Understanding Lawful Money
Despite what you might think when hearing the term “lawful money,” it’s not what Robin Hood was stealing! Lawful money refers to currency that has been legislated as legal tender by government decree. Originally, it denoted money backed by precious metals, but now spans a broader spectrum including reliable old coins and bills.
History of Lawful Money
It was back in 1913 when the Federal Reserve got the right under the Federal Reserve Act to issue notes that would be redeemable in what was termed ’lawful money’. But, they left everyone hanging by not specifying exactly what they meant by that. Fast forward to 1933, Congress tried to clear the air by stamping all U.S. coins and currency as the real deal for all debts, public and private. However, this move wasn’t without its dramas and debates on whether modern forms of currency truly meet the criteria of ’lawful'.
The Big Confusion Over Lawful Money
Imagine this: you’re playing Monopoly, but no one can agree on whether digital coins or just the paper money counts—chaos, right? That’s sort of what happened with lawful money. The U.S. Constitution chimed in with the classic, “only gold and silver coins are real money,” throwing another curveball into understanding what constitutes lawful money.
Today, the term is a fancy way of referring to all forms of U.S. currency officially sanctioned as legal tender, which includes both the bills from Monopoly and those hypothetical digital coins.
Practicality Versus Principle
In economic textbooks, lawful money stands as a paragon of ‘proper’ currency, weighed down by historical gravitas. In reality, it’s more like that one overly formal dinnerware set everyone keeps but never uses. While you could demand to be paid in gold coins at your next job, be prepared for some raised eyebrows—and possibly a security escort out the building.
Related Terms
- Legal Tender: Money that must be accepted if offered in payment of a debt.
- Fiat Money: Currency that a government has declared to be legal tender, yet it is not backed by a physical commodity.
- Federal Reserve Notes: The paper money issued by the Federal Reserve, but commonly called “dollars” on the streets.
- Specie: A term that refers to money in the form of coins rather than notes.
Suggested Books for Further Studies
- “The History of Money” by Jack Weatherford
- “Currency Wars” by James Rickards
- “The Power of Gold: The History of an Obsession” by Peter L. Bernstein
From understanding lawful money, it’s clear that money is not just about bills and coins—it’s about the authority and trust a society places in them. Whether for deep economic insight or just to win an argument on trivia night, knowing these nuances about money can surely pay off.
