How Legal Tender Is Issued in The U.S. Today
Paper money is a form of currency that is physically printed by the Bureau of Engraving and Printing, under authority of the Federal Reserve System. The Bureau of Engraving and Printing is part of the U.S. Treasury Department, whereas the Federal Reserve is not. In contrast to paper money, coins are physically produced by the U.S. Mint, within and under authority of the U.S. Treasury. The Federal Reserve System can authorize as much paper money as it sees fit, but the U.S. Treasury is restricted by law to a certain maximum amount of coinage in circulation.
The Federal Reserve System can increase the money supply by creating money to purchase U.S. Government securities on the open market. Article I, Section 8 of the Constitution explicitly contemplates U.S. Government "securities."
Those "open market operations" involve the buying and selling of U.S. government securities, including federal agency securities and also (as happened, for instance, in response to the recent economic turmoil) mortgage-backed securities. Federal agency securities have been issued by the federal government to finance deficit spending.
The Federal Reserve System can also increase the money supply by allowing banks to issue more loans, which is accomplished by reducing the reserve requirement ratio. This regulation of banks is pursuant to the Commerce Clause. Conversely, the Federal Reserve System can reduce the money supply by selling securities or by increasing the reserve requirement ratio.
Read more about this topic: Legal Tender Cases
Famous quotes containing the words legal, tender, issued and/or today:
“We should stop looking to law to provide the final answer.... Law cannot save us from ourselves.... We have to go out and try to accomplish our goals and resolve disagreements by doing what we think is right. That energy and resourcefulness, not millions of legal cubicles, is what was great about America. Let judgment and personal conviction be important again.”
—Philip K. Howard, U.S. lawyer. The Death of Common Sense: How Law Is Suffocating America, pp. 186-87, Random House (1994)
“The tender skin does not shrink from bayonets, the timid woman is not scared by fagots; the rack is not frightful, nor the rope ignominious. The poor Puritan, Antony Parsons, at the stake, tied straw on his head when the fire approached him, and said, “This is God’s hat.””
—Ralph Waldo Emerson (1803–1882)
“There is hardly an American male of my generation who has not at one time or another tried to master the victory cry of the great ape as it issued from the androgynous chest of Johnny Weissmuller, to the accompaniment of thousands of arms and legs snapping during attempts to swing from tree to tree in the backyards of the Republic.”
—Gore Vidal (b. 1925)
“The late Président de Montesquieu told me that he knew how to be blind—he had been so for such a long time—but I swear that I do not know how to be deaf: I cannot get used to it, and I am as humiliated and distressed by it today as I was during the first week. No philosophy in the world can palliate deafness.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)