What makes legal currency legal?

Basically, if an American storekeeper says “I’ll only accept Mexican pesos, and don’t you dare try to pay with anything else.” what’s stopping him? Is he legally obligated to accept American dollars? What if he only wants to accept buckskins or dandylions? Or does the legal just mean, that’s what you pay taxes with and that’s what they tax?

BTW, I did use the example of an American, but I’m really Canadian and would appreciate to learn about any of the countries you would happen to know of.

United States law provides:

31 U.S.C. § 5103.

From the US Department of the Treasury, http://www.ustreas.gov/education/faq/currency/legal-tender.html:

Likewise, from the Bank of England, http://www.bankofengland.co.uk/banknotes/legaltender.htm:

Basically because the government says it is. Nothing but their word backing it up.

Other than their words, it’s a stable money supply that makes people accept a currency. :slight_smile:

From a gross economic standpoint, most legal currency, historically and currently, is backed up by a few generally accepted but suprisingly abstract concepts. Some of these, such as god/s, heads of state, symbols of peace/war, etc are featured on the currency to reinforce its validity. Also, the influence of the government who issues the currency can have an effect on the value of said currency, usually in an obvious way i.e. the government collapses, the currency is worthless in general.