Legal money is any form of money issued by the United States Treasury, not by the Federal Reserve system. It includes gold and silver coins, treasury bills and treasury bills. Legal money contrasts with fiat money, in which the government places value even if it has no intrinsic value and is not backed by reserves. Fiat money includes legal tender such as paper money, checks, drafts and banknotes.
Legal money is also called “cash”, which means “in its real form”.
Break legal money
Curiously, the dollar bills we carry in our wallets are not considered to be legal money. The notation at the bottom of a US dollar note reads: “Legal offer for all debts, public and private”, and is issued by the United States Federal Reserve, not the United States Treasury. Legal money can be exchanged for an equivalent amount of legal money, but macro effects such as inflation can change the value of the fiat money. Legal money would be the most direct form of property, but for practical reasons it has little use in direct transactions between the parties.
The Federal Reserve Act of 1913, which established the Federal Reserve system and authorizes it to issue notes from the Federal Reserve, states that “[Federal Reserve notes] are U.S. obligations and are receivable by all national and member banks and federal reserve banks and for all taxes, customs, and other public taxes. They must be exchanged in legal tender money on request at the United States Department of the Treasury, in the city of Washington, in the district of Columbia, or in a Federal Reserve bank. “However, the law does not explicitly define what legal tender means. Since some currencies that could be used by national banking associations as” legal currency reserves “were not considered to be legal tender, Congress amended the Federal Reserve Acted in 1933 to include all American coins and currency as legal tender for all purposes, The 1933 amendment extended the legal tender power to all types of money, creating disagreements as to whether paper money and Federal Reserve bank reserves are legal money. While some argue that the Federal Reserve notes are legal money, others tend to disagree.
Since the Constitution of the United States states that “no state shall make anything other than gold and silver an offer for the payment of debts”, some argue that this is the definition of legal money and, therefore, any means of payment other than gold or silver is not considered legal money. Indeed, the main meaning of legal tender money is legal tender, but a broader interpretation is frequently applied in certain contexts.