Conflict between Article 1 Section 8 and Section 10

[Free Moral Agent]

I've been looking back at my copy of the U.S. Constitution and have been doing some highlighting... So this should be the first a few threads I'll be posting up on here. My guess is that I'm just going to need some historical context and things should become clear.

Now I know that the passage in Art. I, Sec. 10 is regularly used by us in citing the invalidity of FDR notes in payment of legal tender.

No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts...

However, Art. 1, Sec. 8 states that

The Congress shall have Power... To borrow Money on the credit of the United States...

Clue me in on how such a system would work in which states are prohibited from printing money yet the federal government be able to borrow money on U.S. assets?

[foofighter20x]

Art. I, Sec. 8 grants Congress power to enumerated areas. It is targeted at the federal government, in particular, Congress.

Art. I, Sec. 9 circumscribes and limits Congress's power within those enumerated areas. It is targeted at the federal government, in particular, Congress.

Art. I, Sec. 10 removes powers from the Union's constituent states. It is targeted at the state governments. Notice that the powers denied to the states relate to exercises of soverignty which would allow states to interfere with the functioning of the powers granted to the federal government. Also, keep in mind that Art. I, Sec. 10 is referred to in the Tenth Amendment in the phrase "nor prohibited by it to the States".

[foofighter20x]

As to the money question: it's one of the embarrassing facts about the commodity-money movement.

The states can only make gold or silver legal tender. Congress is granted power to coin money. Congress's power to emit bills of credit or make money legal tender is a bit of a gray area which is usually just swept under the rug of the Necessary and Proper Clause.

The idea of the Framers in the Constitution was that the states were forbidden from tampering with the money supply as the money supply and monetary policy were nationalized. Conversely, the states in turn, via the representation of the state legislatures in the U.S. Senate, would check and balance any attempts within the federal government from doing the same--that is, tampering with the money supply.

Borrowing is an unrelated matter. The U.S. doesn't borrow on its assets, but borrows on its own credit. What this means is that if the U.S. defaults on a loan, neither the state governments nor the people become liable for paying the debt. The only thing that suffers from the default is the credit rating of the U.S. government. And we all know how that goes: if you don't pay your debts, then no one loans you money.

[Free Moral Agent]

I thought the reason why what is written in Art. I, Sec. 8 is there because...

It has to do with when the Federal Government needs to generate funds in a short amount of time for a legitimate war effort, it borrows money instead of taxing directly. When its over, it then stops and the inflation liquidates. I don't know the historical details behind this, but I know its happened before in pre-1913 USA.

Borrowing is an unrelated matter. The U.S. doesn't borrow on its assets, but borrows on its own credit. What this means is that if the U.S. defaults on a loan, neither the state governments nor the people become liable for paying the debt. The only thing that suffers from the default is the credit rating of the U.S. government. And we all know how that goes: if you don't pay your debts, then no one loans you money.

From which body does it borrow from? If the people don't suffer, is this new pool of money separate from that of the states?

[foofighter20x]

Congress borrows from whomever is willing to purchase their bonds.

And you are correct in one sense that borrowing is necessary for war-time revenues. But there are other reasons that borrowing is necessary.

Let's say FedGov desires to stand up a new customs office. Congress passes the legislation with a minimal tax to pay for it. However, the tax isn't really collectible right away, but they need that office right now. So, they include a provision to sell a few bond to pay for it now and then use the tax revenues to pay down off the debt incurred.

Borrowing, when used properly, is a good power for government to have. It's when it's used improperly that there's a huge problem with it.