Wayne Pearson submitted these notes on the redeemability of Federal Reserve Notes in gold. Thanks.
-Editor
Once upon a time, in 1929, Federal Reserve Notes (1928 series) were backed
by gold.
In this $5 example, read what it says on the upper left.
Now look at a 1934 $5 FRN. After FDR outlawed gold, you can see the
difference in the writing.
For more background on Federal Reserve Notes, Wayne passed along this Investopedia article. Thanks.
-Editor
Federal Reserve notes were first issued after the creation of the Federal
Reserve System (FRS) in 1913. Before 1971, any Federal Reserve note issued
was theoretically backed by a legally specified amount of gold held by the U.S.
Treasury, though since 1933 private citizens were not allowed to actually
redeem them for gold dollars. Because these notes held legal tender status
and represented actual dollars (legally specified as a given quantity of gold
held by the Treasury), they came to commonly be referred to as "dollar bills"
as they circulated through the economy.
However, under President Nixon, the last vestige of the gold standard was
officially abandoned, creating a fully fiat currency, where the Federal Reserve
notes themselves became the sole circulating legal tender (along with small
base-metal coins), redeemable only for other Federal Reserve notes and not
for physical dollars.
Federal Reserve notes are not backed by hard assets. Instead, Federal
Reserve notes are now backed solely by the government's declaration that
such paper money was legal tender in the United States, or by fiat.
Today, Federal Reserve notes circulate as money throughout the U.S. and the
rest of the world wherever dollar-denominated transactions take place. These
notes are still commonly referred to as "dollars," which was previously a
legally defined quantity of gold or silver but is now simply the official unit of
account for U.S. legal tender, including Federal Reserve notes.
The U.S. Treasury prints the Federal Reserve notes at the instruction of the
Board of Governors and the twelve Federal Reserve member banks. These
banks also act as the clearinghouse for local banks that need to increase or
reduce their supply of cash on hand. Once new Federal Reserve notes are
issued, they become a liability of the Federal Reserve, which can be redeemed
by bearers on demand for different Federal Reserve notes.
To read the complete article, see:
Federal Reserve Note
(https://www.investopedia.com/terms/f/federal-reserve-note.asp)
Wayne Homren, Editor
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