What Can Be Used As Legal Tender?

The concept of lawful money is distinct from legal tender, with the former being any form of currency issued by the United States Treasury and the latter being any money that the government will accept in payment of taxes or debts. Lawful money includes gold and silver coins, Treasury notes, and Treasury bonds, while legal tender includes paper money, checks, drafts, and banknotes. While the US Constitution states that only gold and silver coins are valid forms of money, Federal Reserve notes have also been deemed lawful money by federal and state courts. The term lawful money first appeared in 1862 when Congress authorized the issue of greenbacks and declared them to be lawful money and legal tender for all debts.

Lawful money is issued by the US Treasury, not the Federal Reserve

The term "lawful money" is used in the Federal Reserve Act, which authorises the Board of Governors of the Federal Reserve System to issue Federal Reserve notes. However, it is important to note that lawful money is distinct from the currency issued by the Federal Reserve System. Lawful money is issued by the US Treasury and includes gold and silver coins, Treasury notes, and Treasury bonds.

The Federal Reserve Act of 1913 established the Federal Reserve System and authorises it to issue Federal Reserve notes, which are obligations of the United States and are receivable by all national and member banks, as well as Federal Reserve banks, for taxes, customs, and other public dues. On the other hand, lawful money is a broader term that includes various issues of "demand notes" and "United States notes" authorised by Congress during the Civil War.

The US Constitution specifies gold and silver as the legal form of tender for debts, which has led to varied interpretations as new forms of payment have emerged. Lawful money is considered to be the most direct form of ownership, but it has little practical use in direct transactions between parties. It is separate from fiat money, which is assigned value by the government but has no intrinsic value and is not backed by reserves. Fiat money includes legal tender such as paper money, cheques, drafts, and banknotes.

While Federal Reserve notes are considered legal tender, there is debate over whether they constitute lawful money. Some argue that Federal Reserve notes are lawful money, as supported by federal and state court cases such as Milam v. U.S. in 1974. However, others disagree, citing the US Constitution's reference to gold and silver as the only valid forms of tender for debts. This ambiguity stems from Congress's failure to explicitly define the term "lawful money" in the Federal Reserve Act.

Federal Reserve notes are considered lawful money by federal and state courts

The concept of "lawful money" has been a source of debate and confusion, with some arguing that it exclusively refers to gold and silver coins as prescribed by the US Constitution. However, federal and state courts have consistently ruled that Federal Reserve notes are indeed "lawful money". This is exemplified in cases such as Milam v. U.S. (524 F.2d 629, 9th Cir. 1974), where an individual's attempt to redeem a $50 Federal Reserve Bank Note in "lawful money" was denied. The courts rejected the notion that "lawful money" must be limited to gold or silver, citing previous rulings by the US Supreme Court.

The term "lawful money" has had a complex history in the United States. Initially, it referred to various issues of "demand notes" and "United States notes" authorised during the Civil War. The Federal Reserve Act of 1913 established the Federal Reserve System and authorised it to issue Federal Reserve notes, stating that these notes "'shall be obligations of the United States'. In 1933, Congress amended the Federal Reserve Act to include all US coins and currency as legal tender for all purposes, including Federal Reserve notes. This amendment created a distinction between "lawful money" and "legal tender," with the former referring to money that banks could count towards their reserve requirements, and the latter being any money accepted by the government in payment of taxes.

Despite the legal tender status of Federal Reserve notes, some individuals still argue that they are not valid currency and cannot be taxed. This belief is often based on the interpretation that only gold or silver coins constitute "lawful money". However, federal and state courts have consistently rejected these arguments, affirming that Federal Reserve notes are indeed "lawful money".

In conclusion, Federal Reserve notes are considered "lawful money" by federal and state courts, despite ongoing debates and differing interpretations of the term "lawful money". The courts have consistently upheld the validity of Federal Reserve notes as legal tender, rejecting arguments that restrict "lawful money" to gold and silver coins.

The US Constitution states that only gold and silver coin are lawful money

The US Constitution states that "no state shall make anything but gold and silver coin a tender in payment of debts". This has led to the belief that the only constitutionally valid forms of money are gold or silver coins, which are referred to as "lawful money". Lawful money is separate from "fiat money", which is assigned value by the government but has no intrinsic value of its own and is not backed by reserves. Fiat money is considered legal tender, meaning it can be used to make payments and settle debts, but it is not lawful money.

