It seems that there are two sections in the constitution split between the federal and state governments – the power over currency. The federal government has the power to coin money and regulate the value of which seems to give it wide latitude over what it says a dollar is worth.
Under this power, it can say a dollar is worth so many barrels of oil, ounces of silver, pounds of cabbage, or nothing at all (fiat money). This begs the question: why would the writers of the constitution allow so much leeway over the nation’s currency when they themselves valued hard money?
The writers of the constitution decided to use the sovereign power of the states to keep the federal government in check by only allowing gold or silver currency to be used within their own borders. This limitation on the states keeps the federal government’s coinage power in check because when the federal government coins anything other than gold or silver the states are bound by the constitution to declare it illegal. In fact, they don’t even have a choice in the matter simply because the constitution forces them to reject anything the federal government coins that isn’t gold or silver.
This is what prevents the federal government from abusing its coinage power, because when all fifty states ban a proposed federal currency that isn’t gold or silver then that currency simply can’t be used within any geographical space within the country. The currency effectively becomes banned within the country by the states themselves which means that the states check the federal government over the use of this power.
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