The ‘dollar’ is mentioned once in the Constitution:
The migration or importation of such persons as any of the states now existing shall think proper to admit, shall not be prohibited by the Congress prior to the year one thousand eight hundred and eight, but a tax or duty may be imposed on such importation, not exceeding ten dollars for each person.
This is the infamous block on the abolition of the slave trade put into Article I Section 9 to placate the plantation owners crafting American capitalism through the blood and bodies of African peoples. It actually is not referencing United States dollars (which did not exist yet) but Spanish dollars, the currency used in the Spanish colonies. However Spanish dollars were Alexander Hamilton’s basis for creating the worth of the US dollar. Originally the USD’s value was based in silver, not gold: the Coinage Act set its value at 371 4/16 grain pure silver. The Coinage Act arose from a very simple directive of the Constitution, Article I Section 8: “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” But this provision is going to provide some very interesting problems for us later on.
The Gold Standard Act of 1900 formally set the value of the USD as based in gold, abandoning the bimetallic standard. Then two very important events happened for both the law of currency and our economy as a whole: (1) the creation of the Federal Reserve (2) Executive Order 6102. That’s right, things are about to get real Zeitgeist-y.
What we know today as the dollar is actually a federal reserve note, which begun to be printed in 1913 after the creation of the Federal Reserve, the US central banking system. I’ve argued before that the Federal Reserve is the most powerful government institution and a whole separate series could (and probably will) be done on it. For now I’ll just say that it was created in response to the Panic of 1907 to create a fractional reserve banking system and subsequently making the USD a fiat currency.
Fractional reserve banking is the practice of only holding a fraction of the reserves necessary to cover depositor liabilities, with the central bank (the Federal Reserve) serving as the “lender of last resort.” Back when money was still somewhat physically cumbersome, ‘bank runs’ would occasionally occur where too many depositors would try to withdraw their accounts.
But this risk was worth it for the banks, for the fractional reserve banking system allowed them to be intermediaries between borrowers and lenders. No longer did Phil have to ask Angela directly for a $500 loan: Phil could go to a bank with a fractional reserve requirement of 10% where Angela had made a deposit of $555.55 and the bank could make a $500 loan to Phil.
Fractional reserve banking was also crucial for the development of global capitalism because of its ability to grow the money supply. In actuality all of it is debt, because the money multiplication begins by the Federal Reserve making deposits in its member banks. In fact in economics there is no singular money: there is MB (central bank money) and M1-M3 (commercial bank money). MB consists of Federal Reserve credit made to its member banks, held in both required and excess reserves. When the excess reserves are lent to other banks or consumers, the amount lent is added to the money supply.
So now that everyone is confused, let’s talk about Executive Order 6102. Executive Order 6102 was very important but not because it was some great tragic loss of Ron Paul’s beloved gold standard. Gold’s monetary value is just as fictitious as a piece of paper or a number in my bank checking account. Gold was not dangerous to the Federal Reserve because it was “real”: it was dangerous because they did not control its supply. And since the Gold Standard Act set the dollar’s value at gold, the Federal Reserve could not expand the money supply. And the Federal Reserve really needed to expand the money supply:
While the act was coercive (failure to turn in your gold could result in large fines or up to 10 years in prison), it was not theft as much as eminent domain, with the Federal Reserve paying $20.67 per troy ounce. But not everyone thought this was a good deal, and of course it was a lawyer who decided to fight for his right to hoard gold. That lawyer was Frederick Barber Campbell and while he escaped punishment in Campbell v. Chase Nat’l Bank, the Court upheld the government’s authority and his gold was seized.
Campbell’s argument was simple: he had a contract with the bank and the bank was not honoring it. And to be fair to the late Attorney Campbell, he had some pretty convincing visual aids:
The Court however disagreed because the gold was being seized by eminent domain that Attorney Campbell was being justly compensated for.
“The kind of property to be taken by the federal government under its right of eminent domain in one of its delegated plenary zones of governmental action and the method in which it is to be taken is, therefore, purely a legislative question,” wrote the Court, “The taking of private property for public use need not be in pursuance of a condemnation proceeding, nor need it be preceded or even accompanied by payment of compensation [citations removed].” So the very important holding to be taken from this case is that money (which gold was legally) is not exempt from eminent domain when there is a judicial determination that it serves the public use to convert currency.
