For writing promissory notes and obligations of payment in true money of value, is the only proper use of paper for monetary transactions. The note is then worth the sum it is given for under the law. If the person writing the note is worth nothing, then the promise is worthless. The true value then is not the promissory note, but the man behind it. When persons in government begin printing money and establishing claims to its value, the entire system of value and worth is overturned and apparitions replace reality.
Bernhard Thuersam, www.circa1865.org
The Evils of Paper Money
“The currency provisions of the federal constitution were intended to “shut and bar the door” against the evils of a legal-tender paper money issued by State or national governments. For more than two generations it succeeded in accomplishing that end. Contemporaneous with the establishment of the new government, banks were introduced into the United States and spread everywhere with astonishing rapidity. As a result the American people continued as in former times to use for the most part a paper currency, consisting of the notes of these banks. They were not legal tender, as the old bills of credit had been, and could not be made so; and no one supposed that they could give rise to the evils of depreciated paper currency.
The framers of the Constitution of the United States were deeply impressed with the still fresh recollection of the baneful effects of a paper money currency on the property and moral feeling of the community. It was accordingly provided by our National Charter that no State should coin money, emit bills of credit, make anything but gold and silver coin a tender, in payment of debts, or pass any law impairing the obligation of contracts; and the power to coin money and to regulate the value thereof, and of foreign coin, was, by the same instrument, vested exclusively in Congress.
As this body has no authority to make anything whatever a tender in payment of private debts, it necessarily follows that nothing but gold and silver can be made a legal tender for that purpose, and that Congress cannot authorize the payment in any species of paper currency of any other debts but those due the United States, or such debts of the United States as may, by special contract, be made payable in such paper . . .
The provisions of the Constitution were universally considered as affording complete security against the danger of paper money. The introduction of the banking system met with a strenuous opposition on various grounds, but it was not apprehended that banknotes, convertible at will into specie, and which no person could be legally compelled to take in payment, would degenerate into pure paper money, no longer paid at sight in specie.
Still less it was expected; and it was the catastrophe of the year 1814 which first disclosed not only the insecurity of the American banking system, as then existing, but also that when a paper currency, driving away and superseding the use of gold and silver, has insinuated itself through every channel of circulation and become the only medium of exchange, every individual finds himself, in fact, compelled to receive such currency, even when depreciated more than twenty per cent, in the same manner as if it had been made a legal tender.”
( The Economic History of the United States, 1765-1860, Guy Stevens Callender, Sentry Press, 1965, pp. 564-566)