The Federal Reserve Act of 1913 gave the Federal Reserve the right to issue Federal Reserve Notes, which are backed by the US government and can be redeemed in lawful money. However, the Act did not explicitly define what lawful money is. This has caused confusion, with some people arguing that Federal Reserve notes are lawful money, while others disagree. The US dollar bills that people carry in their wallets are an example of fiat money and are therefore not considered lawful money.

In 1933, Congress amended the Federal Reserve Act to include all US coins and currency as legal tender for all purposes. This extended the power of legal tender to all types of money and further blurred the distinction between lawful money and legal tender. Federal and state courts have since held that Federal Reserve notes are also "lawful money".

While the US Constitution does state that only gold and silver coin are lawful money, this interpretation has been complicated by the introduction of new forms of payment and the lack of a clear definition of lawful money by Congress. The term "lawful money" first appeared in 1862 during the Civil War era when Congress gave several types of money, including greenbacks and Treasury notes, the status of lawful money.

Lawful money is the most direct form of ownership

The concept of "lawful money" is distinct from that of "legal tender". Lawful money is any form of currency issued by the United States Treasury, including gold and silver coins, Treasury notes, and Treasury bonds. Legal tender, on the other hand, is any money that the government will accept in payment of taxes and debts.

The Federal Reserve Act of 1913 established the Federal Reserve System and authorized it to issue Federal Reserve notes, which are obligations of the United States and must be accepted by all national and member banks, as well as Federal Reserve banks, for taxes, customs, and other public dues. However, these Federal Reserve notes are not considered lawful money by some, who argue that only gold or silver coins, as prescribed by the US Constitution, can be lawful money. This interpretation stems from Article I, Section 10 of the Constitution, which states that "no state shall... make anything but gold and silver coin a tender in payment of debts".

The ambiguity surrounding the definition of lawful money arises from the fact that Congress has never explicitly defined the term. The closest we get to a definition is from an Act passed on July 12, 1870, which stated that "the terms 'lawful money' and 'lawful money of the United States,' ... shall be held and construed to mean gold or silver coin of the United States". However, this Act was passed in the context of specifying what types of money national banks could count towards meeting their legal reserve requirements, and thus, the term "lawful money" in this context referred specifically to money that banks could count towards satisfying their reserve requirements.

Despite the lack of a clear definition, lawful money is said to be the most direct form of ownership. This is because it represents the most fundamental level of currency, issued directly by the United States Treasury. While lawful money may have little practical use in direct transactions between parties due to its rarity and the emergence of new forms of payment, it nonetheless forms the basis of the entire monetary system. Lawful money is the foundation upon which the value of all other forms of currency is built, and it is the ultimate form of ownership and settlement of debts.

Legal tender is a form of money that courts of law are required to recognise as payment for debt

The concept of "lawful money" is distinct from "legal tender", with the former being any form of currency issued by the United States Treasury, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money is contrasted with fiat money, which includes legal tender such as paper money, checks, drafts, and banknotes. Legal tender, on the other hand, is a form of money that courts of law are required to recognise as payment for debt.

The distinction between the two terms dates back to the Federal Reserve Act of 1913, which established the Federal Reserve System and authorised it to issue Federal Reserve notes. While Federal Reserve notes are considered legal tender, they are not considered lawful money by some. This is because the US Constitution states that only gold and silver coins shall be used as tender in payment of debts, leading to the interpretation that any other form of payment is not lawful money.

However, federal and state courts have held that Federal Reserve notes are indeed lawful money. In the case of Milam v. U.S. in 1974, the United States Court of Appeals for the Ninth Circuit rejected the assertion that lawful money must be gold or silver, affirming that Federal Reserve notes constitute lawful money.

It is important to note that legal tender is primarily associated with the settlement of debts. While it is not mandatory for creditors to accept legal tender, the tendering of payment in legal tender discharges the debt. This means that a debtor cannot be sued for non-payment if they offer legal tender for the full amount of the debt, regardless of whether the creditor accepts it or not.

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