The Words On The Bills & Legal Tender

I like to study monetary history -- yup, read Friedman & Schwartz' magnus opus in college -- and doing some readings the last year or so with books spanning the gold standard to 1921 Recession and The Great Depression.

The changes in the writings concerning gold, silver, and legal tender are fascinating. Even as a young collector (or spender of bills ! ) I never really paid too much attention to them but you can see there are big differences and the changes over the years WERE important.

Here's a Gold Certificate, and the seal writings clearly state you are entitled to Gold...and the writing at the bottom of the obverse says gold coin (Eagles, DEs, etc.)



Notice that it is good for ALL DEBTS with no exceptions.

Next we have a United States Note (Red Seal) which states it is legal tender....for all debts public and private.....but then says "except duties on imports and interest on the national debt."



Why these obscure exclusions ? Because the Treasury didn't want a gold drain out of the U.S. so NOT allowing these to be used for duties on imports and interest on the national debt helped towards that goal.

Next up, a 1928 Federal Reserve Note which says that is was redeemable in gold...on demand....at the U.S. Treasury (so you had to goto Washington, DC I guess).



What I find interesting is that at 1st glance this bill looks like a hybrid: it's a FRN...it's worth $20 dollars ("bearer on demand" language at bottom)...but it has the quasi-gold certificate language above the seal. But while you could get gold at the Treasury, it's unclear if the FRB's that you went to could pay you off with gold or a pair of $10 bills at their choice... or your choice. Again, unless Federal Reserve Bank means a MEMBER bank, then FRB means you would need to goto 1 of the 12 actual physical locations which would be a PITA.

Lastly, after we went off the Gold Standard we have this FRN which says that the note is legal tender for ALL debts public and private with no exceptions regarding national debt or imports.

I guess "redeemable in lawful money" (isn't this bill lawful money ? ) means a pair of $20's and a $10 bill. Also known as....change !!

 

Log in or Sign up to hide this ad.

Feel free to add others I missed from the Small and especially Large Bill eras.

I don't have any large bills myself, but I'm sure the verbiage changed from 1863 to the 1920's.

 

United States Notes: Besides the Red Seal, the notes didn't have a $10, $20, or $50 denomination. They were issued from 1862 to 1971. I still don't know why we had USN's and FRN's being issued at the same time -- you'd think there'd only be 1 type of currency bill (aside from the years with GC's and SC's).

The bulk of federal revenues came from import duties (no federal income tax until 1913 ! ) so the government wanted gold and not paper for those fees. On interest on the national debt: the fear was that being able to pay in paper would collapse the bond prices so paying interest in gold was seen as maintaining the creditworthiness of the United States (smart move !). That's why you had these 2 weird exclusions specifically listed.

In the 1930s, this USN legalese would be changed to: "This note is a legal tender at its face value for all debts public and private."

 

TC, that's for a SC ?

 

There now....BEAUTIFUL note.

I like the PCGS Yellow label.

 

That SC would pay in EITHER silver coin or a silver bar, I believe.

 

Silver certificates this old were only backed by silver dollars. It wasn't until years later that uncoined silver was used to back certificates -- that's why the wording changed from "one silver dollar" to "one dollar in silver" starting with the 1934 series.

 

Beautiful bill. Never seen one like that.

 

Interesting....

I'd like to get more information on the verbiage on that 1928 FRN which seems to imply a Gold Certificate-like redemption feature.

 

I am not an expert in paper money, but oddly enough, it was illegal to hold and collect the gold certificates after Roosevelt’s gold surrender order in 1933. This was in force for a long time despite the fact that the notes had no gold on them. As a collector you could collect rare U.S. gold coins, and, little known to most at the time, everyone could save $100 in gold coins.

 

I think the GC's got legalized in the early-1960's, a decade or so before it became legal to own/hold gold in bulk.

 

First, this post made me miss RickieB. I think he'd be happy to see this. Second, counterfeit $100 bills have been on the rise where I live and stores are refusing to accept any that aren't the new ones with the blue security strip. I thought that was illegal but apparently, the key word to the all debts public and private wording is debt. Buying something is not a debt apparently.

 

I'm not sure that being afraid of a counterfeit is the same as not accepting said bill as lawful money or to settle a debt (which could also mean a purchase, not sure).

Stores can refuse bills of a certain size just because they might not be able to make change, for instance.

BTW, who is/was RickieB ?

 

I consider him a friend. He helped forward people's knowledge of paper money and their designers beyond what many collectors know. He helped build community on here and offline. He held amazing contests that required learning and has wonderful prizes pertinent to the information learned from the contests. Do a search of his name on here and see for yourself

 

Gold Certificate vs. Gold Redemption Clause on FRN: Primary difference was that a Gold Certificate was a direct warehouse receipt issued by the U.S. Treasury and was backed 100% by gold coin with a golden-yellow design. A Federal Reserve Note with a Gold Redemption Clause (such as Series 1928) was a general obligation of the Federal Reserve backed by a 40% gold reserve plus commercial paper, featuring standard green seals.

The gold redemption clause on FRNs - promising payment "in gold on demand"—effectively ceased on January 30, 1934, with the passage of the Gold Reserve Act. This law amended Section 16 of the Federal Reserve Act, officially ending domestic gold redemption and removing gold clauses from U.S. paper currency.

 

Little clarification here:

The United States notes were authorised under legislation passed in 1862 - they had absolutely no backing in precious metals and were the country's first fiat money. Until the financial system stabilised in the mid to late 1870s the USN's often traded at a discount vs physical gold or silver.

And Legal Tender red seals were issued in denominations of $10, 20 and $50 during the 19th century:


The $20 and $50 were last issued with the 1880 series but continued to be used until the early 20th century.

The $10 soldiered on into the 20th century:



And the $10 continued to be issued with the 1923 issue that I don't own an example of.

After the small sized currency came out in 1929 the LTN's were limited to $1, $2, $5 denominations until near the end of the law authorising the notes when the $100 was added to satisfy the law in 1966 which I have an example of but not imaged.

 

Great info, thanks Scottish !

I find it strange that since the USNs circulated pretty much as FRNs during their small-size era...that both would be issued because, especially once we were off the gold standard, they each functioned the SAME insofar as the citizens using them as legal tender to make purchases and settle debts.

 

The small sized $1 in the Series 1928 was printed contemporarily but in fact was not circulated until the late 1940s and only in Puerto Rico. They are highly collectable and I want a nice crisp example of one sometime.

Puerto Rico and Cuba seemed to be the destination for silver certificates and LTN notes - Cuba was independent from 1902 but used US currency until ca. 1935.