Framers defeated this language as being too prone to abuse.
Consequently, the Constitution’s monetary clauses expressly grant Congress the power to coin money and to borrow money by issuing “notes” meaning interest-bearing government bonds. Nonetheless, Congress did not have the power to issue bills-of-credit. Given the Framers’ general hostility to paper money, it seems likely that the Framers’ intended to prohibit the federal government from issuing any bills-of-credit (paper money) whatsoever as was the case concerning the states.
Without question, the Constitution created a government of enumerated powers meaning that without an express grant of an expressed power, Congress thereby lacks the power to act. Therefore, it was clearly understood at the time of drafting the Constitution that striking the language to grant such a power amounted to a prohibition on Congress’s power to issue paper money.
I will do a report on the whole constitutional problem presented. Canada has a different history. The US expressly went through hyperinflation so the Framers dealt expressly with the power to issue money. That does not exist in Canada. Nonetheless, Trudeau canceled all the currency and it is no longer a LEGAL TENDER as of January 1sy, 2021. However, this is only phase #1. The currency is NOT worthless. You can still deposit it and present it to the Bank of Canada for credit to your account.