The Redemption of Lawful Money Ebook

In 1913, the Federal Reserve Act was passed, establishing the Federal Reserve System and giving it the authority to issue Federal Reserve notes. According to the Act, these notes are considered obligations of the United States and must be accepted by all national and member banks, as well as Federal Reserve banks, for payment of taxes, customs, and other public dues. They can be redeemed for lawful money upon request at the Treasury Department in Washington, D.C. or any Federal Reserve bank. However, the Act did not explicitly define what constitutes lawful money.

As a result, in 1933, Congress amended the Federal Reserve Act to include all U.S. coins and currency as legal tender for all purposes. This was because some currencies that could be used by national banking associations as “lawful money reserves” were not recognized as legal tender. This amendment expanded the power of legal tender to all types of money, which sparked debate over whether paper money and Federal Reserve bank reserves are considered lawful money.

Learn about the Redemption of Lawful Money and how lawful money is not subject to the indirect tax known as income tax.

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