In just about every country, including ours, paper money in circulation is a liability on the books of the central bank. When you look at the top of a dollar bill and it says “Federal Reserve Note”, the word Note isn’t being used to denote just a piece of paper with printing on it, but rather a note in the economic sense; that is a signed promissory note.
But it seems that in every other country, the notes are signed by those in charge of the central bank, and not by Administration functionaries. Why is the U.S. different? Why doesn’t our money bear the signature of Paul Volker, and perhaps that of the president of whatever regional Federal Reserve Bank issued the note?
but doesn’t it work basically the same way in other countries? Does the Deutsche Bundesbank have anything other than the “full faith and credit of the German nation” backing its currency?
Don’t know the answer for sure but one possible reason is that the Fed was founded relatively late in 1913 whereas the dollar is a lot older. With countries like Germany however the Bundesbank and the DM were probably started at around the same time after WW2.
From the Treasury site, we discover that the SOT is the CFO of the U.S., and that the Treasurer (originally) was charged with reciept and custody of US funds. We also learn that various demoninations of currency are issued to the Federal banks. We also learn that the Treasury office is older than the deparment.
One should also keep in mind that currency & coin issued in the US is for the payment of Federal debts.
So, as US funds are issued by the government, not the bank, the Treasurer & Secretary sign the bills. They are the offices ultimately responsible for the funds on the executive side.
Keep in mind that until recent times, US currency was backed by gold & silver controlled by the government, which was ultimately the Treasurer’s responsibility.
Well, almost. Since at least 1928, when we changed the size of the US dollar banknote to the size it is today, most of the total dollar value in US currency was in Federal Reserve notes.
We also made Silver Certificates, US Notes, Gold Certificates but these were dwarfed by the total value of Federal Reserve Notes. Fed notes were essentially backed by good faith as said.
So do the Treasurer and the Secretary of the Treasury have time to do anything else, or are their duties solely to sign currency all day? I hate to thing of the damage to their wrists.
When the Federal Reserve System was created in 1913, William Jennings Bryan was adamant that the notes created by Federal Reserve Banks be obligations of the federal government, not of the reserve banks themselves. In other words, the obligation to redeem paper money in specie upon demand fell upon the Treasury Department. There were some grains of logic in this, since otherwise, in case of a regional business depression, the government might allow one of the 12 regional banks to fail and leave its note holders high and dry.
When the United States went off of the gold standard, the concept of Federal Reserve Notes being an “obligation” upon anybody went out the window. But, to this today, the notes carry the endorsement of the Treasury and not of the Fed.
They are still legal tender, of course, but that’s a matter of law–not of Fed or Treasury policy. The distinction between notes being an “obligation” of the Treasury or of the Fed lost all meaning when we went off of the gold standard.
SecTreas is obvious a big time position, since it’s a cabinet appointment and all, but what the fark does the Treasurer of the United States do? And how do you get that job?
It helps to be female to be named Treasurer. It has become pretty much a 20th Century (and now 21st) Century tradition for a female to be appointed to this position.
It also helps to be a friend of the incoming president. The current treasurer is Rosario Munn, the former mayor of Huntington Park, CA.
The Federal Reserve prints an awful lot of dollar bills. Don’t the Treasurer and Sec. of the Treasury get writer’s cramp from signing all of them?
OK, seriously, I understand that the Federal Reserve actually has more gold in its vaults than is at Fort Knox. Not that this means much. After all, they never actually do anything with the gold in either place. They should just sell the stuff and get rid of it. But this is probably treading on GD grounds, so never mind.
Within my memory, these women, among others, have been Treasurer:
Ivy Baker Priest
Elizabeth Russell Smith
Kathryn O’Hay Granahan
Ramona Acosta Bañuelos (probably the first person to add an accent from another language to American currency)
I assume that the gold could ultimately be used in transactions with other countries if, say, the dollar was to collapse for some reason to such a point that no other central bank would want it.
I believe it’s signed by trhose fellows because if it was only signed by the President, and the President turns out to be a fink, is everyone going to accept money that has his signature on it? There is some shielding from finkage here, some fink-deflection. You’ve got three chances for finkage, if there’s just one valid person’s signautre on that note it’s good.
I’m sprainyng this all out of my… foot of course. I think that we should use Euros.
cdhostage, can I just say how much I like the word fink?
I think you’re wrong, though: This country is more than its president, and the people of the world know it. Most of the thread I alluded to earlier was wasted in trying to give an economic or legal foundation to something that is shored up by sheer psychology. Money is worth something because people think it is worth something, and they think it will continue to be worth something for long enough to do something with it.
Money is a bet: When you take a sawbuck outta my hand when I take your book, you’re betting that the sawbuck will be worth something to the guy who sells you electricity. You, remembering all the times the bet paid off, decide that’s a good risk and decide to take it. Because everyone around you also thinks it’s a good risk, it continues to be a good risk. Hence our economy is strong both here and abroad, and our money is widely seen as worth counterfeiting.
(Counterfeit is the sincerest form of flattery. ;))
Once people deicde it is no longer a good risk, it ceases to be a good risk. That’s when you get the Deutschmark, circa 1933.
I think technically it is an obligation. It’s been a long time since my currency and banking class, but iirc there is some mechanism by which a commercial bank’s ability to draw FRB notes on its FRB
account depends on the amount of money its own depositors have deposited. It’s very hazy to me now, but I remember that basically it was like a piece of circular reasoning; which however, works well as long as the money supply is not allowed to expand out of proportion to the size of the economy.
