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.
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](http://www.norfed.org/RC/RC_About.asp#What is a Redemption Center?) before you mess around with them - anytime someone has to say ‘we are not a MLM scheme’, I tend to stay away.
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”.
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.
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.
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.
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.