The Federal Convention knew that several states had large sums of paper money in circulation, and that it was an interesting property, and they were sensible that those states would never consent to its immediate destruction, or ratify any system that would have that operation. The mischief already done could not be repaired: all that could be done was, to form some limitation to this great political evil.1
As the paper money had become private property, and the object of numberless contracts, it could not be destroyed or intermeddled with in that situation, although its baneful tendency was obvious and undeniable. It was, however, effecting an important object to put bounds to this growing mischief. If the states had been compelled to sink the paper money instantly, the remedy might be worse than the disease. As we could not put an immediate end to it, we were content with prohibiting its future increase, looking forward to its entire extinguishment when the states that had an emission circulating should be able to call it in by a gradual redemption.
In Pennsylvania, their paper money was not a tender in discharge of private contracts. In South Carolina, their bills became eventually a tender; and in Rhode Island, New York, New Jersey, and North Carolina, the paper money was made a legal tender in all cases whatsoever. The other states were sensible that the destruction of the circulating paper would be a violation of the rights of private property, and that such a measure would render the accession of those states to the system absolutely impracticable. The injustice and pernicious tendency of this disgraceful policy were viewed with great indignation by the states which adhered to the principles of justice. In Rhode Island, the paper money had depreciated to eight for one, and a hundred per cent. with us. The people of Massachusetts and Connecticut had been great sufferers by the dishonesty of Rhode Island, and similar complaints existed against this state. This clause became in some measure a preliminary with the gentlemen who represented the other states. "You have," said they, "by your iniquitous laws and paper emissions shamefully defrauded our citizens. The Confederation prevented our compelling you to do them justice; but before we confederate with you again, you must not only agree to be honest, but put it out of your power to be otherwise." Sir, a member from Rhode Island itself could not have set his face against such language. The clause was, I believe, unanimously assented to: it has only a future aspect, and can by no means have a retrospective operation; and I trust the principles upon which the Convention proceeded will meet the approbation of every honest man. . . .
Mr. Chairman, I believe neither the 10th section, cited by the gentleman, nor any other part of the Constitution, has vested the general government with power to interfere with the public securities of any state. I will venture to say that the last thing which the general government will attempt to do will be this. They have nothing to do with it. The clause refers merely to contracts between individuals. That section is the best in the Constitution. It is founded on the strongest principles of justice. It is a section, in short, which I thought would have endeared the Constitution to this country. When the worthy gentleman comes to consider, he will find that the general government cannot possibly interfere with such securities. How can it? It has no negative clause to that effect. Where is there a negative clause, operating negatively on the states themselves? It cannot operate retrospectively, for this would be repugnant to its own express provisions. It will be left to ourselves to redeem them as we please. We wished we could put it on the shoulders of Congress, but could not. Securities may be higher, but never less. I conceive, sir, that this is a very plain case, and that it must appear perfectly clear to the committee that the gentleman's alarms are groundless.