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Old 12-11-2002, 02:40 PM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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Why is American currency signed by the Treasurer and the Secretary of the Treasury?

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?
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Old 12-11-2002, 03:37 PM
Nametag Nametag is offline
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Because American Currency isn't backed by the Federal Reserve, it's backed by "the full faith and credit of the United States of America."
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Old 12-11-2002, 04:34 PM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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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?
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Old 12-11-2002, 04:44 PM
CyberPundit CyberPundit is offline
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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.
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Old 12-11-2002, 05:14 PM
deathawk deathawk is offline
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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.

http://www.treas.gov/education/ is an interesting read.
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Old 12-11-2002, 08:09 PM
samclem samclem is offline
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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.
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Old 12-11-2002, 09:30 PM
Arnold Winkelried Arnold Winkelried is offline
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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.
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Old 12-11-2002, 09:40 PM
Freddy the Pig Freddy the Pig is offline
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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.
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Old 12-11-2002, 09:54 PM
samclem samclem is offline
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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.
How are they not an obligation of the United States? Not been repudiated as of yet, I think.
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Old 12-11-2002, 10:10 PM
Freddy the Pig Freddy the Pig is offline
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Originally posted by samclem
How are they not an obligation of the United States? Not been repudiated as of yet, I think.
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.
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Old 12-11-2002, 10:29 PM
kniz kniz is offline
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posted in OP
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?
  • paul volker? Paul Volker? Paul Volker? Paul Volker? Paul Volker? Paul Volker? Where have you been for the last 20 years?

    It's Greenspan, ______
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Old 12-12-2002, 01:23 AM
ElwoodCuse ElwoodCuse is offline
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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?
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Old 12-12-2002, 01:28 AM
BobT BobT is offline
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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.
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Old 12-12-2002, 02:11 AM
dtilque dtilque is offline
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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.
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Old 12-12-2002, 03:00 AM
dougie_monty dougie_monty is offline
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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)
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Old 12-12-2002, 06:19 AM
clairobscur clairobscur is offline
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Quote:
Originally posted by dtilque
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.


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.
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Old 12-12-2002, 07:45 AM
Derleth Derleth is online now
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I was once involved in a massive thread entitled `What is money?'

I don't think the question was ever answered.

Be warned.
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Old 12-12-2002, 07:54 AM
cdhostage cdhostage is offline
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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.
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Old 12-12-2002, 08:29 AM
Derleth Derleth is online now
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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.
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Old 12-12-2002, 02:48 PM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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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.
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Old 12-12-2002, 03:17 PM
Nametag Nametag is offline
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Obligation to do what? There is no specie for which Federal Reserve notes may be exchanged, so there is no obligation, no backing, no nothing. There is only the promise of the U.S. Treasury that "Yes, if you take this note, you'll be able to buy something with it later." That's good enough for me, but I there are those who are upset that redeeming a Federal Reserve note will only get you more notes. For those people, there's the Liberty Dollar.
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Old 12-12-2002, 04:07 PM
Riboflavin Riboflavin is offline
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Originally posted by Nametag
For those people, there's the Liberty Dollar. [/B]
I thought the Liberty Dollar was kind of neat when I followed your lik, and though about dropping a few bucks through them just for the novelty value. However, they seem to have an Amway-stlye 'almost a pyramid' scheme going for people who want to become redemtion centers, which makes me think the whole thing is not quite so altruistic as the website would have you believe. Look at the stuff on redemtion centers before you mess around with them - anytime someone has to say 'we are not a MLM scheme', I tend to stay away.
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Old 12-12-2002, 04:19 PM
Freddy the Pig Freddy the Pig is offline
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Must every question involving currency be hijacked into an exegesis on the nature of money? In 1913, when the Federal Reserve System and Federal Reserve notes were created, the United States was on a gold standard. Under a gold standard, bank notes carry an obligation on the part of the issuing authority to redeem in specie upon demand. Because the Federal Reserve Act created 12 regional central banks instead of one national central bank (this was the key difference between the United States and other countries!), it made sense for this obligation to fall upon the Treasury rather than the regional banks. The signatures of the Secretary of the Treasury and the Treasurer of the United States symbolized this commitment.

Today we no longer have a specie standard. The distinction between notes being an obligation of the Fed or of the Treasury is meaningless. But precisely because this distinction is meaningless, there has never been any reason to change the signatures on our currency. As Stephen Jay Gould said, "Historical origin need not match current utility".
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Old 12-12-2002, 09:06 PM
samclem samclem is offline
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Quote:
In 1913, when the Federal Reserve System and Federal Reserve notes were created, the United States was on a gold standard. Under a gold standard, bank notes carry an obligation on the part of the issuing authority to redeem in specie upon demand. Because the Federal Reserve Act created 12 regional central banks instead of one national central bank (this was the key difference between the United States and other countries!), it made sense for this obligation to fall upon the Treasury rather than the regional banks.
Interestingly, the clause that was printed on Federal Reserve Banknotes prior to Roosevelt taking us off the gold standard was

"Redeemable in gold on demand at the Unitred States Treasury or in gold or lawful money at any Federal Reserve Bank.

So, was the obligation also on the individual Federal Reserve Banks? But you're right, have the big boys sig. on the notes made them seem more legit.
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Old 12-13-2002, 12:02 AM
Freddy the Pig Freddy the Pig is offline
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Right, samclem, you could take the notes either to your nearest Fed bank or to Washington. As long as the Washington option was available, you didn't have to worry about your regional bank running out of specie. The ultimate obligation, in other words, lay with the Treasury, and the signatures emphasized this point. Also, regarding the signatures, I believe in early days it was the "Register of the Treasury" and not the Secretary--I'm not sure when or why that was changed.
  #26  
Old 12-13-2002, 11:34 AM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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Quote:
Originally posted by Nametag
Obligation to do what? There is no specie for which Federal Reserve notes may be exchanged, so there is no obligation, no backing, no nothing.
Well, technically speaking, FR notes are not treasury currency, and hence aren't actually "money" in the strictest sense of the word. So you could have them redeemed for the only kind of money which actually exists now: coins. Granted it's not specie, but it's still a redemption of a sort.
  #27  
Old 12-13-2002, 11:40 AM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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Actually I think I meant to say that FR notes are accounting liabilities of the FR banks. That's how they carry them on their books.
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