And recently John Oliver criticized Jill Stein, saying that the President has no power to dictate the Federal Reserve. I hope we all now recognize how ridiculous that assertion and how it is John Oliver and his team that have a fundamental misunderstanding of executive power and the Federal Reserve.
So back to the show and Phillip Price. Why does Phillip Price want to make E-Coin the currency, aside from his racially-tinged hatred of Bitcoin? Well quite simply because his corporation, E-Corp, controls it. Now we do not know very much about E-Coin, but we can assume that since they are in competition that it is very similar to Bitcoin, what the U.S. Treasury calls a “convertible decentralized virtual currency [emphasis added].” Bitcoin’s own precedent is interesting but mostly unrelated to this issue: for our purposes we just need that US Treasury definition. A convertible currency is more liquid than national currencies like the USD, their value removed from governmental control. In Bitcoins case, this has made it extremely volatile, producing some big winners and big losers. It is more like a tradeable security than like the USD.
But here is where Mr. Robot brings up the first major issue: E-Coin is directly controlled by a corporation, and particularly a multi-national conglomerate that has enough holdings and power to operate essentially as a shadow world government in conjunction with China and the Dark Army. In many ways, before even the adoption as official national currency, E-Coin is more centralized and less volatile than Bitcoin. We can further infer this from its rise to prominence as the value of the USD and the tightening of credit increases in the wake of the 5/9 hack. In many ways it was becoming a national currency, something that Price leverages against the US.
So why does E-Corp need the official recognition of the US government? Well, I do worry that the shows’ writers may have constructed this plot based on the false conjectures about currency control in Zeitgeist and other conspiracy theories. That being said, currency control does play a very important role because Money is one of the states of transformation in the circulation of capital. This is my preferred illustration of the circuit as written by Marx in Capital, Vol. 2:
Firms set prices in modern capitalism (it is a bit more complicated in early forms like mercantilism). It is a common misconception that Money is the universal that binds the market, but it is actually Price, which can clearly illustrated with any good. A bottle of seltzer worth $1.75 USD is also worth $1.60 Euro but they are the same price. And of course the Price is created based on the Labor and Means of Production that went into it. Corporations tend to dislike the Federal Reserve (even under such free market demagogues as Alan Greenspan) because it is a governmental intervention into the Money part of the circuit, distorting their ability to control their accumulation of capital (this is a gross simplification obviously, but sufficient for now).
So by gaining control of the money supply, Price and E-Corp gain almost absolute control of their circuit of capital accumulation aside from the distortions of real competition (though E-Corp would obviously face little, at least in the United States). So could they do it? The next major issue for E-Corp is the constitutional issue of powers reserved to Congress. Article 1 Section 8 most importantly reserves the power to “regulate the value” of currency. As an infringement, it would seem that E-Corp gaining control of the currency would be found to be unconstitutional.
But there’s a catch: standing doctrine. “Standing” is what allows a plaintiff to bring a challenge to a governmental party, and under the modern conservative Supreme Court it has been majorly restricted, most recently in Spokeo. The argument the government would likely make is that plaintiffs need to show a “concrete and particularized harm.” But a change to currency would necessarily effect every business and person in the United States, making it a generalized harm. Now some generalized harms have been upheld as sufficient to confer standing, such as voting rights. But the most recent cases like Spokeo do not give much hope, even assuming a new liberal judge on the Court since Justice Kagan crossed the ideological aisle to join Justice Alito’s holding.
Now while a private party would not be able to pass the threshold of standing, lawsuits by governmental entities are not held to the same restriction. Assuming that the adoption of E-Coin was created either by a bill passed through Congress or an executive order, the Federal Reserve may have grounds to file suit. Yes, the only legal means of fighting back against E-Corp may be held by the Federal Reserve, but it actually gets even more depressing.
The Federal Reserve would still have to deal with the issue of political question. Baker v. Carr provides six factors for political question and the one most at issue is #6, the potential for embarrassment from multifarious pronouncements by various branches on one question. This would particularly be the case if Price decided to push E-Coin adoption through Congress, the very entity entrusted to currency regulation that creates the constitutional issue.
So the short answer to whether Price’s scheme to have E-Coin adopted as the official US currency is constitutional is that it is not, but the ridiculous procedural precedent created by the modern Supreme Court makes it extremely difficult to contest. And here we can see an important fact IRL: our ability to shape our government through litigation is incredibly restricted and the public-private partnerships of the neoliberal era are difficult to contest even when blatantly in violation of the Constitution.