What is the diffrence of an gold certificate and a 1928 federal reserve note?

They were both redeemble in gold.....
I want to know about the diffrence of an gold certificate and a redeemble in gold federal reserve note(except the design)

 

Log in or Sign up to hide this ad.

The basic differences were (a) gold certificates were legal tender for all debts and payments, but Federal Reserve notes were not; and (b) gold certificates were obligations of the Treasury, and Federal Reserve notes were obligations of the Federal Reserve banks.

In addition, because Federal Reserve banks could hold 40% gold for their notes, they could pay out legal tender notes in exchange for the FRNs.

Other than that, they were on par owing to their redeemability in gold.

 

How were '28 redeemable gold FRN's not legal tender for all debts and payments?

 

Don't confuse being redeemable for gold (practical use) with being legal tender (legal use). They are not the same thing.

Until 1933, only gold certificates were legal tender for all debts. United States notes were legal tender for some debts, and all other currency were not legal tender. That is the definition according to the laws authorizing each class of note.

However, being redeemable for gold muddied the picture. FRNs and USNs were redeemable for gold coin, and therefore on par with gold certificates. Thus they were de facto legal tender because of this relationship, and holdings of GCs, FRNs, or USNs were just as good as gold.

Legal tender had to do with what the Treasury would accept for specific debts owed to it. Federal Reserve notes, by law, were only receivable by the Federal Reserve banks and their member banks. If you tried to pay a debt to the Treasury in Federal Reserve notes, but they required legal tender, they could deny your offer.

I need to correct my first post: Federal Reserve notes were backed by at least 40% with gold, not 100%.

 

So back in the '30s and '40s you couldn't take a $20 FRN to the gorcery store and spend it? You would need a gold certificate? Then why did they make FRN's???

 

Interesting read about some of the laws concerning what could be used when and how..~thanks~

 

Legal tender has everything to do with the government—no law mandated any private business to accept government-issued money. That being said, most business accepted whatever currency you offered, without question.

Federal Reserve notes were created under the Federal Reserve Act of 1913. Until then, the government had one kind of currency—a non-elastic currency, one whose volume in circulation cannot easily be expanded or contracted. Silver certificates and gold certificates were backed by reserves of gold coins and silver coins; the volume of United States notes was fixed by an 1875 law; and national bank notes were backed by Treasury bonds purchased by the banks. Financial panics, such as the Panic of 1907, became worse because the Treasury had no means to quickly inject currency into the economy.

The 1913 Act fixed that. Federal Reserve notes were backed by gold and short-term paper, such as commercial debt, put up as collateral by the member banks. When a Federal Reserve bank offered this collateral, they were issued notes; when the notes were longer needed, they withdrew them and dispursed the collateral. The act was structured so each transaction was essentially automatic, thus (in theory) preventing devastating contractions of the money supply.

A direct consequence of the Federal Reserve Act was the end of national bank notes, although that occurred two decades after the act became law.

 

I never understood that, though I am sure the verbiage on the bills was vetted by Treasury lawyers.

I mean...how can a bill be good for private but not public debts...or custom duties ? To me, it's like saying you can exchange it for quarters at a state-chartered bank but not a federally-chartered bank.

So if you owed income tax in future years, you couldn't pay it with FRN's ? Unreal....

Do you or anybody know of a good source that goes into the differences in the LEGAL and LEGAL TENDER status of the various bills issued over the years...with a focus on the legal writings on the FRONTS of the bill (gold vs. gold coin, all debts public and private vs. only some, etc.) ?

Book or website, doesn't matter.

 

Were they ?

My other thread has pics of the relevant bills so I won't duplicate here.... but while the FRN's had the gold language I don't see it on the USN's (or at least the one that I posted from Series 1928A).

These ratios were always in flux; for Gold Certificates, the ratio was 33-40% gold coin, the remainder gold bars. It changed over time depending on gold reserves and coinage quantity.

Like with MSDs, the Mint operators were always saying that they were probably striking too many gold coins and that bars could achieve the same function at lower cost and also had greater usage with lower transportation costs.

 

Gold Certificates: At least after 1907 when we went from Liberty Heads to Saints.....GCs had to be 2/3rds gold coin, 1/3rd bars or foreign coins. In 1916, it was proposed to be a 50-50 ratio and the actual law that passed made it 1/3rd gold coin, 2/3rds bars or foreign coins.

 

1928 Federal Reserve Notes (FRNs):

• Issuing Body: Federal Reserve Banks.
• Gold Language: "Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank."
• Redemption: Could be exchanged for gold coins or other "lawful money" at the Treasury or a FRB.
• Appearance: Green backs, gold serial numbers/seal on the front (like a standard FRN).

1928 Gold Certificates (GCs):

• Issuing Body: U.S. Treasury.
• Gold Language: "This certifies that there has been deposited in the Treasury of the United States of America $X in gold coin payable to the bearer on demand."
• Redemption: Direct claim on gold coin held in the Treasury, essentially gold certificates.
• Appearance: Gold seal and serial numbers on the front; the backs were orange ("yellow boys") for large size, but the small 1928 series matched the green backs of FRNs, notes https://en.wikipedia.org/wiki/Gold_certificate_(United_States).

Key Distinction

• FRNs: A promise to pay gold or other money; served general circulation.
• GCs: A receipt for gold deposited in the Treasury; served primarily for large commercial/bank transactions, though smaller denominations existed.

End of Gold Redemption:

• All gold redemption promises, including on 1928 notes, ceased after the Emergency Banking Act of 1933 and the Gold Reserve Act of 1933 making these notes historical artifacts of the gold standard era.

_____________________

My 1 quibble above is that on the 1928 FRNs it says the SNs were in gold...I'm not seeing that, if anybody else can show me this isn't an AI/internet mistake, let me know.

In the sister thread, the SNs appear black.