Who "owns" paper money?

Factual Questions
1

I’ve got a pretty heated debate going on in my office currently that I’m hoping this board can give us a final verdict on.

The subject came up of who ultimately has ownership of the green pieces of paper in your wallet (we know they’re not actually paper, just using the colloquial terminology).

One half of our staff believes that if you are in possession of a note of currency, you own both the currency and the note itself.

The other half believes that while you are entrusted with the value of the note, the note itself belongs to the Federal Reserve, which could recall them if it wanted to - that all physical currency is, in effect, a loan of sorts. I suppose this applies to coins as well. That last part is of course a theoretical scenario, since in reality there isn’t enough physical money to account for the amount of currency that exists.

Our own extremely unscientific research (read: Googling) into the subject hasn’t turned up any definitive answers, and mostly leads to conspiracy theorist blogs.

Help us out, Straight Dope. Enlighten us.

2

Somewhat relevant information. I countries where bank notes have been replaced with new issues several times there are generally no recall. The central bank just informs everyone that from date A the old notes will cease to be legal tender, and from date B we’ll no longer exchange them for new notes. No “We own the notes, return them or face our wrath.”

On the other hand it’s illegal to destroy or deface currency, which does make it unlike other property.

3

This makes no sense to me. If my car is recalled, does that mean that I had been merely borrowing it? No way. I go with what naita said.

4

It’s not paper? :confused:

(I have an idea it might be rag paper rather than wood pulp, but that is still paper isn’t it? I assume we are talking about American banknotes here. I have seen Australian ones, and they are some weird plastic stuff.)

5

Keeve,

It’s also not illegal to destroy your car. It’s illegal (as naita mentioned) to destroy or deface currency. I feel like the same rules don’t apply.

Njtt, American “paper” money is a blend of cotton. That’s why you can accidentally throw your pants in the wash with a twenty in the pocket and it comes out okay - if it were really paper it would get shredded.

6

The US Treasury Dept “owns” the currency device. It represents a promise by the US Gov’t the note or coin or whatever is backed by the Federal Reserve.

The general public owns the value of the promise noted on the device, not the device itself.

7

First, I think the OP has a confusion of terms: “if you are in possession of a note of currency, you own both the currency and the note itself”

The note itself is the currency. I think by currency you mean value.

Actually, the holder does own the currency, what they do not own is the value.

When the government recalled silver certificates, the public was not compelled to cash them in. People still hold many. What they no longer hold is their value as directly exchangeable for silver.

The government could say turn in all old style dollar bills by July 4 for replacement with new currency, old bills will no longer be deemed acceptable currency after that. You can hold all the bills you want, if you want to give the value back to the government.

As an aside, inflation illustrates how what we hold/own is the paper, not the value.

8

US money is 75% cotton and 25% linen, no wood paper.

9

True, for certain definitions of ‘deface.’

From the US Treasury department website, the law on currency:

Defacement of currency is a violation of Title 18, Section 333 of the United States Code. Under this provision, currency defacement is generally defined as follows: Whoever mutilates, cuts, disfigures, perforates, unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, Federal Reserve Bank, or Federal Reserve System, with intent to render such item(s) unfit to be reissued, shall be fined not more than $100 or imprisoned not more than six months, or both.

IANAL, but I think the key phrase here is “unfit to be reissued.” Drawing a mustache on Washington is a defacement, but I doubt it’s gonna land anyone in the pokey.

And, the law on coin:

This question is addressed by Title 18, Section 331, which provides penalties for the mutilation of our coins. These penalties consist of not more than $2,000 or imprisonment of not more than five years, or both. This section generally applies to anyone who “fraudulently alters, defaces, mutilates, impairs, diminishes, falsifies, scales, or lightens” any coins circulating in the United States. It also addresses anyone who “fraudulently possesses, passes, utters, publishes, or sells . . . or brings into the United States, any such coin.” If you believe you know of such fraud, you should contact your local office of the United States Secret Service, which is responsible for investigating such cases.

I think the key word here is “fraudulent.” So, these souvenir elongaged penny machines deface the coin, but not with any fraudulent intent.

10

Executive Order 6102 and Gold Reserve Act of 1934 and their being upheld by SCOTUS in the Gold Clause Cases make it pretty clear that the medium that represents money (coins, currency) belongs to the Government because of their power to regulate the economy.

11

As I said: rag paper, but still paper.

12

Executive Order 6102 refers to people owning the gold, how does that translate into it belonging to the government :

It’s looks like a special exemption to me, not a case of “it belongs to us so now we’re taking it back”.

13

Saint Cad,

Both the EO and the Act you cite deal only with precious metal coins, gold in fact and on the face do not address “ownership” of paper currency.

Do you have any particular case in mind?

I just read Norman v B&O RR and Perry v US and there is no express or implied statement that the government retains ownership of currency, except in the case of precious metals (gold and silver) where some sense of ownership may be inferred from the government’s declared authority to restrict exportation and indeed to remove gold currency from circulation.

Even as above, removing gold coins from circulation did not mean that the governemtn compelled holders of gold coin to resubmit them to government “owners” as, just as in the case of the certificates, many individuals retained possession of such specie even after the government had 'withdrawn all gold coin from circualtion".

We know this is true because many of us have seen gold US currency in private hands.

14

Well, the Commerce Clause gives Congress the power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” But that’s surely not the same thing as the power to “regulate the economy”.

15

Note that it is not just gold/silver coins. The US has recent laws protecting from melting nickels and pennies. Nickels in particular have at times recently been more valuable for their melt value than their face value.

The newer laws went into effect in 2006. So I think that would mean in general that you could have melted them, etc., prior to that. Once melted, I don’t see how the government could claim ownership in any way, so presumably they weren’t the government’s property to begin with. (Else melting them earlier would have been de facto illegal.)

16

So, I guess that’s cleared up.

Personally, I think FrankJBN’s argument makes more sense to me. You own a piece of “paper”. . . the “value” of said paper is determined/owned by the federal government. . . .but, I don’t really know. That’s just makes sense to me.

Cool question and thread though.

17

So what you’re saying is that it is legal for the government to seize gold coins and certificates in the exercise of fiscal policy but that legal theory would not extend to Federal Reserve notes?

18

Except that modern U.S. currency isn’t “backed” by anything. It’s fiat currency. Before 1963, you could “redeem” paper money for its value in “lawful money” – a term which apparently had no official definition by Congress – but no such promise exists today.

19

Saint Cad asks in response to my post: “So what you’re saying is that it is legal for the government to seize gold coins and certificates in the exercise of fiscal policy but that legal theory would not extend to Federal Reserve notes?”

No, I didn’t say that at all and I cannot see how you could construe my post as saying such.
I in fact said just about the complete opposite. ""did not mean that the governemtn compelled holders of gold coin to resubmit them to government “owners” (Emphasis added) IOW there was no seizure.

20

So then if I “own” a gold coin or certificate then the only way the government could legally take it was under eminant domain. Are you claiming then that requiring people to turn in their gold (coin and certificates) was under eminant domain? If so what was the public use?

I just don’t see how given the legal thoery at the time you can reconcile the court upholding the government control of gold coin and certificates under its power to regulate commerce with private ownership of those same coins and certificates.