A Crisis of Dollars and Sense

Edwin Vieira, Jr.
12/24/2008

The “dollar” bills that we routinely exchange for goods and services are not genuine constitutional dollars, but promissory notes substituting for the real thing.

Every day, millions of Americans receive and pay out what they think are “dollars.” Yet, in almost every instance, they are deceiving themselves. For the “one-dollar” (picture of George Washington on its face) Federal Reserve Note (FRN) that most everyone uncritically calls a “dollar” is not a “dollar” at all. No statute of the United States has ever declared that note to be a “dollar.” Neither could such a declaration ever be made. For each and every FRN, of whatever denomination, is only a “note” – a private bank’s promise to pay the holder a stated number of “dollars.” Self-evidently, a promise to pay some thing is not that thing itself.

Even the statute that authorizes the emission of FRNs requires that “They shall be redeemed in lawful money on demand at the Treasury Department … or at any Federal Reserve bank” (12 U.S.C. § 411) – which proves that FRNs are not themselves “lawful money.” Another statute does declare FRNs to be “legal tender for all debts, public charges, taxes, and dues” (31 U.S.C. § 5103). But FRNs would not have to be declared “legal tender” if they were actually “dollars.” Rather, the statutory designation “legal tender” recognizes that FRNs are not “dollars,” but may be used as substitutes for “dollars” with respect to any payment covered by the law.

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